FATR Ratio Ford’s impressive total asset size is $225 billion (Ford, 2015a). The fixed assets turnover ratio (FATR) illustrates the effectiveness of using fixed assets to generate sales. Ford’s average fixed asset turnover ratio for 2013-2015 is (0.33 for 2015 + 0.32 for 2014 + 0.28) / 3 = 0.31 (Ford, 2015a; Ford, 2015c). Although the number is small, one can compare Ford’s FATR with a competitor during the same period to determine which one uses their fixed assets better. GM’s average FATR for the same period was (0.28 for 2015 + 0.18 for 2014 + 0.14 for 2013) / 3 = 0.2 (GM, 2015a, GM, 2015c). Therefore, one can conclude that Ford’s usage of fixed assets was more productive than GM’s. I will give GM some credit, because of their increasing …show more content…
Over half of the total assets for Ford are current, meaning they are able to turn them into cash within the given period. Ford had a TATR of 0.67 in 2015, 0.69 in 2014, and 0.73 in 2013 (Ford, 2015b). I am concerned with the declining trend that represents they are losing efficiency. Another interesting component is although the TATR has been trending down. Ford’s fixed asset turnover ratio is increasing. One could conclude that ford has been converting more of their assets into fixed assets. The horizontal analysis of Ford’s balance sheet for fixed assets for 2015 is 120.29% and 100% for 2013 (Ford, 2015a). Therefore, emphasizing the correlation between increases in fixed assets and growing FATR. Management is playing the field well, by increasing fixed asset efficiency, depreciating the fixed assets, and generating more revenue, thus creating a win-win scenario on the …show more content…
Both of these indications are in line with management’s strategy to increase productivity in new markets and introduce new products. Thus, Ford is spending money on new fixed assets, research and development and borrowing capital to fund their innovations and expansion strategies. Ford mentions they are increasing their participation in newly developed and emerging markets (SEC, 2015). Another correlation between the management’s discussion within Fords 10-k and the financial analysis within this essay is Ford’s market expansion into the Pacific Asia Africa segment (SEC, 2015). Because ford is entering into new markets, their costs are increasing for selling and administration. The costs include hiring new salespeople and promoting their new products in new market segments. Thus causing the increase of selling and administrate costs in the horizontal income statement analysis. Furthermore, Ford’s fixed assets are also increasing because they are investing in new land and equipment to manufacture their new
Another observation is that GM looks to use more debt financing that equity financing for funding their activities. The debt to equity ratio has steadily decreased over the past five years and is higher that the industry average. Also, the current and quick ratios are much lower than the industry averages. This again can pose so...
One look at the common-size income statements for these companies can tell a story. While Jones Apparel Group was lagging at year ended 1998, even with a restructuring charge on Liz Claiborne’s income statement, 1999 was a different story. Huge growth at Jones lead to revenues double of that one year ago while Liz, while increasing, was quickly falling behind. The growth for both of these companies continued into the year ended 2000, but Jones Apparel Grou...
Rhett Dornbach-Bender, Bill Slade, Joe Thorpe. "Strategic Report for Ford Motor Company." Oasis Consulting (2009): 28. online. 20 May 2014. .
Ford uses a global area division organization design, setting up subsidiary companies for the different countries/regions that it is operating in....
Overall, Horizontal analysis and financial ratios are essential factors that businesses use to monitor its liquidity. Therefore, in order to improve Apple’s ratios and profitability, the company needs to implement a strategy to increase the company’s liquidity. Business owners or managers should monitor current ratio and acid test ratio as these ratios help us to ensure the company has the proper liquid assets to pay current liabilities, to stay in operations and to expand the company. As we noted in our acid test ratio and current ratio for the company, we show a lower ratio for acid test ratio than the current ratio, which means that the company’s current assets rely on inventory. Therefore, the company needs to convert old inventory into
Since companies are often unable to sell their fixed assets within any reasonable amount of time they are carried on the balance sheet at cost regardless of their actual value. As a result, it is possible for companies to grossly inflate this number, leaving investors with questionable and hard-to-compare asset figures (Investopedia.com, 2003).
So the discussion on internal and external analysis clearly defines that where the competitive advantage of Ford Motors is and where it is lacking. People who have durability as their first priority will go for Ford but they lack in some of their strategies which the management should consider and work on it. We also came to know that Ford is an innovative company from the very first and also serves local demands with the help of related and supporting industry. But in some points they have taken wrong decisions which compel them to sell some of their brands to others. The good news is they are doing hard job to maintain their performance regarding their star and cash cow products to remain in the competition.
Any successful business owner or investor is constantly evaluating the performance of the companies they are involved with, comparing historical figures with its industry competitors, and even with successful businesses from other industries. To complete a thorough examination of any company's effectiveness, however, more needs to be looked at than the easily attainable numbers like sales, profits, and total assets. Luckily, there are many well-tested ratios out there that make the task a bit less daunting. Financial ratio analysis helps identify and quantify a company's strengths and weaknesses, evaluate its financial position, and shows potential risks. As with any other form of analysis, financial ratios aren't definitive and their results shouldn't be viewed as the only possibilities. However, when used in conjuncture with various other business evaluation processes, financial ratios are invaluable. By examining Ford Motor Company's financial ratios, along with a few other company factors, this report will give a clear picture of how the company is doing now and should do in the future.
Rondo is showing steady improvement in its Fixed Assets Turnover ratio. Total Assets Turnover ratio is a measure of all assets measured against sales. Rondo is showing improvement in this area at 1.0, but is still below the industry average of 1.1. Rondo's performance is fair in this ar...
line, built a company upon those unique foundations that pushed through one of America’s hardest financial times. As of 2014 Ford Motor Company ran into another dip in profit due to the competitive market. However, the company is investing into its future by looking into multiple aspects that have high potential in paying off. As of the end of 2015, the company’s total Revenue equated to $149.5 Billion compared to $135 Billion in 2014. The company’s insight on using start up companies and awareness of sustainability could push Ford Motor Company into a much brighter future.
Upon examining P&G’s financial ability to meet short-term obligations, it is apparent that not only have their current liabilities exceeded current assets over the last three years, but close to half of their current assets have been tied up in inventories and other illiquid assets. For example, assessing both the quick and current ratio respectively shows that less than 70% of the firm’s current assets could be converted immediately to pay current commitments, but a little more than 90% of the firm’s liabilities would ultimately be covered. Though, based on industry average similar findings occur; therefore, it must not be uncommon for industries similar to P&G to
The Ford Motor Company has been in business since the nineteenth century, and it has enjoyed a rather successful run as one of the top automobile-making industries in the United States. Ford Motor Company is a prosperous business because of strategic planning and changes that it was willing to take a risk on developing and implementing. Successful corporations have to adapt to the constantly changing environment or the company will be doomed to failure. In other words, customer shopping habits change as new products are introduced to the market or when other factors beyond Ford Motor Company’s control affect which vehicles are sold. For example, there is an increased demand for fuel efficient cars when the average price per gallon
Many economic factors exist that impact the development of Ford Motor Company's strategic plan and it’s no small task to project how some of these factors might change as the strategy is being realized. Consider the prospect of expansion into a new market like China or Mexico. Economic changes like currency devaluation will make Ford’s product more expensive to their target market potentially reducing overall sales revenue. Oil prices as we’ve seen in the U.S. economy can also play a big factor as large vehicles become less desirable and more fuel efficient compact cars gain market share.
Through Dupont analysis, we have been able to see the specific strengths and weaknesses of BMW and Audi’s management. BMW’s lower profit margin and asset turnover indicate less efficient cost management and asset management. Their debt multiplier indicates that they’re taking advantage of debt, but the benefit of this isn’t realized because of their problems with cost and asset management. Due to Audi’s more efficient use of their assets, and better cost efficiency, it can be said that their management has performed better than BMW’s over the past year.
The Ford family still controls the company through multiple voting shares, even though it owns a much lower proportion of the equity. Ford’s business strategy is the integrated cost leadership/ differentiation strategy; this involves engaging in primary and support activities that allow the company to simultaneously pursue low cost and differentiation. This strategy is flexible and enables Ford to use technology to control the production of a variety of products in moderate, flexible qualities and with a minimum manual interaction, whose goal is to eliminate cost verse product variety. Cost leadership is a strong strategy, but it can be undermined by the frequent changes in technology, the imitation of cost advantage and the loss of focus on consumers. Ford’s differentiation strategy focuses on developing a unique product that consumers are willing to pay for, and the combination of these two strategies enables Ford to stay on its core competencies.