Ford Business Analysis
Introduction A company’s financial health is the deciding factor of future growth. As humans, we rely on health checkups to improve and maintain our health. Same thing goes for businesses. Without maintaining proper financial health that company will not be around long afterwards. I want to begin by presenting and comparing Ford Motor Company’s income statement, balance sheet, and cash flow to determine the financial health of the company versus two of the company’s current competitors. Income Statement Five different categories are covered on a company’s income statement.
Those categories are Total Revenue, Gross Profit, Operating Income or Loss, Net Income, and Net Income Applicable to Common Shares. These categories are usually viewed quarterly or annually. The main purpose of the income statement is to show management as well as investors, whether money was lost or made during reported time periods. Total revenue is the price of the product times the quantity sold. Gross profit is revenue minus cost. Operating income or loss is negative income from operations. Net income applicable to common shares is bottom-line profit belonging to stockholders.
In the annual report starting January 1, 2010 and ending December 31, 2010, Ford Motor Company reported Total Revenue at $128,954,000 with Cost of Revenue as $104,451,000. That is a Gross Profit of $24,503,000. On that same day, General Motors posted Total Revenue at $135,592,000 and Cost of Revenue at $118,944,000. Gross Profit of $16,648,000. Honda Motor Company, which annual reporting started on April 1, 2010, and ended on March 31, 2011, reported Total Revenue at $107,829,000 with Cost of Revenue being $78,389,000. Gross profit of $29,440,000.
Ford Motor Company’s operating expenses where relatively high when compared to General Motors and Honda Motor Company. Ford reported Operating Income or Loss of $6,658,000. The figure was determined after subtracting $18,061,000 from the gross profit and also included nonrecurring expenses of $216,000. General Motors reported Operating Income or Loss of $5,084,000 after subtracting expenses from Gross Profit with no nonrecurring expenses. Honda Motor Company reported Operating Income or Loss of $6,875,000 after subtracting from Gross Profit. Honda’s expenses also included $5,883,000 in research development. Neither, Ford
Motor Company, or General Motors, invested in research development. I believe that is why Honda, according to the figures, profited more. The Net Income for Ford Motor Company was $6,561,000 after expenses were subtracted from Gross Profit. General Motors posted Net Income of $6,172,000. Net Income Applicable to Common Shares of $4,668,000 was less than the Net Income total because of Preferred stock and other adjustments. Honda Motor Company posted a Net Income of $6,444,000 after expenses. Balance Sheets Reporting financial position is the primary purpose of balance sheets. Balance sheets show Assets, Liabilities, and Stockholder’s Equity.
Just as the word “balance” means, the total assets equal net worth, plus total liabilities. Ford Motor Company, General Motors, and Honda Motor Company’s total current assets consist of cash and cash equivalents, short-term investments, net receivables, inventory, and other current assets. Cash equivalent refers to assets that can be converted immediately into cash. Ford Motor Company reported $14,805,000, General Motors reported $22,301,000, and Honda Motor Company reported $15,432,000 in cash or cash equivalents. Ford ($20,765,000) and General Motors ($5,555,000) were the only two of the three to report short term investments.
Net Receivables are assets or money minus bad debts, that are owed to the company. According to the figures, Honda’s assets are much higher than the other two companies in this category. Honda would appear to be selling more products because of this figure. Inventory for Ford Motor Company is significantly lower than General Motors and Honda Motor Company. Less inventory means less production is occurring. Without inventory, how do companies make money? Total current inventory reported for Ford Motor Company was $48,875,000. General Motors reported $53,053,000 and Honda Motors reported $56,588,000.
Total Assets is another figure in itself. Total assets is the sum of all assets, current and long term, owned by the company. Ford Motor Company invests more money in the long term than General Motors and Honda combined. Investing in long term, if your money compounds will generate earnings from previous earnings. Albert Einstein referred to compound interest as the greatest mathematical discovery of all time. Benjamin Franklin stated, “Money makes money, and the money that makes money, makes money. ” Property Plant and Equipment,, Goodwill, Intangible assets, Accumulated amortization, Other assets,
Deferred long term asset changes, also determine final figures when calculating Total assets. Ford is leading in that category. Liabilities are also on the balance sheet. Liabilities are the debts a company owes for the 12 month period. Liabilities consist of accounts payable, short/current long term debt, deferred long tern liability charges, minority interest, and negative goodwill. According to figures, Ford Motor Company has twice as much liability as Honda Motors. Stockholders’ equity, often referred to as the book value of the company, is an accumulation of total-assets minus total liabilities.
Equity comes from two sources, originally invested money, and earnings retained by the company that accumulated over time through operations. Stockholders’ equity include miscellaneous stocks options warrants, redeemable preferred stock, preferred stock, common stock, retained earnings, treasury stock, capital surplus, and other stockholder equity. All of these factors come together to determine the company’s net tangible assets. Ford Motor Company did not fare well in this category. Neither did General Motors. Honda posted positive gains according to the reports. Ford reported -$775,000 in net tangible assets.
General Motors reported -$7,480,000 and Honda Motor Corporation reported a positive gain of $53,692,000. Cash Flow Cash flow is the money coming in and out of the business. Obviously you want more money coming in than going out. Cash Flows, provided by or used in, Operating activities, Investing activities, Financing activities, all add up to determine a the company’s change in cash and cash equivalents. Honda Motors is the only one of the three that posted positive income in this category with $1,920,000. Ford Motor Company reported -$6,089,000. General Motors reported -$1,814,000.
Technological Advancement (www. ford. com/technology) Technological advances such as the EcoBoost Engine, SecuriCode Keyless Entry and Adaptive cruise control is just some of the advancements Ford Motor Company has made in the last few years. The EcoBoost direct-injection technology produces cooler, denser, charges that creates more power for every drop of fuel. No more searching for keys with the SecuriCode Keyless Entry. The keypad remains unnoticeable until activated. Companies like Toyota and Nissan have adapted a similar system which lets you unlock or lock doors with using a key.
Adaptive cruise control alerts you of a potential collision from within the vehicle. When traffic slows down, your car automatically slows down to maintain a safe distance that you have set. Globalization Globalization affects each organizations business strategy different. According to Mussa (2003), “Globalization is the increasing interaction among, and integration of, the activities, especially economic activities, of human societies around the world. ” In order for a company to have a successful global strategy, the global strategy provides an organization wit a competitive advantage, an organization must compete globally.
General Motors and Ford Motor Company did not compete like Toyota, Honda, and other foreign automotive industries in technology and vehicle reliability. Some of the factors that affect an organization’s globalization are costs, government, customers, and competition. Ford Motor Company Benchmark Analysis When comparing Ford Motor Company to other auto manufacturers, one thing that stands out is the fact that Ford was the first automaker to begin taking technology to a whole new level. Oldsmobile was the first auto maker to introduce large scale, production-line manufacturing of automobiles in 1902.
Henry Ford, founder of Ford Motor Company, greatly expanded this process. In 15 minute intervals, Ford was able to produce cars off the line. His process increased productivity eightfold. He could reduce man hours from 12. 5 before, to 1 hour and 33 minutes after, while using less manpower. Ford implemented complex safety procedures. He assigned workers to specific areas instead of working all over. This practice reduced injury rate. The assembly line made it to where employees worked at a certain pace with repetition which created more output while companies in other countries used less productive methods.
Ford was the first automaker to spread worldwide the fastest. Ford Britain and Ford France was founded in 1911. 12 years later in 1923, Ford Denmark was founded. Shortly afterwards in 1925, Ford began production in Germany. Ford revolutionized automotive globalization. Ford Motor still to this day, continues to make tremendous strides in globalization and the overall Ford customer experience. Ford started what is called Ford Solutions. Ford Solutions is an integrated approach to provide flexible and customized solutions for consumer needs. We wanted to extend the Ford experience of providing the best quality services and products well beyond the vehicles. With Ford Solutions, valued customers are offered a number of programs to satisfy their needs. Giving the consumer piece of mind that comes with every purchase of Ford product. ” (Dy Buncio, Luie Ford VP for Sales and Marketing) Conclusion In Conclusion, to be an industry leader, a company must continue to invest in its resources. Employees, research and development, and stakeholders are all key components to being successful. Ford Motor Company continues to do just that.
Ford continues to be a relevant, driving force in the community. Building partnerships and addressing challenges people are facing. Ford has seen the economic struggles of various communities. The company has felt the effects of the depression just like everyone else. The figures from the income statements, balance sheets, and cash flow charts measure a company’s success. Ford Motor Company may not be the industry leader, but the company has continues to improve as time goes on. Positive persistency is the key to desirable results and company success.
References (www. finance. yahoo. com/q/is? s=F+Income+Statement&annual) (www. finance. yahoo. com/q/bs? s=F+Balance+Sheet&annual) (www. finance. yahoo. com/q/cf? s=F+Cash+Flow&annual) (www. finance. yahoo. com/q/is? s=GM+Income+Statement&annual) (www. finance. yahoo. com/q/bs? s=GM+Balance+Sheet&annual) (www. finance. yahoo. com/q/cf? s=GM+Cash+Flow&annual) (www. finance. yahoo. com/q/is? s=HMC+Income+Statement&annual) (www. finance. yahoo. com/q/bs? s=HMC+Balance+Sheet&annual) (www. finance. yahoo. com/q/cf? s=HMC+Cash+Flow&annual)
