In the coming week, Learning Team B will discuss the financial health of Ford Motor Co. The discussion will include an analysis of the current financial condition after calculating profitability ratios, liquidity ratios, activity ratios, and solvency ratios. We will answer questions about where the company began, how the company manages their investments, and where the company is now financially. We will also look at the DuPont Method as it relates to Ford Motor Co. and their financial troubles.
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Specific Task that have been Accomplished
How Much the Company has borrowed?
It has been discovered that Ford Motor Co. borrowed 23.5 billion dollars in 2006 from the government in an effort to reduce debt. Ford Motor Company’s debt liabilities, long term-debts, current notes is the total of what the company has borrowed. Define the Business Need
Because of the money borrowed, Ford is in better shape than General Motors and Chrysler. The financial ratios, profitability, liquidity, activity, solvency, have already been calculated. The business need will include high-level deliverables to resolve problems. The business needs of the Ford Motor Company is to improve in the area of return on equity and return on capital by addressing customer service needs and customer satisfaction as a means of retention of reputation and quality assurance.
How liquid is the Company
The liquidation of Ford Motor Company can easily be defined as the ability in which as asset can be converted into cash, to meet short-term financial obligations. In order for Ford to meet this obligation, the company has to have more liquid. The company can calculate their liquids by using financial rations such as cash ratio, quick ratio, and current ratio.
How Efficiently the Organization is using its Assets
This will be determined by using the Debt Ratios of the company’s liabilities and assets. Additionally, the straight line depreciation method will be used to determine if assets are profitable or assuming greater debt to the company.
Strength and weakness
The strength and weakness of an organization is crucial. According to (Titman, Keown, & Martin, p. 79), “Financial ratios provide a second method for standardizing the financial information in the income statement and balance sheet. Ratios answer questions about the firm’s financial health or strength and weaknesses.” The relevant questions are how liquid is the firm, will it be able to pay on time, did the firm finance the purchase of assets, is the management efficient in utilizing assets to generate sales, is ROI adequate based on the organization financial goals and objectives, and are shareholders getting value for their investment.
The ratio mechanism is liquidity, capital structure, and asset management efficiency, profitability, and market value ratios assessments. “The acid test is the current ratio to assess firm liquidity; we assume that the firm’s accounts receivable will be collected and turned into cash on a timely basis and that its inventories can be sold without an extended delay. But the truth is that a company’s inventory might not be very liquid at all, (Titman, Keown, & Martin, p. 80).”
Debt & Equity Financing
According to (Investorwords.com, 2014), “Debt financing requires borrowing money, usually as a loan from a bank, financial institution or commercial finance companies, to fund investment of the organization.” Organizations must keep in mind that debt builds credit that s supports lower insurance rates and future borrowing. Additionally, an organization can gain a tax deductible interest rate to lessen the impact of repayment. Equity financing requires investment partners that provide funding for a share of ownership. Each type of financing has advantages and disadvantages of appeal, organizations use both to finance investment ventures.
Problems, Solutions, and Potential Issues
The high-level of deliverables occurs according to the Britannica (2014) website “because of financial struggles at the beginning of the 21st century, the company sold off Aston Martin in 2007 and both Jaguar and Land Rover in 2008.” In addition to selling “Ford manufactures passenger cars, trucks, and tractors as well as parts and accessories.”
The team should further expound on the business need of Ford Motor Co. The Market Value Added (EVA) and Economic Value Added (EVA) have been research, but need to be further researched to explain difference it makes for Ford Motor Co. All ratios and ROE need to be calculated and explained:
ELIZABETH Profitability Ratio
Finally, the team needs to determine how profitable the organization is at the end of the research.
In concluding, Learning Team B discusses the financial health of Ford Motor Company within a progress report. The report includes an analysis of the current financial condition after calculating profitability ratios, liquidity ratios, activity ratios, and solvency ratios. The report answer questions about where the company began, how the company manages their investments, and where the company is now financially. The report finally looks into the DuPont Method as it relates to Ford Motor Co. and their financial troubles.