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Ford Motor Company Financial Analysis

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Description

Ford Motor Company is a multinational American automaker and is headquartered in Dearborn, Michigan. The company is founded by Henry Ford and is integrated on June 16, 1903. The company sells commercial vehicles and automobiles under the brand named as Ford while the luxury cars are under the Lincoln brand.   The business of the company includes designing, manufacturing, marketing, and servicing the full line of cars, sports utility vehicles and trucks as well as the luxury vehicles (Bhasin, 2018). 

 

Analysis of Financial Statement

After analyzing the previous five years of Ford's financial performance, it is analyzed that in 2018, the company made around $3.7 billion profit which is around 52 per cent slip in its profits due to poor performance from the European and Chinese businesses. However, it is also reported that 92 percent of the shares on $160.3 billion in revenue for the year. So in this regard, the company has lost $116 million in 2018. This loss was also driven by the re-measurement of pension plans.  

 

Analysis of the Balance Sheet

After analyzing the balance sheet for the last five years, the changes in assets and liabilities indicate that there is a decrease in debts in the previous years and assets have increased which indicates that the company is improving its financials. However, the reduction in debts has been associated with the restructuring in 2018. This includes the outlays of cash which is about $7 billion and some special charges against the earning, which is $11 billion over three to five years. In this regard, the executives state that the changes are necessary to refocus the growth of the company like the self-driving cars and the electric vehicles and stay away from losing the money or sectors showing slow growth (Ford Motor Company, 2017). 

However, the capital infusion is prohibited in Ford because it disturbs the competition. But the government has injected around $7 million in this sector in 2018.  While assessing the revenues from the past five years, it is seen that the company has increased revenues which can be analyzed from the given graphs (See Fig 1 and Fig 2).

Fig 1: Revenues of Ford (2019)

 

 

Fig 2: Net Income of Ford (2019)

 

 

From the above graphs, it is seen that the company has a stable revenue growth over time, and this indicates that the company is doing well and its revenues show an increasing trend with time. On the other side, the net income of the Ford Company is not showing a stable trend, but there are ups and downs in the net income due to the net losses. As the net income is attributed to the company, have shown the volatile nature overt the past decade. The car manufacturer produced net losses of around 15 billion U.S. in 2008 to 09 crisis. But the company showed a quick recovery and brought the net income close to the 16.9 billion U.S. dollars in 2011. 

Still, there is a need for Ford to recall the faulty airbags. This will help to reach the recall rate and sparked the concern of people among consumers over Ford's safety vehicles. But still, the net income reached to 7.7 billion US $ in 2017 to 2018 (Ford Motor Company, 2018).

 

Shareholder’s Equity

After analyzing the shareholder's equity is showing an increasing trend which shows that the company is earning good which increases shareholder equity. No, the company had not bought the new shares because the Ford Company was down and its sales fell by 4.9percent.

However, the stock price of the company is underperforming in the broader stock market. While the dividend yield is another tale that is increasing almost every year since the company reinstated its dividend. Overall, the company's dividend yield has shown an increasing trend of 2.5x from 2.6% in 2012 to 6.7% in 2019. While focusing on the income, the investors see the attractive return given that the average dividend yield is 3% – 5%.

After assessing the cash flow statement, the company shows that Ford Motor's cost of equity is 20.2%. Ford Motor's cost of equity is 102% higher than the sector median for the most recent period (Ford Motor Company, 2018).

 

Financial Ratios

Working Capital

Ford Motor Company has a Working Capital of -3.4841E10. 

 

Liquidity Ratio

After looking at Ford's liquidity, it is determined that the company can pay the short term obligations for the last five years while the current average ratio is 1.23.

 

Debt to Equity 

The debt to equity ratio, there is seen an increase from 4.6 to 4.9.  In 2017, the company had an increase of approximately $5 billion in equity, which is the reason for the decrease in the leverage ratio.  Overall, within the past three years, the company has been progressing.

References

Bhasin, H.  (2018).  Ford competitors.  Retrieved from https://www.marketing91.com/ford-competitors/.

Chinese Yuan Renminbi Rates table.  (2018).  X-rates.com.  Retrieved from https://www.x-rates.com/historical/?from=CNY&amount=1&date=2018-07-31.

Ford Motor Company.  (2017).  Form 10-k 2016.  Retrieved from https://corporate.ford.com/content/dam/corporate/en/investors/reports-and-filings/Other/Ford-Motor-Company-2016-10-K.pdf.

Ford Motor Company.  (2018).  Form 10-K 2017.  Retrieved from http://d18rn0p25nwr6d.cloudfront.net/CIK-0000037996/4f90d024-95f4-4f27-86f7-ce89d6b320a9.pdf.

 

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