Financial Analysis of Ford Motors

Company Name: Ford Motors

Competitors: General Motors and Tesla

Your Report consists of three parts:

Part 1: Financial Analysis

Part 2: Managerial Actions

Part 3: Investors’ Decisions

1.1 Current and quick ratios:

 

1.2 Turnover ratios:

 

1.3Cycle & DIR

 

2. Long-Term Debt Policy:

 

 

3. Asset Utilization:

 

4. Profitability:

 

5. Return on Investment:   

 

5.3 Dividend Payout:

 

6. Market ratios:

 

6.2 Growth Ratios:

1.4 Cash Cycle: Discuss at least 5 ways through which your company could reduce its cash cycle. Please note that we discussed a complete list of ways to reduce cash cycle in class, but not all items would be applied to your company—choose the ones that will work for your company and discuss in details how each way could be achieved.

1.5 Cash position: Discuss the company’s cash position in general –is the company holding too much, right just, or not enough cash?). Your answer should be based on the ratios you calculated above and consider the company’s balance sheet, income statement, cash flow statement, and its business strategy. (Cash = cash & equivalent + ST investments)

2.2 Based on Higgins 5-Factor Model of Financing Decisions, analyze your company against each of the 5 factors, and weigh the relative importance of these five factors. Should the company use high or low level of debt? (read Chapter 6) 

2.3 Give advice to the company in terms of its debt policy—should the company reduce its debt, issue more debt, or stay in the current situation, explain your answers in details. 

4.2 Are the company’s margins changing? Why and what are the underlying business cause—changes in competition, changes in input costs, or poor overhead cost management? 

4.3 Now look at the company’s SG&A: is the company managing its overhead and administrative costs well? What are the business activities driving these costs? Are these activities necessary? 

4.4 Discuss the company’s tax planning strategies and whether it strategically locates certain operations in tax havens, (hint: you can find the information on the company’s annual report). Is the company’s effective tax rate affected by the US tax cut? 

4.5 Suggest two ways through which the company could improve its net profit margin, if necessary; or if you think the company’s current net profit margin is fine, you can also suggest two ways specifically to keep it or even further increase it.

5.2 Suggest two ways through which the company could improve its ROE, if necessary; or if you think the company’s current ROE is fine, you can also suggest two ways specifically to keep it or even further increase it.

7.1 Calculate the following for your company and its two competitors in the most recent year AND comment on the numbers:

• Beta
• Cost of equity
• Credit rating (if credit rating not available, show synthetic rating)
• Cost of debt

7.2 Calculate the following for your company and its two competitors in the most recent year AND comment on the numbers:

• Market value of equity (MV Equity)
• Market value of debt (MV Debt)
• Market value of equity as a percentage of (MV Equity + MV Debt)
• WACC

7.3 Where do you see the company’s WACC going, increasing, decreasing, or remaining at the same level? Why? Type your answers starting from here:

7.4 Discuss two ways to improve the company’s WACC, your answers should relay to the general market condition, as well as the company’s debt structure & policy.

Type your answers starting from here:

Others

Discuss one more thing that’s not discussed above but you find worth noticing from the company’s income statement, balance sheet, or cash flow statement.

1. From a CEO/CFO’s perspective, summarize the company’s overall strengths and weaknesses in (1) operation, (2) investment, and (3) financing. What is your company’s overall core competence? Does it have a wide or narrow economic moat?

2. From a CEO/CFO’s perspective, understand your value drivers and various ratios and suggest how the company could increase its value. Your analysis here should be based on both your ratio analysis and valuation.

3. What are some ways that your company can further its growth? (hint: you can read Chapter 4 but please apply it to your company specifically; you can also draw on your analysis above on PEST, industry trend, and firm-specific factors)

1. Creditors’ decision:

If you work for a bank and the company approaches you for debt financing:

• Which ratios/numbers in Part 2 are important considerations?
• Will you issue loans to the company? Why?
• If you are not issuing a loan to the company for now, what would need to improve for you to decide to issue loans?

Type your answers starting from here:

Equity Investors’ decision:

If you are considering whether or not to invest on the company’s publically traded stocks:

which ratios are important considerations? Will you purchase the stock? Why?

• Which ratios/numbers in Part 2 are important considerations?
• Will you invest in the company’s stock? Why?
• If you are not investing in the stock for now, what would need to improve for you to decide to invest? Type your answers starting from here: