Running head: AMERICAN CORPORATION ANALYSIS

American Corporation Analysis

Ford Motor Company
Sarah Chau, Gabriella Goodfield, Janet Jackson, and Mohammed Al Mufti
ACC/561
October 26, 2015
Myrtle Clark

AMERICAN CORPORATION ANALYSIS

AMERICAN CORPORATION ANALYSIS

Introduction
Comparative Analysis

Horizontal Analysis
Horizontal Analysis is use to evaluate the financial statements for several periods.

Horizontal analysis, also known as trend analysis, is a technique for evaluating a series of
financial statement data over a period of time. Its purpose is to determine the increase or
decrease that has taken place, expressed as either an amount or a percentage (Kimmel, 2011 pg.
694 para 1). The formula to use for the Balance sheet is Change Since Base period=Current Year
Amount Base Year Amount /Based Year Amount and the formula to use for the Income
Statement and the Statement of Cash Flows is Current Results in relation to based year= Current
year/Based year Amount.
Learning Team D chose Ford Motor Company. The Annual Report with the filing date
August 3, 2015 is being used for the horizontal analysis. Using 2012 as the based year and 2014
as current year to see if there are increases or decrease. In the income statement, Ford has the
following as revenue that is on the income statement.
1. Operating leases
2. Retail Financing
3. Dealer Financing
Operating leases increased by 1.54% this shows that more people are leasing Fords cars rather
than buying. Retail Financing has decrease by .93% this could mean that due the fact, the United
States is going through a recession or people are buying cars from other care companies. Dealer
financing is at 1.14%. This could show that the dealerships are selling more cars and trucks.

AMERICAN CORPORATION ANALYSIS

The statements of cash flows show that net income has increase by 1.40%. In the
Statement of Cash flow, there are net changes that are in negative in years 2012 and 2014.
Example is liabilities but Ford is improving on that.
The balance sheet shows that cash has decrease by 0.34 %( my calculations shows -0,
34%). In other accounts such as finance, receivables there are good increases. These results
could show that Ford is on the rebound.

Vertical Analysis

Ratio Analysis

Liquidity Ratios
1. Current Ratio
Fords current ratio is at 1.103:1 this shows that for every dollar that Ford has in
liabilities they have $1.103 in assets. In 2013, Ford current ratio was at 1.101.
The means that Ford has increase. Ford liquidity in 2014 is extremely low.
2. Current Cash Debt Coverage Ratio
3. The current cash debt coverage ratio results for Ford is 0.04
times a mean s that Fords value when comparing to another car
company is 0.04 times.
4. Inventory Turnover Ratio
5. Days in Inventory
6. Receivables Turnover Ratio

AMERICAN CORPORATION ANALYSIS

The Receivables Turnover ratio for Ford is 0.07 times. This will have a negative
effect on the average collection period
7. Average Collection Period
The average collection period is defined as 365/receivables
ration turnover. In order to get this number, one must calculate
the receivables ratio turnover. This is defined s net credit
sales/average net receivables. For Ford Motor, Inc, according to
their 2014 10K report, receivables ratio turnover is the following:
8. 108,400,000,000/113,000,000,000=.96
Then, to calculate the average collection period, the
calculation would be the following:
9. 365/.96= 384 days

Profitability Ratios
1. Earnings Per Share
2. Price-Earnings Ratio
3. Gross Profit Rate
4. Profit Margin Ratio
5. Return on Assets Ratio
6. Asset Turnover Ratio
7. Payout Ratio
Payout ratio is defined as cash dividends declared on
common stock/net income. For Ford Motor, Inc, this calculation

AMERICAN CORPORATION ANALYSIS

was simple as there were no cash dividends paid out in 2014 (p

FC-4).

8. Return on Common Stockholders Equity Ratio

Return on common stockholders equity ratio is defined as
(net income-preferred stock dividend)/average common
stockholders equity.
The calculation is the following:
(1,700,000,000-0)/(11,367,000,000)= $.15
Stockholders equity was obtained on page FC-3 in Fords
report, and net income was obtained from page 21 in Fords
report. There were no dividends paid out in 2014.

Conclusion
References

Kimmel, P.D., Weygandt, J.J., & Kieso, D.E. (20011) Accounting Tools for business decision
making (4th ed.) Hoboken, NJ John Wiley & Sons
http://credit.ford.com/investor-center/company-reports; report 12_31_14; 10-K

AMERICAN CORPORATION ANALYSIS