A

RESEARCH PROJECT REPORT (CP-402)

ON
“RATIO ANALYSIS OF FORD MOTOR CO”
Submitted In the Partial Fulfillmentforthe Award of
Degree of
Master of Business Administration (MBA)
TO
KURUKSHETRA UNIVERSITY, KURUKSHETRA

Session-(2016-2018)

Under the Supervision of: Submitted By:

Ms. KamalpreetKaur Ankit

Assistant professor College Roll No: 73161214
Faculty of management GGGI University Reg No: 16GGDA170

1
 PREFACE
This research project is a part of the Business Administration Course being taken up
at Department of Management Studies, Galaxy Global Group of Institution
affiliated to Kurukshetra University. The topic assigned to me was “RATIO
ANALYSIS OF FORD MOTOR CO”

This project has been of great help in providing me an insight in to the working of an
organization; it gave me a chance to apply, all I had learn to practical situations,
enhancing my understanding and image of the business world. This experience in
decision making and practical application of knowledge has contributed greatly to my
growth both as a person and manager.
In MBA course requires equal attention towards practical as well as theoretical
aspects of business, various problems are to be dealt with in that course .That’s why
research programs are there to give deep as well as thorough knowledge of subjects
and problems which are practical whenever one enters in the profession.
Research programs are included in the curriculum of various management courses so
as to trained students with practical knowledge and exposure to professional life.

The project entitled “RATIO ANALYSIS”. The first task will to know about the
concept on which the project was based. Then we will have to set criteria, on the basis
of which the above concept will value. The factors, on the basis of which the research
has been done, analyzed, evaluated and then presented. The research was design and
extensive analysis brought to light several facts.

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 ACKNOWLEDGEMENT
I would like to extend my sincere and heartfelt obligation towards all the persons
who have helped me in this endeavor. Without their active guidance, help,
cooperation and encouragement I would not have made progress in the project.

First and foremost I would like to express my sincere gratitude to Dr. Raj
Kumar, Director, Galaxy Global Group of Institutions.

Secondly, I express my deepest thanks to Dr. SubhkamnaRathore, HOD and

Assistant Professor Faculty of Management, Galaxy Global Group of
Institutions for providing opportunity and giving necessary advices, guidance,
valuable support, and assistance in the completion of this project report.

Thirdly, my project guideMs. KamalpreetKaur, Assistant Professor Faculty of

Management, Galaxy Global Group of Institutions who in spite of being extra
ordinarily busy with his duties, took time out to here, guide, advice and keep me
on the correct path.

I am also thankful to all the respondents who helped in the accomplishment of

this project by their valuable responses and suggestions.

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 DECLARATION
I, Ankit hereby declare that, I am the sole author of the project titled “RATIO
ANALYSIS OF FORD MOTOR CO”“submitted to “Galaxy Global group of
institutions” affiliated to Kurukshetra University in fulfillment of the requirements
for the award of the degree of Master of Business Administration. It is an original
work carried out by me. This project contains no material previously published or
written by another person except where due reference is made.Under this research
all information are relevant according to my knowledge.

Ankit

(Student of GGGI)

4
 CERTIFICATE

This is to certify that the Dissertation entitled “A RESEARCH PROJECT ON

RATIO ANALYSIS OF FORD MOTOR CO” is a bonafide record of independent
research work done by ANKIT ( Reg. No.: 16GGDA170) undermy supervision
and submitted to Kurukhsetra University Kurukshetra in partial fulfillment for
the award of the Degree of MASTER OF BUSINESS ADMINISTRATION.

MRS KAMALPREET KAUR

(Assistant Professor)
Faculty of Management

5
 TABLE OF CONTENTS

CHAPTER
Sr. No. NO TOPIC PAGE NO

1. CHAPTER 1 INTRODUCTION 01-09

2. CHAPTER2 INDUSTARY AND

COMPANY PROFILE 10-30

3. CHAPTER 3 RATIO ANALYSIS 31-50

4. CHAPTER 4 LITERATURE
REVIEW 51-55

5. CHAPTER 5 RESEARCH
METHODOLOOGY 56-61

6. CHAPTER 6 DATA ANALYSIS AND

INTERPREETATION 62-89

7. CHAPTER 7 FINDINGS
RECOMMENDATIONS 89-94
AND CONCLUSION

BIBLOGRAPHY

ANNEXURE

6
 CHAPTER 1

INTRODUCTION

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INTRODUCTION
The project undertaken is on ratio analysis in FORD MOTOR CO. It describes about
how the company manages its financial aspects and the various steps that are required
in the management of financial system.
Cash is the lifeline of a company. If this lifeline deteriorates, so does the company's
ability to fund operations, reinvest and meet capital requirements and payments.
Understanding a company's cash flow health is essential to making investment
decisions. A good way to judge a company's cash flow prospects is to look at its
working capital as well as ratio analysis.
Aratio analysis is a quantitative analysis of information contained in a
company's financial statements. Ratio analysis is used to evaluate various aspects of a
company's operating and financial performance such as its efficiency, liquidity,
profitability and solvency.
The ratio analysis is an important yardstick to measure the company’s operational and
financial efficiency. Any company should have a right amount of cash and lines of
credit for its business needs at all times. This project describes how the financial
system takes place at FORD MOTOR CO.

INTRODUCTION TO RATIO ANALYSIS

When we observed the financial statements comprising the balance sheet and profit or
loss account is that they do not give all the information related to financial operations
of a firm, they can provide some extremely useful information to the extent that the
balance sheet shows the financial position on a particular date in terms of structure of
assets, liabilities and owner’s equity and profit or loss account shows the results of
operation during the year. Thus the financial statements will provide a summarized
view of the firm. Therefore in order to learn about the firm the careful examination of
in valuable reports and statements through financial analysis or ratios is required.

Meaning and Definition:-

Ratio analysis is one of the powerful techniques which is widely used for interpreting
financial statements. This technique serves as a tool for assessing the financial
soundness of the business. The idea of ratio analysis was introduced by Alexander
wall for the first time in 1919. Ratios are quantitative relationship between two or

8
more variables taken from financial statements. Ratio analysis is defined as, “The
systematic use of ratio to interpret the financial statement so that the strength and
weakness of the firm as well as its historical performance and current financial
condition can be determined. In the financial statements we can find many items are
co-related with each other For example current assets and current liabilities, capital
and long term debt, gross profit and net profit purchase and sales etc. To take
managerial decision the ratio of such items reveals the soundness of financial
position. Such information will be useful for creditors, shareholders management and
all other people who deal with company.

Importance:

As a tool of financial management ratio are of crucial significance. The importance

of ratio analysis lies in the fact that it presents facts on a comparative basis and
enables the drawing inferences regarding the performance of a firm. Ratio analysis is
relevant in assessing the performance of a firm in respect of the following aspects:

Liquidity
position

Trend Long term

analysis. solvency

Aspects
of Ratio
analysis

Inter firm Operating

comparison efficiency

Overall
profitability

Liquidity Position

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With the help of ratio analysis conclusions can be drawn regarding the liquidity
position of a firm would be satisfactory if it is able to meet its current obligations
when it became due. A firm can be said to have the ability to meet its short term
liabilities if it has sufficient liquid funds to pay the interest on its short maturing debt
usually within a year as well as to repay the principal. This ability is reflected in the
liquidity ratios of a firm. The liquidity ratios are particularly useful in credit analysis
by banks and other suppliers of short term loans.

Long term solvency:

Ratio analysis is equally useful for assessing the long term financial viability of a
firm. This aspect of the financial position of a borrower is of concern to the long term
creditors, security analysts and the present and potential owners of a business. The
long term solvency is measured by the leverage/capital structure and profitability
ratios which focus on earning power and operating efficiency. Ratio analysis reveals
the strengths and weakness of a firm in this respect. The leverage ratio for instance,
will indicate whether a firm has reasonable proportion of various sources of finance or
if it is heavily loaded with debt in which case its solvency is exposed to serious strain.
Similarly the various profitability ratios would reveal whether or not the firm is able
to offer adequate return to its owners consistent with the risk involved.

Operating efficiency:

Yet another dimension of the usefulness of the ratio analysis, relevant from the
viewpoint of management, is that it throws light on the degree of efficiency in the
management and utilization of its assets. The various activity ratios measure this kind
of operational efficiency. In fact, the solvency of a firm is, in the ultimate analysis,
dependent upon the sales revenues generated by the use of its assets total as well as its
components.

Overall profitability:

Unlike the outside parties which are interested in one aspect of the financial position
of a firm, the management is constantly concerned about the overall profitability of
the enterprise. That is, they are concerned about the ability of the firm to meet its

10
short term as well as long term obligations to its creditors, to ensure a reasonable
return to its owners and secure optimum utilization of the assets of the firm. This is
possible if an integrated view is taken and all the ratios are considered together.

Inter firm comparison:

Ratio analysis not only throws light on the financial position of a firm but also serves
as a stepping stone to remedial measures. This is made possible due to inter firm
comparison and comparison with industry averages. A single figure of a particular
ratio is meaningless unless it is related to some standard or norm. one of the popular
techniques is to compare the ratios of a firm with the industry average. It should be
reasonably expected that the performance of a firm should be in broad conformity
with that of the industry to which it belongs. An interfere comparison would
demonstrate the firm’s position vis-à-vis its competitors. If the results are at variance
either with the industry average or with those of the competitors, the firm can seek to
identify the probable reasons and, in that light, take remedial measures.

Trend Analysis

Finally, ratio analysis enables a firm to take the time dimension into account. In other
words, whether the financial position of a firm is improving or deteriorating over the
years. This is made possible by the use of trend analysis. The significance of a trend
analysis of ratios lies in the fact that the analysts can know the direction of movement,
that is, whether the movement is favourable or unfavourable. For example, the ratio
may be low as compared to the norm but the trend may be upward. On the other hand,
though the present level may be satisfactory but the trend may be a declining one.

Limitations:

Ratio analysis is a widely used tool of financial analysis. Yet, it suffers from various
limitations. The operational implication of this is that while using ratios, the
conclusions should not be taken on their face value. Some of the limitations which
characterise ratio analysis are

i) Difficulty in comparison

ii) Impact of inflation, and iii) Conceptual diversity.

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Difficulty in comparison:

One serious limitation of ratio analysis arises out of the difficulty associated with their
comparisons are vitiated by different procedures adopted by various firms. The
differences may relate to

 Differences in the basis of inventory valuation (e.g. last in first out, first in first
out, average cost and cost)
 Different depreciation methods (i.e. straight line vs. written down basis)
 Estimated working life of assets, particularly of plant and equipment
 Amortization of intangible assets like good will, patents and so on
 Amortization of deferred revenue expenditure such as preliminary expenditure
and discount on issue of shares
 Capitalization of lease
 Treatment of extraordinary items of income and expenditure; and so on.

Secondly, apart from different accounting procedures, companies may have different
accounting periods, implying differences in the composition of the assets, particularly
current assets. For these reasons, the ratios of two firms may not be strictly
comparable.

Another basis of comparison is the industry average. This presupposes the

availability, on a comprehensive scale, of various ratios for each industry group over a
period of time. If, however as is likely such information is not compiled and available,
the utility of ratio analysis would be limited.

Impact of inflation:

The second major limitation of the ratio analysis as a tool of financial analysis is
associated with price level changes. This, in fact, is a weakness of the traditional
financial statements which are based on historical costs. An implication of this feature
of the financial statements as regards ratio analysis is that assets acquired at different
periods are, in effect, shown at different prices in the balance sheet, as they are not
adjusted for changes in the price level. As a result, ratio analysis will not yield strictly
comparable and, therefore, dependable results. To illustrate, there are two firms which

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have identical rates of returns on investments, say 15%. But one of these had acquired
its fixed assets when prices were relatively low,

While the other one had purchased them when prices were high. As a result, the book
value of the fixed assets of the former type of firm would be lower, while that of the
latter higher. From the point of view of profitability, the return on the investment of
the firm with a lower book value would be overstated. Obviously, identical rates of
returns on investment are not indicative of equal profitability of the two firms. This is
a limitation of ratios.

Conceptual Diversity:

Yet another factor which influences the usefulness of ratios is that there is difference
of opinion regarding the various concepts used to compute the ratios. There is always
room for diversity of opinion as to what constitutes shareholders equity, debt, assets,
and profit and so on. Different firms may use these terms in different senses or the
same firm may use them to mean different things at different times.

Reliance on a single ratio, for a particular purpose may not be a conclusive indicator.
For instance, the current ratio alone is not a as adequate measure of short term
financial strength; it should be supplemented by the acid test ratio, debtors turnover
ratio and inventory turnover ratio to have real insight into the liquidity aspect.

Finally, ratios are only a post mortem analysis of what has happened between two
balance sheet dates. For one thing, the position in the interim period us bit revealed by
ratio analysis. Moreover, they give no clue about the future.

In brief, ratio analysis suffers from some serious limitations. The analyst should not
be carried away by its oversimplified nature, easy computation with a high degree of
precision. The reliability and significance attached to ratios will largely depend upon
the quality of data on which they are based. They are as good as the data itself.
Nevertheless, they are an important tool of financial analysis.

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Some Ratio are helpful to know the financial condition of the organization, there
are

Liquidity ratio
Long –term
• . A) Current ratio Profitability Ratios
• B) Quick ratio Solvency Ratio
A) Gross profit
A) Debt-equity
ratio
ratio
B) Net profit ratio
B) Proprietor Ratio
C) Operating
C) Int. Coverage
expenses ratio
ratio

Activity/Efficiency 0r Current
Assets Movement Ratio
Earnings Ratios – Overall
A) Inventory turnover ratio
Profitability Ratios
B) Debtor’s turnover ratio
A) Return on asset
C) Debtor’s collection period
B) Return on capital employed
ratio
D) Creditor’s turnover ratio

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 Executive Summary

The project on ratio analysis has been a very good experience. Every company faces

the problem of proper financial management in their day to day processes. An

organization’s cost can be reduced and the profit can be increased only if it is able to

manage its financial efficiently through proper ratio maintained. At the same time the

company can provide customer satisfaction and hence can improve their overall

productivity and profitability.

This project is a sincere effort to study and analyze the financial management of

FORD. The project was focused on making a financial overview of the company by

conducting a ratio analysis of FORD for the years 2013 to 2017 and Ratios analysis &

various components of financial management & for the year 2015 in aninverse

growth.

The internship is a bridge between the institute and the organization. This made me to

be involved in a project that helped me to employ my theoretical knowledge about the

myriad and fascinating facets of finance. And in the process I could contribute

substantially to the organization’s growth. The experience that I gathered over the

past six months has certainly provided the orientation, which I believe will help me in

shouldering any responsibility in future.

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 CHAPTER 2

INDUSTRY AND COMPANY PROFILE

INDUSTRY PROFILE

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The automotive industry is a wide range of companies and organizations involved in
the design, development, manufacturing, marketing, and selling of motor vehicles,
some of them are called automakers. It is one of the world's most important economic
sectors by revenue. The automotive industry does not include industries dedicated to
the maintenance of automobiles following delivery to the end-user, such
as automobile repair shops and motor fuel filling stations.

The term automotive was created from Greek autos (self), and Latin motivus (of
motion) to represent any form of self-powered vehicle. This term was proposed
by Elmer Sperry.

HISTORY

Thomas B. Jeffery automobile factory in Kenosha, Wisconsin, c.1916

Citroën assembly line in 1918

The automotive industry began in the 1890s with hundreds of manufacturers that
pioneered the horseless carriage. For many decades, the United States led the world in
total automobile production. In 1929, before the Great Depression, the world had
32,028,500 automobiles in use, and the U.S. automobile industry produced over 90%
of them. At that time the U.S. had one car per 4.87 persons.] After World War II, the
U.S. produced about 75 percent of world's auto production. In 1980, the U.S. was

17
overtaken by Japan and then became world's leader again in 1994. In 2006, Japan
narrowly passed the U.S. in production and held this rank until 2009, when China
took the top spot with 13.8 million units. With 19.3 million units manufactured in
2012, China almost doubled the U.S. production, with 10.3 million units, while Japan
was in third place with 9.9 million units. From 1970 (140 models) over 1998 (260
models) to 2012 (684 models), the number of automobile models in the U.S. has
grown exponentially.

Safety

Safety is a state that implies to be protected from any risk, danger, damage or cause of
injury. In the automotive industry, safety means that users, operators
or manufacturers do not face any risk or danger coming from the motor vehicle or its
spare parts. Safety for the automobiles themselves implies that there is no risk of
damage.

Safety in the automotive industry is particularly important and therefore highly

regulated. Automobiles and other motor vehicles have to comply with a certain
number of norms and regulations, whether local or international, in order to be
accepted on the market. The standard ISO 26262, is considered as one of the best
practice framework for achieving automotive functional safety.

In case of safety issues, danger, product defect or faulty procedure during the
manufacturing of the motor vehicle, the maker can request to return either a batch or
the entire production run. This procedure is called product recall. Product recalls
happen in every industry and can be production-related or stem from the raw material.

Product and operation tests and inspections at different stages of the value chain are
made to avoid these product recalls by ensuring end-user security and safety and
compliance with the automotive industry requirements. However, the automotive
industry is still particularly concerned about product recalls, which cause considerable
financial consequences.

Economy

Around the world, there were about 806 million cars and light trucks on the road in
2007, consuming over 980 billion liter’s (980,000,000 m3) of gasoline and diesel fuel
yearly. The automobile is a primary mode of transportation for many developed

18
economies. The Detroit branch of Boston Consulting Group predicts that, by 2014,
one-third of world demand will be in the four BRIC markets (Brazil, Russia, India and
China). Meanwhile, in the developed countries, the automotive industry has slowed
down. It is also expected that this trend will continue, especially as the younger
generations of people (in highly urbanized countries) no longer want to own a car
anymore, and prefer other modes of transport. Other potentially powerful automotive
markets are Iran and Indonesia.Emerging auto markets already buy more cars than
established markets. According to a J.D. Power study, emerging markets accounted
for 51 percent of the global light-vehicle sales in 2010. The study, performed in 2010
expected this trend to accelerate. However, more recent reports (2012) confirmed the
opposite; namely that the automotive industry was slowing down even in BRIC
countries. In the United States, vehicle sales peaked in 2000, at 17.8 million units.

List of countries by motor vehicle production

Year Production Change

1997 54,434,000

1998 52,987,000 -2.7%

1999 56,258,892 6.2%

2000 58,374,162 3.8%

2001 56,304,925 -3.5%

2002 58,994,318 4.8%

2003 60,663,225 2.8%

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Year Production Change

2004 64,496,220 6.3%

2005 66,482,439 3.1%

2006 69,222,975 4.1%

2007 73,266,061 5.8%

2008 70,520,493 -3.7%

2009 61,791,868 -12.4%

2010 77,857,705 26.0%

2011 79,989,155 3.1%

2012 84,141,209 5.3%

2013 87,300,115 3.7%

2014 89,747,430 2.6%

2015 90,086,346 0.4%

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 Year Production Change

2016 94,976,569 4.5%

Automotive industry by country

The OICA counts over 50 countries which assemble manufacture or disseminate

automobiles. Of that figure, only 13, boldfaced in the list below, possess the
capability to design automobiles from the ground up.

Algeria Egypt

Argentina Finland

Australia France

Austria Ghana

Azerbaijan Germany

Bangladesh Hungary

Belarus India

Belgium Indonesia

Brazil Iran

Bulgaria Italy

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 Canada Japan

China Jordan

Colombia Kazakhstan

Czech Republic Kenya

Ecuador Morocco

Top 20 motor vehicle producing countries 2016-17

Country Motor vehicle production (units)
China 28,118,794
United States 12,198,137
Japan 9,204,590
Germany 6,062,562
India 4,488,965
South Korea 4,228,509
Mexico 3,597,462
Spain 2,885,922
Canada 2,370,271
Brazil 2,156,356
France 2,082,000
Thailand 1,944,417
United Kingdom 1,816,622
Turkey 1,485,927
Czech Republic 1,349,896
Russia 1,303,989

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 Indonesia 1,177,389
Iran 1,164,710
Italy 1,103,516
Slovakia 1,040,000

List of manufacturers by motor vehicle production

This is a list of the 15 largest manufacturers by production in 2016-17.

Stake holding

It is common for automobile manufacturers to hold stakes in other automobile

manufacturers. These ownerships can be explored under the detail for the individual
companies.

Rank Group Country Vehicles

1 Toyota Japan 10,213,486

2 Volkswagen Group Germany 10,126,281

3 Hyundai South Korea 7,889,538

4 General Motors United States 7,793,066

5 FORD MOTOR Co United States 6,429,485

6 Nissan Japan 5,556,241

7 Honda Japan 4,999,266

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Rank Group Country Vehicles

Fiat Chrysler Italy / United

8 4,681,457
Automobiles States

9 Renault France 3,373,278

10 PSA France 3,152,787

11 Suzuki Japan 2,945,295

12 SAIC China 2,566,793

13 Daimler Germany 2,526,450

14 BMW Germany 2,359,756

15 Changan China 1,715,871

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 COMPANY PROFILE

INTRODUCTION
The Indian auto industry is one of the largest in the world. The industry accounts for
7.1 per cent of the country's Gross Domestic Product (GDP). The Two Wheelers
segment with 80 per cent market share is the leader of the Indian Automobile market
owing to a growing middle class and a young population. Moreover, the growing
interest of the companies in exploring the rural markets further aided the growth of
the sector. The overall Passenger Vehicle (PV) segment has 14 per cent market share.
India is also a prominent auto exporter and has strong export growth expectations for
the near future. Overall automobile exports grew 13.01 per cent year-on-year between
April-December 2017. In addition, several initiatives by the Government of India and
the major automobile players in the Indian market are expected to make India a leader
in the 2W and Four Wheeler (4W) market in the world by 2020.

FORD MOTOR Co manufactures and exports vehicles and engines made at its
integrated manufacturing facilities in Chennai, Tamil Nadu and Sanand, Gujarat.
Since its entry in India in 1995, FORD MOTOR Co has invested more than US$ 2
billion to expand its manufacturing facilities and sales & service footprint to meet the
demand in one of the world's fastest-growing auto markets. FORD MOTOR Co
India’s integrated manufacturing facility at Maraimalai Nagar, near Chennai,
produces its award-winning range of products including the FORD MOTOR
CoEcoSport and FORD MOTOR Co Endeavour.
As part of its overall commitment, FORD MOTOR Co inaugurated its US$ 1 billion
state-of-the-art integrated manufacturing facility in Sanand, Gujarat in March 2015.
With Sanand being operational, FORD MOTOR Co India has doubled its annual
installed manufacturing capacity to 610,000 engines and 440,000 vehicles. The sub-
four-metre compact sedan, FORD MOTOR Co Aspire, became the first car to roll out
from the new FORD MOTOR CoSanand plant. The plant also manufactures Next-
Gen Figo hatchback.
FORD MOTOR Co’s biggest-ever product line-up in India today offers a vehicle to
suit the needs of nearly every consumer. In 2016, FORD MOTOR Co has also given
Indian consumers their first opportunity to own the iconic FORD MOTOR Co
Mustang. Debuting ahead of the Delhi Auto Expo 2016 and set to hit Indian

25
showrooms later this year, the new Mustang is all set to bring the world-class
performance and refinement of FORD MOTOR Co’s iconic pony car to India’s roads.
As part of its strategy to Make in India for India and the World, FORD MOTOR Co
continues to strengthen India as a center of excellence for small cars and low
displacement engines. The company has embarked on an accelerated export strategy
and presently, exports Next-Gen Figo, Aspire, and EcoSport to over 40 markets
around the world.
Along with introducing new products, FORD MOTOR Co continues to grow closer to
customers with the continued expansion of its nationwide dealership network as well
as world-class after-sales offerings. Presently, FORD MOTOR Co has more than 376
sales and service outlets in 209 cities across India. To enhance afFORD MOTOR
Coability and accessibility, FORD MOTOR Co has introduced many pioneering
initiatives that reduce the cost of ownership including the Sub-assembly of parts, Pan-
India Roadside Assistance, and Mobile Service Support. To ensure total transparency
in service costs, FORD MOTOR Co also introduced a unique Service Price Promise,
which allows customers to calculate the vehicles’ periodic maintenance costs even
before booking the service at the dealership.
Ensuring customer convenience, FORD MOTOR Co has expanded the availability of
FORD MOTOR Co Genuine Parts with the appointment of distributors in
Maharashtra, Goa, Karnataka, Kerala, Delhi, Tamil Nadu, AP, and Telangana.
FORD MOTOR Co’s presence in India includes FORD MOTOR Co Credit India,
which started dealer wholesale inventory and retail financing in 2015 as a non-
banking financial company. With five decades of global experience, FORD MOTOR
Co Credit’s operations span in as many as 100 countries where it has emerged as a
preferred automotive financier for both FORD MOTOR Co customers as well as
dealers.
FORD MOTOR Co Credit is known for its reliable and transparent loan products at
competitive rates, flexible terms, and outstanding customer service.
Continuing to generate employment and help the economy, FORD MOTOR Co’s
operations currently employ more than 14,000 hard-working, dedicated men and
women across its operations in India which also include Global Business Services,
with offices in Chennai, New Delhi, and Coimbatore.
Registered as FORD MOTOR Co Motor Pvt Ltd. (FMPL) as a legal entity, Global
Business Services provide innovative solutions to nearly every FORD MOTOR

26
Colocations around the world in areas of Information Technology, Product
Engineering, Finance and Accounting, Automotive Financing, Material, Planning &
Logistics, Marketing Sales and Service, Analytics, and Purchasing.
Driving innovation from India, FORD MOTOR Co recently announced plans to build
a new global engineering and technology center in Chennai. Besides the establishment
of a global engineering and technology center, the new FORD MOTOR Co campus
spread across 28 acres will host operations of FORD MOTOR Co Global Business
Services in areas of IT, Product Engineering, Finance and Accounting, Data
Analytics, Manufacturing among others.
FORD MOTOR Co’s commitment to India is not just business centric. At the heart of
our business plans are people and communities. Going further with its Better World
philosophy, FORD MOTOR Co India in association with FORD MOTOR Co Motor
Company Fund announced ‘Operation Better World,' with the endeavour to address
issues related to Education, Sustainability and Auto Safety around communities where
it operates.
AnuragMehrotra was appointed Managing Director of FORD MOTOR Co India,
effective June 1, 2017.
Mehrotra reports directly to Peter Fleet, Group Vice President, and President, Asia
Pacific, FORD MOTOR Co Motor Company and is based at FORD MOTOR Co’s
India corporate office in Gurgaon. In his role, Mehrotra is responsible for managing
FORD MOTOR Co’s operations in India.
Previously as executive director, Marketing, Sales & Service, Mehrotra has been
responsible for all marketing, sales and service functions in India.
Before this, Mehrotra, 44, served as vice president of sales and marketing at FORD
MOTOR Co India, leading several successful marketing campaigns & growing the
company’s sales and service footprint. Before joining FORD MOTOR Co India,
Mehrotra was vice president – Corporate Marketing at WNS Global Services, a
leading business process outsourcing company, where he was responsible for lead
generation and brand building in North America and Europe.

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Born in 1973, Mehrotra holds a degree in Electronics Engineering & Diploma in
marketing management.

VinayRaina - Executive Director for Marketing, Sales & Service at FORD

MOTOR Co India

Rahul Gautam - Vice President, Marketing, FORD MOTOR Co India

George Elisseou - HR Director, FORD MOTOR Co India

David Schock - Chief Financial Officer, FORD MOTOR Co India

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Market Size

Production of passenger vehicles, commercial vehicles, three wheelers and two

wheelers grew at 11.27 per cent year-on-year between April-December 2017 to
21,415,719 vehicles. The sales of passenger vehicles and two wheelers grew by 5.22
per cent and 40.31 per cent year-on-year respectively, in December 2017.

The auto industry is set to witness major changes in the form of electric vehicles
(EVs), shared mobility, Bharat Stage-VI emission and safety norms. Electric cars in
India are expected to get new green number plates and may also get free parking for
three years along with toll waivers@. India's electric vehicle (EV) sales increased
37.5 per cent to 22,000 units during FY 2015-16 and are poised to rise further on the
back of cheaper energy storage costs and the Government of India’s vision to see six
million electric and hybrid vehicles in India by 2020.
Investments
In order to keep up with the growing demand, several auto makers have started
investing heavily in various segments of the industry during the last few months. The
industry has attracted Foreign Direct Investment (FDI) worth US$ 17.91 billion
during the period April 2000 to September 2017, according to data released by
Department of Industrial Policy and Promotion (DIPP).
Some of the recent/planned investments and developments in the automobile sector in
India are as follows:

 The only electric automaker in India, Mahindra and Mahindra Ltd, has partnered
with Uber for deploying its electric sedan e-Verito and hatchback e2o Plus on Uber
platforms in New Delhi and Hyderabad.
 Vedanta Resources Plc is planning to invest around US$ 9 billion in India and create
more than a million direct or indirect jobs in the country.

Government Initiative

The Government of India encourages foreign investment in the automobile sector and
allows 100 per cent FDI under the automatic route.Some of the recent initiatives taken
by the Government of India are -

29
  The Government of Karnataka is going to obtain electric vehicles underFAME
Scheme and set up charging infrastructure across Bengaluru, according to Mr
R V Deshpande, Minister for Large and Medium Industries of Karnataka.
 The Ministry of Heavy Industries, Government of India has shortlisted 11
cities in the country for introduction of electric vehicles (EVs) in their public
transport systems under the FAME (Faster Adoption and Manufacturing of
(Hybrid) and Electric Vehicles in India) scheme.
 Energy Efficiency Services Limited (EESL), under Ministry for Power and
New and Renewable Energy, Government of India, is planning to procure
10,000 e-vehicles via demand aggregation, and has already awarded contracts
to Tata Motors Ltd for 250 e-cars and to Mahindra and Mahindra for 150 e-
cars.
 The government is planning to set up a committee to develop an institutional
framework on large-scale adoption of electric vehicles in India as a viable
clean energy mode, especially for shared mass transport, to help bring down
pollution level in major cities.

Road Ahead
The automobile industry is supported by various factors such as availability of skilled
labour at low cost, robust R&D centres and low cost steel production. The industry
also provides great opportunities for investment and direct and indirect employment
to skilled and unskilled labour.
The Indian automotive aftermarket is estimated to grow at around 10-15 per cent to
reach US$ 16.5 billion by 2021 from around US$ 7 billion in 2016. It has the potential
to generate up to US$ 300 billion in annual revenue by 2026, create 65 million
additional jobs and contribute over 12 per cent to India’s Gross Domestic Product#.
Exchange Rate Used: INR 1 = US$ 0.015 as of January 4, 2018
The automobile industry in India is world’s fourth largest, with the country currently
being the world's seventh largest commercial vehicle manufacturer. Indian automotive
industry (including component manufacturing) is expected to reach Rs 16.16-18.18
trillion (US$ 251.4-282.8 billion) by 2026. Two-wheelers dominate the industry and
had a 79 per cent share in the automobile production in FY17. Sales of cars, utility
vehicles and vans grew 8.85 per cent during calendar year 2017. Automobile exports
from India increased 13.01 per cent year-on-year in April-December 2017. Indian

30
automobile industry has received foreign direct investments (FDI) worth US$ 17.91
billion between April 2000 and September 2017.
The passenger vehicle sales in India crossed the three million unit milestone during
FY 2016-17, and is further expected increase to 10 million units by FY20.
The government aims to develop India as a global manufacturing as well as a research
and development (R&D) hub. It has set up National Automotive Testing and R&D
Infrastructure Project (NATRiP) centres as well as a National Automotive Board to
act as facilitator between the government and the industry. The Indian government
has also set up an ambitious target of having only electric vehicles being sold in the
country.
Alternative fuel has the potential to provide for the country's energy demand in the
auto sector as the CNG distribution network in India is expected to rise to 250 cities in
2018 from 125 cities in 2014. Also, the luxury car market could register high growth
and is expected to reach 150,000 units by 2020.

FORD MOTOR Co Motor Company

Go Further

The FORD MOTOR Co World Headquarters in Dearborn, Michigan, also known asthe Glass House

Type Public

 NYSE: F
Traded as

31
  S&P 100 Component
 S&P 500 Component

Industry Automotive

Founded June 16, 1903; 114 years ago

Founder Henry FORD MOTOR Co

Headquarters Dearborn, Michigan, U.S.

Area served Worldwide

Key people William C. FORD MOTOR Co, Jr.(Executive

Chairman)

Jim Hackett(President and CEO)

Products  Automobiles
 Luxury Vehicles
 Commercial Vehicles
 Automotive parts

Services  Automotive finance

 Vehicle leasing
 Vehicle service

Revenue US$151.8 billion (2016)

Operating income US$4.116 billion (2016)

Net income US$4.596 billion (2016)]

Total assets US$237.9 billion (2016)

32
 Total equity US$29.17 billion (2016)

Owner  The Vanguard Group(5.82%)

 Evercore Wealth Management (5.58%)
 FORD MOTOR Co family
(1% equity; 40% voting power)

Number of employees 201,000 (2016)[1]

Divisions  FORD MOTOR Co

 Lincoln
 Motorcraft

Website FORD MOTOR Co.com

FORD MOTOR CoIkon

FORD MOTOR Co India Private Limited is a wholly owned subsidiary of the FORD
MOTOR Co Motor Company in India. FORD MOTOR Co India Private Limited's
headquarters are in Maraimalai Nagar, Chennai, Tamil Nadu. It currently is the sixth
largest car maker in India after Maruti Suzuki, Hyundai, Tata, Mahindra.

33
 HISTORY

FORD MOTOR CoFigo FORD MOTOR Co Endeavour

FORD MOTOR CoEcoSport

FORD MOTOR Co India Private Limited began production in 1926 as a subsidiary of

the FORD MOTOR Co Motor Company of Canada, but was shut down in 1954 as the
company was in loss .FORD MOTOR Co re-entered the market in October 1995 as
Mahindra FORD MOTOR Co India Limited (MFIL), a 50-50 joint venture with
Mahindra & Mahindra Limited. FORD MOTOR Co increased its interest to 72% in
March 1998 and renamed the company FORD MOTOR Co India Private Limited.
The total investments made by FORD MOTOR Co Motor Company since it set shop
in 1995 stands at $2 billion as of April 2012.

Corporate Governance

The management team of FORD MOTOR Co India comprises - President,

AnuragMehrotra. VinayRaina - Executive Director of Marketing, Sales & Service,
Rahul Gautam - Vice President, Marketing, N. Prabhu - Vice President, Service,
Lakshmi Ram Kumar S - Vice President, Sales, George Elisseou - HR Director, David
Schock - Chief Financial Officer Manufacturing facilitiesFIPL's main manufacturing
plant located in Maraimalai Nagar, 45KM from Chennai has a capacity to produce

34
150,000 cars on a two-shift basis and 200,000 with three shifts. In 2010-11, the
company's production crossed the 100,000 mark.

As its new hatchback Figo was launched in March 2010, FORD MOTOR Co Motor
Company has invested $500 million to double capacity of the plant to 200,000
vehicles annually and setting up a facility to make 250,000 engines annually. The
engine plant opened for operations in January 2010.

To meet the growing domestic demand and with an eye on engine exports, the
company has invested $72 million to raise engine production capacity to 330,000
units.The company is rolling out the urban SUV FORD MOTOR CoEcoSport in June
2013. It had announced a $142-million investment on this. With FORD MOTOR
CoEcoSport, the Chennai plant will ramp up to full capacity (200,000 units). Last
year, production touched 127,000 units.As part of its plan to launch 8 new vehicles by
2015, the car maker is pumping in an investment of $1 billion for a new state-of-the-
art manufacturing plant at Sanand, Gujarat. The plant is coming up on 460 acre site. It
will have an initial installed capacity to manufacture 270,000 engines and 240,000
vehicles a year. Coming up alongside the plant is the supplier park spread across 150
acres and the company has attracted 19 world-class supplier manufacturers to date.
The plant is expected to commence production by 2014.Once the Sanand plant is fully
operational, FORD MOTOR Co India will have a cumulative capacity to make
440,000 cars and 610,000 engines annually.

Models

Current

1. FORD MOTOR Co Mustang (Launched July 2016) Built in the USA.

2. FORD MOTOR Co Endeavour (Launched January 2016) Built in India.

3. FORD MOTOR CoEcosport (Launched June 2013) Built in India.

4. FORD MOTOR CoFigo Aspire (Launched August 2015) Built in India.

5. FORD MOTOR CoFigo (Launched September 2015) Built in India.

35
Discontinued

1. FORD MOTOR CoIkon (1999–2010)

2. FORD MOTOR Co Escort (1996–2001)

3. FORD MOTOR CoMondeo (2001–2006)

4. FORD MOTOR Co Fusion (2004–2010)

5. FORD MOTOR Co Endeavour (2003-2015)

6. FORD MOTOR CoClassic(2005-2015)

7. FORD MOTOR Co Fiesta (2011-2015)

8. FORD MOTOR CoFigo (2010-2015)

Sales and service network

Presently, FORD MOTOR Co has more than 376 sales and service outlets in 209
cities across India.

Sales performance

In the year 2010, FIPL recorded sales of 83,887 vehicles against 29,488 vehicles sold
during the year 2009 and registered a sales growth of 172%.

Exports

FORD MOTOR Co India currently exports 40 percent of its engine production and 25
percent of its car production to 35 countries, some of them are, Saudi Arabia, South
Africa, Nepal, Mexico, Kenya, Bahrain, Angola, Bermuda, Ghana, Iraq, Liberia,
Lebanon, Malawi, Madagascar, Mauritius, Nigeria, Senegal, Tanzania, UAE, Zambia
and Zimbabwe.

Corporate social responsibility

FORD MOTOR Co India’s CSR activities are focused primarily in four key areas:
road safety, education, healthcare, and environment.

36
 CHAPTER-3

RATIO ANALYSIS

37
Meaning of Ratio: - A ratio is simple arithmetical expression of the relationship of
one number to another. It may be defined as the indicated quotient of two
mathematical expressions.

According to Accountant’s Handbook by Wixon, Kell and Bedford, “a ratio is an

expression of the quantitative relationship between two numbers”.

Ratio Analysis:- Ratio analysis is the process of determining and presenting the
relationship of items and group of items in the statements. According to Batty J.
Management Accounting “Ratio can assist management in its basic functions of
forecasting, planning coordination, control and communication”. It is helpful to know
about the liquidity, solvency, capital structure and profitability of an organization. It is
helpful tool to aid in applying judgement, otherwise complex situations.

Ratio analysis can represent following three methods.Ratio may be expressed in the
following three ways :

1. Pure Ratio or Simple Ratio: - It is expressed by the simple division of one

number by another. For example , if the current assets of a business are Rs. 200000
and its current liabilities are Rs. 100000, the ratio of ‘Current assets to current
liabilities’ will be 2:1.

2. ‘Rate’ or ‘So Many Times: - In this type , it is calculated how many times a
figure is, in comparison to another figure. For example , if a firm’s credit sales
during the year are Rs. 200000 and its debtors at the end of the year are Rs. 40000 ,
its Debtors Turnover Ratio is 200000/40000 = 5 times. It shows that the credit
sales are 5 times in comparison to debtors.

3. Percentage: - In this type, the relation between two figures is expressed in

hundredth. For example, if a firm’s capital is Rs.1000000 and its profit is
Rs.200000 the ratio of profit capital, in term of percentage, is
200000/1000000*100 = 20%

38
CLASSIFICATION OF RATIO Ratio may be classified into the four categories as
follows:

A. Liquidity Ratio

a. Current Ratio b. Quick Ratio or Acid Test Ratio

B. Leverage or Capital Structure Ratio

a. Debt Equity Ratio b. Debt to Total Fund Ratio

c. Proprietary Ratio d. Fixed Assets to Proprietor’s Fund Ratio
e. Fixed Assets to Proprietor’s Fund Ratio f. Capital Gearing Ratio
g. Interest Coverage Ratio

C. Activity Ratio or Turnover Ratio

a. Stock Turnover Ratio b. Debtors or Receivables Turnover

Ratio
c. Average Collection Period d. Creditors or Payables Turnover
Ratio
e. Average Payment Period f. Fixed Assets Turnover Ratio
g. Working Capital Turnover
Ratio

C. Profitability Ratio or Income Ratio

(A) Profitability Ratio based on Sales :

a. Gross Profit Ratio c. Operating Ratio

b. Net Profit Ratio d. Expenses Ratio

39
(B) Profitability Ratio Based on Investment:

I. Return on Capital Employed II. Return on Shareholder’s Funds

a. Return on Total Shareholder’s Funds f. Dividend Payout Ratio

b. Return on Equity Shareholder’s Funds g. Earning and Dividend Yield

c. Earning Per Share h. Earning and Dividend Yield

d. Dividend Per Share i.. Earning and Dividend Yield

e. Price Earnings Ratio

LIQUIDITY RATIO

(A) Liquidity Ratio:- It refers to the ability of the firm to meet its current liabilities.
The liquidity ratio, therefore, are also called ‘Short-term Solvency Ratio’. These ratio
are used to assess the short-term financial position of the concern. They indicate the
firm’s ability to meet its current obligation out of current resources.

In the words of Saloman J. Flink, “Liquidity is the ability of the firms to meet its
current obligations as they fall due”.

Liquidity ratio include two ratio:-

a. Current Ratio b. Quick Ratio or Acid Test Ratio

Current Ratio:- This ratio explains the relationship between current assets and current
liabilities of a business.

Current Assets:-‘Current assets’ includes those assets which can be converted into
cash with in a year’s time.

Current Assets = Cash in Hand + Cash at Bank + B/R + Short Term Investment +
Debtors(Debtors – Provision) + Stock(Stock of Finished Goods + Stock of Raw
Material + Work in Progress) + Prepaid Expenses.

40
Current Liabilities :- ‘Current liabilities’ include those liabilities which are repayable
in a year’s time.

Current Liabilities = Bank Overdraft + B/P + Creditors + Provision for Taxation +

Proposed Dividend + Unclaimed Dividends + Outstanding Expenses + Loans Payable
within a Year.

Significance: - According to accounting principles, a current ratio of 2:1 are supposed

to be an ideal ratio.

It means that current assets of a business should, at least , be twice of its current
liabilities. The higher ratio indicates the better liquidity position, the firm will be able
to pay its current liabilities more easily. If the ratio is less than 2:1, it indicate lack of
liquidity and shortage of working capital.

The biggest drawback of the current ratio is that it is susceptible to “window

dressing”. This ratio can be improved by an equal decrease in both current assets and
current liabilities.

b. Quick Ratio:- Quick ratio indicates whether the firm is in a position to pay its
current liabilities with in a month or immediately.

‘Liquid Assets’ means those assets, which will yield cash very shortly.

Liquid Assets = Current Assets – Stock – Prepaid Expenses

Significance :- An ideal quick ratio is said to be 1:1. If it is more, it is considered to

be better. This ratio is a better test of short-term financial position of the company.

LEVERAGE OR CAPITAL STRUCTURE RATIO

(B) Leverage or Capital Structure Ratio :- This ratio disclose the firm’s ability to
meet the interest costs regularly and Long term indebtedness at maturity.

These ratio include the following ratios :

41
a. Debt Equity Ratio:- This ratio can be expressed in two ways:

First Approach : According to this approach, this ratio expresses the relationship
between long term debts and shareholder’s fund.

Formula:

Debt Equity Ratio=Long term Loans/Shareholder’s Funds or Net Worth

Long Term Loans:- These refer to long term liabilities which mature after one year.
These include Debentures, Mortgage Loan, Bank Loan, Loan from Financial
institutions and Public Deposits etc.

Shareholder’s Funds :- These include Equity Share Capital, Preference Share

Capital, Share Premium, General Reserve, Capital Reserve, Other Reserve and Credit
Balance of Profit & Loss Account.

Second Approach : According to this approach the ratio is calculated as follows:-

Formula:

Debt Equity Ratio=External Equities/internal Equities

Debt equity ratio is calculated for using second approach.

Significance: - This Ratio is calculated to assess the ability of the firm to meet its
long term liabilities. Generally, debt equity ratio of is considered safe.

If the debt equity ratio is more than that, it shows a rather risky financial position
from the long-term point of view, as it indicates that more and more funds invested in
the business are provided by long-term lenders.

The lower this ratio, the better it is for long-term lenders because they are more secure
in that case. Lower than 2:1 debt equity ratio provides sufficient protection to long-
term lenders.

42
b. Debt to Total Funds Ratio : This Ratio is a variation of the debt equity ratio and
gives the same indication as the debt equity ratio. In the ratio, debt is expressed in
relation to total funds, i.e., both equity and debt.

Formula:

Debt to Total Funds Ratio = Long-term Loans/Shareholder’s funds + Long-term

Loans

Significance: - Generally, debt to total funds ratio of 0.67:1 (or 67%) is considered
satisfactory. In other words, the proportion of long term loans should not be more than
67% of total funds.

A higher ratio indicates a burden of payment of large amount of interest charges

periodically and the repayment of large amount of loans at maturity. Payment of
interest may become difficult if profit is reduced. Hence, good concerns keep the debt
to total funds ratio below 67%. The lower ratio is better from the long-term solvency
point of view.

c. Proprietary Ratio:- This ratio indicates the proportion of total funds provide by
owners or shareholders.

Formula:

Proprietary Ratio = Shareholder’s Funds/Shareholder’s Funds + Long term

loans

Significance: - This ratio should be 33% or more than that. In other words, the
proportion of shareholders funds to total funds should be 33% or more.

A higher proprietary ratio is generally treated an indicator of sound financial position

from long-term point of view, because it means that the firm is less dependent on
external sources of finance.

43
If the ratio is low it indicates that long-term loans are less secured and they face the
risk of losing their money.

d. Fixed Assets to Proprietor’s Fund Ratio :- This ratio is also know as fixed assets
to net worth ratio.

Formula:

Fixed Asset to Proprietor’s Fund Ratio = Fixed Assets/Proprietor’s Funds (i.e.,

Net Worth)

Significance: - The ratio indicates the extent to which proprietor’s (Shareholder’s)

funds are sunk into fixed assets. Normally , the purchase of fixed assets should be
financed by proprietor’s funds. If this ratio is less than 100%, it would mean that
proprietor’s fund are more than fixed assets and a part of working capital is provided
by the proprietors. This will indicate the long-term financial soundness of business.

e. Capital Gearing Ratio: - This ratio establishes a relationship between equity capital
(including all reserves and undistributed profits) and fixed cost bearing capital.

Formula:

Capital Gearing Ratio = Equity Share Capital+ Reserves + P&L Balance/ Fixed
cost Bearing Capital

Whereas, Fixed Cost Bearing Capital = Preference Share Capital + Debentures +

Long Term Loan

Significance:- If the amount of fixed cost bearing capital is more than the equity
share capital including reserves an undistributed profits), it will be called high capital
gearing and if it is less, it will be called low capital gearing.

The high gearing will be beneficial to equity shareholders when the rate of
interest/dividend payable on fixed cost bearing capital is lower than the rate of return
on investment in business.

44
Thus, the main objective of using fixed cost bearing capital is to maximize the profits
available to equity shareholders.

f. Interest Coverage Ratio:- This ratio is also termed as ‘Debt Service Ratio’. This
ratio is calculated as follows:

Formula:

Interest Coverage Ratio = Net Profit before charging interest and tax / Fixed
Interest Charges

Significance :- This ratio indicates how many times the interest charges are covered
by the profits available to pay interest charges.This ratio measures the margin of
safety for long-term lenders.

This higher the ratio, more secure the lenders is in respect of payment of interest
regularly. If profit just equals interest, it is an unsafe position for the lender as well as
for the company also , as nothing will be left for shareholders.

An interest coverage ratio of 6 or 7 times is considered appropriate.

ACTIVITY RATIO OR TURNOVER RATIO

(C) Activity Ratio or Turnover Ratio: - These ratio are calculated on the bases of
‘cost of sales’ or sales, therefore, these ratio are also called as ‘Turnover Ratio’.
Turnover indicates the speed or number of times the capital employed has been
rotated in the process of doing business. Higher turnover ratio indicates the better use
of capital or resources and in turn leads to higher profitability. It includes the
following:

a. Stock Turnover Ratio:- This ratio indicates the relationship between the cost of
goods during the year and average stock kept during that year.

45
Formula:

Stock Turnover Ratio = Cost of Goods Sold / Average Stock

Here, Cost of goods sold = Net Sales – Gross Profit

Average Stock = Opening Stock + Closing Stock/2

Significance:- This ratio indicates whether stock has been used or not. It shows the
speed with which the stock is rotated into sales or the number of times the stock is
turned into sales during the year.

The higher the ratio, the better it is, since it indicates that stock is selling quickly. In a
business where stock turnover ratio is high, goods can be sold at a low margin of
profit and even than the profitability may be quit high.

b. Debtors Turnover Ratio :- This ratio indicates the relationship between credit
sales and average debtors during the year :

Formula:

Debtor Turnover Ratio = Net Credit Sales / Average Debtors + Average B/R

While calculating this ratio, provision for bad and doubtful debts is not deducted from
the debtors, so that it may not give a false impression that debtors are collected
quickly.

Significance :- This ratio indicates the speed with which the amount is collected from
debtors. The higher the ratio, the better it is, since it indicates that amount from
debtors is being collected more quickly. The more quickly the debtors pay, the less
the risk from bad- debts, and so the lower the expenses of collection and increase in
the liquidity of the firm.

By comparing the debtors turnover ratio of the current year with the previous year, it
may be assessed whether the sales policy of the management is efficient or not.

46
b. Average Collection Period :- This ratio indicates the time with in which the
amount is collected from debtors and bills receivables.

Formula:

Average Collection Period = Debtors + Bills Receivable / Credit Sales per day

Here, Credit Sales per day = Net Credit Sales of the year / 365

Second Formula :-

Average Collection Period = Average Debtors *365 / Net Credit Sales

Average collection period can also be calculated on the bases of ‘Debtors Turnover
Ratio’. The formula will be:

Average Collection Period = 12 months or 365 days / Debtors Turnover Ratio

Significance :- This ratio shows the time in which the customers are paying for credit
sales. A higher debt collection period is thus, an indicates of the inefficiency and
negligency on the part of management. On the other hand, if there is decrease in debt
collection period, it indicates prompt payment by debtors which reduces the chance of
bad debts.

d. Creditors Turnover Ratio :- This ratio indicates the relationship between credit
purchases and average creditors during the year .

Formula:-

Creditors Turnover Ratio = Net credit Purchases / Average Creditors + Average B/P

Note :- If the amount of credit purchase is not given in the question, the ratio may be
calculated on the bases of total purchase.

47
Significance :- This ratio indicates the speed with which the amount is being paid to
creditors. The higher the ratio, the better it is, since it will indicate that the creditors
are being paid more quickly which increases the credit worthiness of the firm.

d. Average Payment Period :- This ratio indicates the period which is normally taken
by the firm to make payment to its creditors.

Formula:-

Average Payment Period = Creditors + B/P/ Credit Purchase per day

This ratio may also be calculated as follows :

Average Payment Period = 12 months or 365 days / Creditors Turnover Ratio

Significance :- The lower the ratio, the better it is, because a shorter payment period
implies that the creditors are being paid rapidly.

c. Fixed Assets Turnover Ratio :- This ratio reveals how efficiently the fixed
assets are being utilized.
Formula:-

Fixed Assets Turnover Ratio = Cost of Goods Sold/ Net Fixed Assets

Here, Net Fixed Assets = Fixed Assets – Depreciation

Significance:- This ratio is particular importance in manufacturing concerns where

the investment in fixed asset is quit high. Compared with the previous year, if there is
increase in this ratio, it will indicate that there is better utilization of fixed assets. If
there is a fall in this ratio, it will show that fixed assets have not been used as
efficiently, as they had been used in the previous year.

d. Working Capital Turnover Ratio :- This ratio reveals how efficiently working
capital has been utilized in making sales.

48
Formula:-

Working Capital Turnover Ratio = Cost of Goods Sold / Working Capital

Here, Cost of Goods Sold = Opening Stock + Purchases + Carriage + Wages +

Other Direct Expenses - Closing Stock

Working Capital = Current Assets – Current Liabilities

Significance :- This ratio is of particular importance in non-manufacturing concerns

where current assets play a major role in generating sales. It shows the number of
times working capital has been rotated in producing sales.A high working capital
turnover ratio shows efficient use of working capital and quick turnover of current
assets like stock and debtors. A low working capital turnover ratio indicates under-
utilisation of working capital.

Profitability Ratios or Income Ratios

(D) Profitability Ratios or Income Ratios:- The main object of every business
concern is to earn profits. A business must be able to earn adequate profits in relation
to the risk and capital invested in it. The efficiency and the success of a business can
be measured with the help of profitability ratio. Profitability ratios are calculated to
provide answers to the following questions:

i. Is the firm earning adequate profits?

ii. What is the rate of gross profit and net profit on sales?

iii. What is the rate of return on capital employed in the firm?

iv. What is the rate of return on proprietor’s (shareholder’s) funds?

v. What is the earning per share?

Profitability ratio can be determined on the basis of either sale investment into
business.

49
(A) Profitability Ratio Based on Sales :

a) Gross Profit Ratio : This ratio shows the relationship between gross profit and
sales.

Formula :

Gross Profit Ratio = Gross Profit / Net Sales *100

Here, Net Sales = Sales – Sales Return

Significance:- This ratio measures the margin of profit available on sales. The higher
the gross profit ratio, the better it is. No ideal standard is fixed for this ratio, but the
gross profit ratio should be adequate enough not only to cover the operating expenses
but also to provide for deprecation, interest on loans, dividends and creation of
reserves.

b) Net Profit Ratio:- This ratio shows the relationship between net profit and sales. It
may be calculated by two methods:

Formula:

Net Profit Ratio = Net Profit / Net sales *100

Operating Net Profit = Operating Net Profit / Net Sales *100

Here, Operating Net Profit = Gross Profit – Operating Expenses such as Office and
Administrative Expenses, Selling and Distribution Expenses, Discount, Bad Debts,
Interest on short-term debts etc.

Significance :- This ratio measures the rate of net profit earned on sales. It helps in
determining the overall efficiency of the business operations. An increase in the ratio
over the previous year shows improvement in the overall efficiency and profitability
of the business.

50
(c) Operating Ratio:- This ratio measures the proportion of an enterprise cost of sales
and operating expenses in comparison to its sales.

Formula:

Operating Ratio = Cost of Goods Sold + Operating Expenses/ Net Sales *100

Where, Cost of Goods Sold = Opening Stock + Purchases + Carriage + Wages +

Other Direct Expenses - Closing Stock

Operating Expenses = Office and Administration Exp. + Selling and Distribution

Exp. + Discount + Bad Debts + Interest on Short- term loans.

‘Operating Ratio’ and ‘Operating Net Profit Ratio’ are inter-related. Total of both
these ratios will be 100.

Significance:- Operating Ratio is a measurement of the efficiency and profitability of

the business enterprise. The ratio indicates the extent of sales that is absorbed by the
cost of goods sold and operating expenses. Lower the operating ratio is better,
because it will leave higher margin of profit on sales.

(d) Expenses Ratio:- These ratio indicate the relationship between expenses and sales.
Although the operating ratio reveals the ratio of total operating expenses in relation to
sales but some of the expenses include in operating ratio may be increasing while
some may be decreasing. Hence, specific expenses ratio are computed by dividing
each type of expense with the net sales to analyse the causes of variation in each type
of expense.The ratio may be calculated as :

(a) Material Consumed Ratio = Material Consumed/Net Sales*100

(b) Direct Labour cost Ratio = Direct labour cost / Net sales*100

(c) Factory Expenses Ratio = Factory Expenses / Net Sales *100

(a), (b) and (c) mentioned above will be jointly called cost of goods sold ratio.

51
It may be calculated as:

Cost of Goods Sold Ratio = Cost of Goods Sold / Net Sales*100

(d) Office and Administrative Expenses Ratio = Office and Administrative Exp./ Net
Sales*100

(e) Selling Expenses Ratio = Selling Expenses / Net Sales *100

(f) Non- Operating Expenses Ratio = Non-Operating Exp./Net sales*100

Significance:- Various expenses ratio when compared with the same ratios of the
previous year give a very important indication whether these expenses in relation to
sales are increasing, decreasing or remain stationary. If the expenses ratio is lower, the
profitability will be greater and if the expenses ratio is higher, the profitability will be
lower.

(B) Profitability Ratio Based on Investment in the Business:-

These ratio reflect the true capacity of the resources employed in the enterprise.
Sometimes the profitability ratio based on sales are high whereas profitability ratio
based on investment are low. Since the capital is employed to earn profit, these ratios
are the real measure of the success of the business and managerial efficiency.

These ratio may be calculated into two categories:

I. Return on Capital Employed

II. Return on Shareholder’s funds

I. Return on Capital Employed :- This ratio reflects the overall profitability of the
business. It is calculated by comparing the profit earned and the capital employed to
earn it. This ratio is usually in percentage and is also known as ‘Rate of Return’ or
‘Yield on Capital’.

52
 Formula:

Return on Capital Employed = Profit before interest, tax and

dividends/Capital Employed *100

Where, Capital Employed = Equity Share Capital + Preference Share Capital + All
Reserves + P&L Balance +Long-Term Loans- Fictitious Assets (Such as Preliminary
Expenses OR etc.) – Non-Operating Assets like Investment made outside the business.

Capital Employed = Fixed Assets + Working Capital

Advantages of ‘Return on Capital Employed’:-

Since profit is the overall objective of a business enterprise, this ratio is a

barometer of the overall performance of the enterprise. It measures how efficiently
the capital employed in the business is being used.

Even the performance of two dissimilar firms may be compared with the help of
this ratio.

The ratio can be used to judge the borrowing policy of the enterprise.

This ratio helps in taking decisions regarding capital investment in new projects.
The new projects will be commenced only if the rate of return on capital employed
in such projects is expected to be more than the rate of borrowing.

This ratio helps in affecting the necessary changes in the financial policies of the
firm.

Lenders like bankers and financial institution will be determine whether the
enterprise is viable for giving credit or extending loans or not.

With the help of this ratio, shareholders can also find out whether they will receive
regular and higher dividend or not.

53
II. Return on Shareholder’s Funds :-

Return on Capital Employed Shows the overall profitability of the funds supplied by
long term lenders and shareholders taken together.Whereas Return on shareholders’
funds measures only the profitability of the funds invested by shareholders.

These are several measures to calculate the return on shareholder’s funds:

(a) Return on total Shareholder’s Funds :-

For calculating this ratio ‘Net Profit after Interest and Tax’ is divided by total
shareholder’s funds.

Formula:

Return on Total Shareholder’s Funds = Net Profit after Interest and Tax / Total
Shareholder’s Funds

Where, Total Shareholder’s Funds = Equity Share Capital + Preference Share

Capital + All Reserves + P&L A/c Balance –Fictitious Assets

Significance:- This ratio reveals how profitably the proprietor’s funds have been
utilized by the firm. A comparison of this ratio with that of similar firms will throw
light on the relative profitability and strength of the firm.

(b) Return on Equity Shareholder’s Funds:-

Equity Shareholders of a company are more interested in knowing the earning

capacity of their funds in the business. As such, this ratio measures the profitability of
the funds belonging to the equity shareholder’s.

Formula:

Return on Equity Shareholder’s Funds = Net Profit (after int., tax &
preference dividend) / Equity Shareholder’s Funds *100

54
RATIO ANALYSIS

Where, Equity Shareholder’s Funds = Equity Share Capital + All Reserves + P&L
A/c

Balance – Fictitious Assets

Significance:- This ratio measures how efficiently the equity shareholder’s funds are
being used in the business. It is a true measure of the efficiency of the management
since it shows what the earning capacity of the equity shareholders funds. If the ratio
is high, it is better, because in such a case equity shareholders may be given a higher
dividend.

(c) Earning Per Share (E.P.S.) :- This ratio measure the profit available to the equity
shareholders on a per share basis. All profit left after payment of tax and preference
dividend are available to equity shareholders.

Formula:

Earning Per Share = Net Profit – Dividend on Preference Shares / No. of Equity
Shares

Significance:- This ratio helpful in the determining of the market price of the equity
share of the company. The ratio is also helpful in estimating the capacity of the
company to declare dividends on equity shares.

(d) Dividend Per Share (D.P.S.):- Profits remaining after payment of tax and
preference dividend are available to equity shareholders.

But of these are not distributed among them as dividend . Out of these profits is
retained in the business and the remaining is distributed among equity shareholders as
dividend. D.P.S. is the dividend distributed to equity shareholders divided by the
number of equity shares.

55
Formula:

D.P.S. = Dividend paid to Equity Shareholder’s / No. of Equity Shares *100

(e) Dividend Payout Ratio or D.P. :- It measures the relationship between the earning
available to equity shareholders and the dividend distributed among them.

Formula:

D.P. = Dividend paid to Equity Shareholders/ Total Net Profit belonging to Equity
Shareholders*100

OR

D.P. = D.P.S. / E.P.S. *100

(f) Earning and Dividend Yield :- This ratio is closely related to E.P.S. and D.P.S.
While the E.P.S. and D.P.S. are calculated on the basis of the book value of shares,
this ratio is calculated on the basis of the market value of share

(g) Price Earning (P.E.) Ratio:- Price earning ratio is the ratio between market price
per equity share & earnings per share. The ratio is calculated to make an estimate of
appreciation in the value of a share of a company & is widely used by investors to
decide whether or not to buy shares in a particular company.

Significance :- This ratio shows how much is to be invested in the market in this
company’s shares to get each rupee of earning on its shares. This ratio is used to
measure whether the market price of a share is high or low.

56
 CHAPTER 4

LITERATURE REVIEW

57
Some important research works undertaken in recent years which are very closely

connected with the present study are reviewed.

• ShindeGovind P. &DubeyManisha (2011) the study has been conducted

considering the segments such as passenger vehicle, commercial vehicle, utility
vehicle, two and three wheeler vehicle of key players performance and also analyze
SWOT analysis and key factors influencing growth of automobile industry.

• Sharma Nishi (2011) studied the financial performance of passenger and

commercial vehicle segment of the automobile industry in the terms of four financial
parameters namely liquidity, profitability, leverage and managerial efficiency analysis
for the period of decade from 2001-02 to 2010-11. The study concludes that
profitability and managerial efficiency of Tata motors as well as Mahindra &
Mahindra ltd are satisfactory but their liquidity position is not satisfactory. The
liquidity position of commercial vehicle is much better than passenger vehicle
segment.

• Singh Amarjit& Gupta Vinod (2012) explored an overview of automobile

industry. Indian automobile industry itself as a manufacturing hub and many joint
ventures havebeen setup in India with foreign collaboration. SWOT analysis done
there are some challenges by the virtue of witch automobile industry faces lot of
problems and some innovative key features are keyless entry, electrically controlled
mechanisms enhanced driving control, soft feel interiors and also need to focus in
future on like fuel efficiency, emission reduction safety and durability.

• ZafarS.M.Tariq& Khalid S.M (2012) the study explored that ratios are calculated
from financial statements which are prepared as desired policies adopted on
depreciation and stock valuation by the management. Ratio is simple comparison of
numerator and a denominator that cannot produce complete and authentic picture of
business. Results are manipulated and also may not highlight other factors which
affect performance of firm by promoters.

• Murlidhar, A. LokHande&Rana Vishal S. (2013) the author tries to evaluate the

performance of Hyundai Motors Company with respect to export, Domestic
Sales,productions and profit after tax. For this purpose, the pie chart and bar graph are
used to show the performance of company various years.

58
• Dharmaraj, A.andKathirvel N. (2013) explored an overview of new industrial
policy act 1991, which allow 100 percent foreign direct investment. An attempt is
made to find out the effect of FDI on financial performance of automobile industry. It
is concluded that the liquidity ratios shows minor changes and profitability shows an
increasing trend during post FDI when compared to pre FDI. Post FDI efficiency ratio
shows that companies are efficiently utilizing the available resources.

• RaphealNisha (2013) the author tries to evaluate the financial performance of

Indian tire industry. The study was conducted for period 2003-04 to 2011-12 to
analyze the performance with financial indicators, sales trend, export trend,
production trend etc. The result suggests the key to success in industry is to improve
labour productivity and flexibility and capital efficiency.

• HotwaniRakhi (2013) the author examines the profitability position and growth of
company in light of sales and profitability of Tata Motors for past ten years. Data is
analyzed through rations, standard deviations and coefficient of variance. The study
reveals that there not exists a strong relationship between sales & profitability of
company.

• ShendeVikram (2014) this research will be helpful for the new entrants and
existing car manufacturing companies in India to find out the customer expectations
and their market offerings. The objective of study is the identification of factors
influencing customers performance for particular segment of cars.

• Idhayajothi, R et al (2014) the main idea behind this study is to analyze the
financial performance of Ashoka Leyland ltd. at Chennai. The result shows that
financial performance is sound and also suggested to improve financial performance
by reducing the various expenses.

• Huda SalheMeften& Manish Roy Tirkey (2014) have studied the financial
analysis of Hindustan petroleum corporation ltd. The study is based on secondary
data. The company has got excellent gross profit ratio and trend is rising in with is
appreciable indicating efficiency in production cost. The net profit for the year 2010-
11 is excellent & it is 8 times past year indicating reduction in operating reduction in
operating expenses and large proportion of net sales available to the shareholders of
company.

59
• SrivastavaAnubha (2014) Data analysis has been done using the top down
approach ,i.e. Economic analysis, industry analysis, company and technical analysis
to find relationship between automobile sector index with market index. Mahindra
and Mahindra have a great position on the stock market and will attract investor and
this could lead to expansion and growth. Thus Tata motors and Maruti Suzuki need to
take care of their stock and expansion.

• SarangiPradeepta K et al (2014) undertook a study to forecast the future trend of

automobile industry. The study highlighted the six different experiments have been
carried out for period of 12 years data to estimate values for next 3 years. In each
experiment graph has been plotted using spreadsheet and then linear trend has been
drawn and expanded to calculate future values.

• Kumar Sumesh&KaurGurbachan (2014) Automobile sector is the dominant

player in economy of world. After liberalization Indian automobile industry has
emerged as a major contributor to India’s GDP. The study identified that there is no
significant in the means score of various financial ratios of Maruti Suzuki and Tata
motors but in meeting their long term obligations and efficacy of utilizing the assets
show the significant difference in the efficiency of both the firms.

• Krishnaveni, M. &Vidya, R. (2015) find that Indian automobile industry is a high

flying sector these days and emerging as an export hub in wake of liberalisation and
globalization. This paper revises the category wise production, sales and exports of
automobile industry in India. Industry growth can be viewed in term of pre and post
liberalization. As government allows 100 percent FDI, increase 15% in customs duty
on cars and MUVs to encourage local manufacturer and concessional import duty on
specified parts of hybrid vehicles.

• Krishnaveni , M. &Vidya, R (2015) author has selected 87 companies out of 242

companies in capital line database to discuss the standard current ratio of automobile
industry is matched with tractor and four sectors like engine parts, lamps, gears and
ancillaries with standard norms. The study concludes that current and liquidity ratio of
automobile industry is matched with tractor and the four sectors but other sectors have
to improve the repaying capacity to strengthen the financial aspects.

60
• Takeh Ata &NavaprabhaJubiliy (2015) Author has made conceptual model to
outline the impact of capital structure on the financial performance i.e. capital
structure is independent variable that value is measured by using four ratios namely,
financial debt, total debt equity, total asset debt and interest coverage ratio where as
financial performance is dependent variable that value is measured by using four
ratios as return on assets, return on equity , operating profit margin and return on
capital employed. Researcher has selected 13 major steel industries and applied
various statistical tools like standard deviation, correlation matrix, anovaetc are
employed for testing hypothesis with help of SPSS22.

• MathurShivam&AgarwalKrati (2016)Ratio’s are an excellent and scientific way

to analyze the financial performance of any firm. The company has received many
awards and achievements due to its new innovations and technological advancement.
These indicators help the investors to invest the right company for expected profits.
The study shows that Maruti Suzuki limited is better than Tata motors limited.

• Jothi, K. &Geethalakshmi, A. (2016) this study tries to evaluate the profitability

&financial position of selected companies of Indian automobile industry using
statistical tools like, ratio analysis, mean, standard deviation, correlation. The study
reveals the positive relationship between profitability, short term and long term
capital.

• Kumar Mohan M.S, Vasu. V. and Narayana T. (2016) the study has been made
through using different ratios , mean, standard deviation and Altman’s Z score
approach to study the financial health of the company. The study reveals there is a
positive correlation between liquidity and profitability ratios except return on total
assets as well as Z score value indicate good health of the company.

• KaurHarpreet (2016) the author tries to examine the qualities & quantities
performer of maruti Suzuki co. & how had both impact on its market share in India,
For this studysecondary data has been collected from annual reports, journals, report
automobile sites. Result shows that MSL has been successfully leading automobile
sector in India for last few years.

61
 CHAPTER 5

RESEARCH METHODOLOGY

62
 RESEARCH METHODOLOGY
INTRODUCTION:

Research methodology is a way to systematically solve the research problem. It May

be understood as a science of studying now research is done systematically. In that
various steps, those are generally adopted by a researcher in studying his problem
along with the logic behind them.

"The procedures by which researchers go about their work of describing, explaining

and predicting phenomenon are called methodology".

TYPE OF RESEARCH:

This project Study on Ratio analysis ofFORD MOTOR CO is considered as an

analytical research. Analytical Research is defined as the research in which,
researcher has to use facts or information already available, and analyze these to make
a critical evaluation of the facts, figures, data or material. This project requires a
detailed understanding of the concept –

 RATIO ANALYSIS Therefore, firstly we need to have a clear idea of what is

ratio, how it is managed in FORD MOTOR CO what are the different are the
different types of ratio maintained bythe company.
 The ratio analysis help a business to find or analysis their financial position and
efficiency
 After that the adequate ratios of Ford for smooth running of the business.
 In the end, suggestions and recommendations on ways for better management and
control of finance are provided.
NEED OF STUDY
 My concern topic in to study of ratio analysis in FORD MOTOR Company. The
need for capital cannot be over emphasized. Every business needs some amount as
capital. The need for working capital and fixed capital arises due to the production
and realization of cash from sales. There is an operating cycle involved in the sales
and realization of cash. There are time gaps in purchase of raw materials and
production; production and sales; and sales and realization of cash. With help of
ratio analysis company know their financial condition and where they are stand or
proper capital structure or not.

1. The study has great significance and provides benefits to various parties
whom directly or indirectly interact with the company.

63
 2. It is beneficial to management of the company by providing crystal clear
picture regarding important aspects like liquidity, leverage, activity and
profitability.

3. The study is also beneficial to employees and offers motivation by showing

how actively they are contributing for company’s growth.

4. The investors who are interested in investing in the company’s shares will
also get benefited by going through the study and can easily take a decision
whether to invest or not to invest in the company’s shares.

Objective of the study

1. To study the present financial analysisof FORD MOTOR CO.

2. To determine the Profitability, Liquidity available to the organization.
3. To analyze the capital structure of the company.
4. To study and analyze the ratio analysis ofFORD MOTOR CO.
5. To study about FORD MOTOR CO Operating Cycle, cash conversion cycle,
processing period.

SCOPE OF THE STUDY:

The scope of the study is identified after and during the study is conducted. The main
scope of the study was to put into practical the theoretical aspect of the study into real
life work experience. The study of ratio analysis is based on tools like Ratio Analysis,
Statement of changes in working capital. Further the study is based on last 5 years
Annual Reports of FORD MOTOR CO

This project is vital to investor in a significant way. It does have some

importance forthe company too. These are as follows –
 This project financial planning and forecasting
 This project help to control the standard ration maintaining in ford
 The project help to communicating financial position or balance sheet to other
parties
 Through this project investor and business or any person know the efficiency
of business
 This project helps to investor to analysis the stock and earns money.

64
Data Collection Method:
In this study only secondary data are used for research.
1. PRIMARY DATA

Primary data are those which are collected for a specific purpose directly from the
field of enquiry and are original in nature when the data requires for a particular study
can be found neither in the internal records nor in published source, It has been
necessary to collect data by conducting first hand investigation. The collection of
primary data is costly, time consuming and laborious process.

The primary data is that data which is collected fresh or first hand, and for first time
which is original in nature.

In this study the Primary data has not been used in this study.

2. SECONDARY DATA
Secondary data are such numerical information which has been collected by some
agency for a specific purpose. The data can be located quickly and inexpensively.
The main sources of secondary data used in the study are:

1. Annual Reports
2. Most of the calculations are made on the financial statements of the company
provided statements.
3. Referring standard texts and referred books collected some of the information
regarding theoretical aspects.
4. Method- to assess the performance of the company method of observation of the
work in finance department in followed.

For the purpose of this study the data and information are based on secondary sources
only. The secondary data has been collected from FORD MOTOR CO, internet etc.
and the other data is collected from official records, journal etc.
The secondary data are those which have already collected and stored. Secondary data
easily get those secondary data from records, annual reports of the company etc. It
will save the time, money and efforts to collect the data.

The major source of data for this project was collected through annual reports, profit
and loss account of 5 year period from 2013-2017 some more information collected
from internet and text sources

65
LIMITATIONS OF THE STUDY

• Limited interaction with the concerned heads due to their busy schedule
• The findings of the study are based on the information retrieved by the selected
unit
• The data based on the secondary data collection method only based on the
balance sheet
• One of the factors of the study was lack of availability of ample information.
Most of the information has been kept confidential and as such as not assed as
art of policy of company.

66
 CHAPTER 6

DATA ANALYSIS AND INTERPRETATION

67
Liquidity

1. Current ratio Selected Financial Data (USD $ in millions)

2013 2014 2015 2016 2017

Current assets 55,138 52,071 102,587 108,461 115,902

Current liabilities 74,131 77,141 82,336 90,281 94,600

Current ratio 0.74 0.68 1.25 1.20 1.23

2017 Calculations
Current ratio = Current assets ÷ Current liabilities
= 115,902 ÷ 94,600 = 1.23

CURRENT RATIO
1.4

1.2

1
Current Ratio

0.8

0.6 1.25 1.2 1.23

0.4 0.74 0.68

0.2

0
2013 2014 2015 2016 2017
CURRENT RATIO 0.74 0.68 1.25 1.2 1.23

INTERPERATION
Ratio Description The company
Current ratio A liquidity ratio calculated FORD MOTOR Co.'s
as current assets divided by current ratio deteriorated
current liabilities. from 2015 to 2016 but then
improved from 2016 to
2017 not reaching 2015
level

68
2. Quick ratio Selected Financial Data (USD $ in millions)

2013 2014 2015 2016 2017

Cash and cash 14,468 10,757 14,272 15,905 18,492
equivalents
Marketable 22,100 20,393 20,904 22,922 20,435
securities
Financial Services – – 45,137 46,266 52,210
finance receivables,
net
Trade and other 9,828 11,708 11,042 11,102 10,599
receivables, less
allowances
Total quick 46,396 42,858 91,355 96,195 101,73
assets 6

Current liabilities 74,131 77,141 82,336 90,281 94,600

Quick ratio 0.63 0.56 1.11 1.07 1.08
Quick ratio = Total quick assets ÷ Current liabilities= 101,736 ÷ 94,600 = 1.08 (2017
Calculations)

QUICK RATIO
1.2

1
Quick ratio

0.8

0.6
1.11 1.07 1.08
0.4
0.63 0.56
0.2

0
2013 2014 2015 2016 2017
QUICK RATIO 0.63 0.56 1.11 1.07 1.08

INTERPERATION
Ratio Description
Quick ratio A liquidity ratio calculated
as (cash plus short-term
marketable investments
plus receivables) divided
by current liabilities.
The company
FORD MOTOR Co.'s
quick ratio deteriorated
from 2015 to 2016 but then
slightly improved from
2016 to 2017.

69
 3. Cash Ratio Selected Financial Data (USD $ in millions)

2013 2014 2015 2016 2017

Cash and cash 14,468 10,757 14,272 15,905 18,492
equivalents
Marketable securities 22,100 20,393 20,904 22,922 20,435
Financial Services – – 45,137 46,266 52,210
finance receivables, net
Total cash assets 36,568 31,150 80,313 85,093 91,137

Current liabilities 74,131 77,141 82,336 90,281 94,600

Cash ratio 0.49 0.40 0.98 0.94 0.96

Cash ratio = Total cash assets ÷ Current liabilities

= 91,137 ÷ 94,600 = 0.96

Cash RATIO
1.2

1
Cash ratio

0.8

0.6
0.98 0.94 0.96
0.4

0.49
0.2 0.4

0
2013 2014 2015 2016 2017
Cash RATIO 0.49 0.4 0.98 0.94 0.96

INTERPERATION
Ratio Description The company
Cash ratio A liquidity ratio calculated as (cash FORD MOTOR Co.'s cash
plus short-term marketable ratio deteriorated from 2015
investments) divided by current to 2016 but then improved
liabilities.. from 2016 to 2017 not
reaching 2015 level.

70
 4. Net Fixed Asset Turnover Selected Financial Data (USD $ in millions)

2013 2014 2015 2016 2017

Automotive 139,369 135,782 140,566 141,546 145,653

sales

Net 27,616 30,126 30,163 32,072 35,327

property

Net fixed 5.05 4.51 4.66 4.41 4.12

asset
turnover

Net fixed asset turnover = Automotive sales ÷ Net property

= 145,653 ÷ 35,327 = 4.12

Net fixed asset turnover

6
Net fixed asset turnover

3
5.05
4.51 4.66 4.41
2 4.12

0
2013 2014 2015 2016 2017
Net fixed asset turnover 5.05 4.51 4.66 4.41 4.12

INTERPERATION
Ratio Description
Net fixed asset turnover An activity ratio calculated
as total revenue divided by
net fixed assets.
The company
FORD MOTOR Co.'s net
fixed asset turnover
deteriorated from 2015 to
2016 and from 2016 to
2017.

71
 5. Total Asset Turnover Selected Financial Data (USD $ in millions)

2013 2014 2015 2016 2017

Automotive 139,369 135,782 140,566 141,546 145,653

sales

Total assets 202,026 208,527 224,925 237,951 257,808

Total asset 0.69 0.65 0.62 0.59 0.56

turnover

Total asset turnover = Automotive sales ÷ Total assets

= 145,653 ÷ 257,808 = 0.56

Total asset turnover

0.8
Total asset turnover

0.7

0.6

0.5

0.4
0.69
0.65 0.62
0.3 0.59 0.56
0.2

0.1

0
2013 2014 2015 2016 2017
Total asset turnover 0.69 0.65 0.62 0.59 0.56

INTERPERATION
Ratio Description The company
Total asset turnover An activity ratio calculated FORD MOTOR Co.'s total
as total revenue divided by asset turnover deteriorated
total assets. from 2015 to 2016 and
from 2016 to 2017.

72
6. Equity Turnover Selected Financial Data (USD $ in millions)

2013 2014 2015 2016 2017

Automotive 139,369 135,782 140,566 141,546 145,653

sales

Equity 26,383 24,805 28,642 29,170 34,890

attributable
to FORD
MOTOR
Company

Equity 5.28 5.47 4.91 4.85 4.17

turnover

Equity turnover = Automotive sales ÷ Equity attributable to FORD MOTOR

Company= 145,653 ÷ 34,890 = 4.17

Equity turnover
6

5
Equity turnover

3
5.28 5.47
4.91 4.85
2 4.17

0
2013 2014 2015 2016 2017
Equity turnover 5.28 5.47 4.91 4.85 4.17

INTERPERATION
Ratio Description The company
Equity turnover An activity ratio calculated FORD MOTOR Co.'s
as total revenue divided by equity turnover
shareholders' equity. deteriorated from 2015 to
2016 and from 2016 to
2017

73
7. Short-term (Operating) Activity Analysis

2013 2014 2015 2017

Inventory turnover 16.25 15.70 14.96 12.78

Receivables turnover 14.18 11.60 12.73 13.74

Payables turnover 6.41 6.17 6.14 5.64

Working capital turnover – – 6.94 6.84

18
Short-term (Operating) Activity Analysis

16 16.25
15.7
14.96 Inventory
14.18 14.18 turnover
14 13.74
12.73 12.75 12.78
12
11.6
Receivable
10 s turnover

8 7.79
6.94 6.84 Payables
6.41 6.17 6.14
6 5.93 turnover
5.64

Working
2
capital
turnover
0 0 0
2013 2014 2015 2016 2017
Time

74
Average No. of Days

2013 2014 2015 2017 29

Add: Average receivable 26 31 29 29 27

collection period

Operating cycle 48 54 53 55 56

Less: Average payables 57 59 59 62 65

payment period

Cash conversion cycle -9 -5 -6 -7 -9

Operting cycle and CC cycle

Average No. of Days

60
54 55 56
50 53
48
40
30
20
10
0
-5 -6 -7
-10 -9 -9
-20
2013 2014 2015 2016 2017
Operating cycle 48 54 53 55 56
Cash conversion cycle -9 -5 -6 -7 -9

INTERPERATION
Ratio Description The company
Inventory turnover An activity ratio calculated FORD MOTOR Co.'s
as cost of goods sold inventory turnover
divided by inventory. deteriorated from 2015 to
2016 and from 2016 to
2017.
Receivables turnover An activity ratio equal to FORD MOTOR Co.'s
revenue divided by receivables turnover
receivables. improved from 2015 to
2016 and from 2016 to
2017.

75
Payables turnover An activity ratio calculated FORD MOTOR Co.'s
as cost of goods sold payables turnover declined
divided by payables. from 2015 to 2016 and
from 2016 to 2017.
Working capital An activity ratio calculated FORD MOTOR Co.'s
turnover as revenue divided by working capital turnover
working capital. improved from 2015 to
2016 but then deteriorated
significantly from 2016 to
2017.
Average inventory An activity ratio equal to FORD MOTOR Co.'s
processing period the number of days in the average inventory
period divided by processing period
inventory turnover over deteriorated from 2015 to
the period. 2016 and from 2016 to
2017.
Average receivable An activity ratio equal to
collection period the number of days in the
period divided by
receivables turnover.
Operating cycle Equal to average inventory FORD MOTOR Co.'s
processing period plus operating cycle
average receivables deteriorated from 2015 to
collection period. 2016 and from 2016 to
2017.
Average payables An estimate of the average FORD MOTOR Co.'s
payment period number of days it takes a average payables payment
company to pay its period increased from
suppliers; equal to the 2015 to 2016 and from
number of days in the 2016 to 2017.
period divided by payables
turnover ratio for the
period.
Cash conversion cycle A financial metric that FORD MOTOR Co.'s cash
measures the length of conversion cycle improved
time required for a from 2015 to 2016 and
company to convert cash from 2016 to 2017.
invested in its operations
to cash received as a result
of its operations; equal to
average inventory
processing period plus
average receivables
collection period minus
average payables payment
period.

76
8. Inventory Turnover Selected Financial Data (USD $ in millions)

2013 2014 2015 2016 2017

Automotive 125,234 123,516 124,446 126,183 131,332

cost of
sales

Inventories 7,708 7,866 8,319 8,898 10,277

Inventory 16.25 15.70 14.96 14.18 12.78

turnover

Inventory turnover = Automotive cost of sales ÷ Inventories

= 131,332 ÷ 10,277 = 12.78

Inventory turnover
18
16
14
12
10
8 16.25 15.7 14.96 14.18
6 12.78

4
2
0
2013 2014 2015 2016 2017
Inventory turnover 16.25 15.7 14.96 14.18 12.78

INTERPERATION
Ratio Description
Inventory turnover An activity ratio calculated
as cost of goods sold
divided by inventory.
The company
FORD MOTOR Co.'s
inventory turnover
deteriorated from 2015 to
2016 and from 2016 to
2017.

77
9. Receivables Turnover Selected Financial Data (USD $ in millions)

2013 2014 2015 2016 2017

Automotive 139,369 135,782 140,566 141,546 145,653

sales

Trade and 9,828 11,708 11,042 11,102 10,599

other
receivables,
less
allowances

Receivables 14.18 11.60 12.73 12.75 13.74

turnover

Receivables turnover = Automotive sales ÷ Trade and other receivables, less

allowances= 145,653 ÷ 10,599 = 13.74

Receivables turnover
16

14

12

10

8
14.18 13.74
6 12.73 12.75
11.6
4

0
2013 2014 2015 2016 2017
Receivables turnover 14.18 11.6 12.73 12.75 13.74

INTERPERATION
Ratio Description The company
Receivables turnover An activity ratio equal to FORD MOTOR Co.'s
revenue divided by receivables turnover
receivables. improved from 2015 to
2016 and from 2016 to
2017.

78
10. Payables Turnover Selected Financial Data (USD $ in millions)

2013 2014 2015 2016 2017

Automotive 125,234 123,516 124,446 126,183 131,332

cost of
sales

Payables 19,531 20,035 20,272 21,296 23,282

Payables 6.41 6.17 6.14 5.93 5.64

turnover

Payables turnover = Automotive cost of sales ÷ Payables

= 131,332 ÷ 23,282 = 5.64

Payables turnover
6.6

6.4

6.2

5.8 6.41
6.17 6.14
5.6 5.93
5.4 5.64

5.2
2013 2014 2015 2016 2017
Payables turnover 6.41 6.17 6.14 5.93 5.64

INTERPERATION
Ratio Description
Payables turnover An activity ratio calculated
as cost of goods sold
divided by payables.
The company
FORD MOTOR Co.'s
payables turnover declined
from 2015 to 2016 and
from 2016 to 2017

79
11. Working Capital Turnover Selected Financial Data (USD $ in millions)

2013 2014 2015 2016 2017

Current 55,138 52,071 102,587 108,461 115,902

assets

Less: 74,131 77,141 82,336 90,281 94,600

Current
liabilities

Working (18,993) (25,070) 20,251 18,180 21,302

capital

Automotive 139,369 135,782 140,566 141,546 145,653

sales

Working – – 6.94 7.79 6.84

capital
turnover

Working capital turnover = Automotive sales ÷ Working capital

= 145,653 ÷ 21,302 = 6.84

Working capital
30,000

25,000

20,000

15,000
25,070
10,000 20,251 21,302
18,993 18,180

5,000

0
2013 2014 2015 2016 2017
Working capital 18,993 25,070 20,251 18,180 21,302

80
 Working capital turnover
9

4 8
7 7
3

0 0 0
2013 2014 2015 2016 2017
Working capital turnover 0 0 7 8 7

INTERPERATION
Ratio Description The company

Working capital turnover An activity ratio calculated FORD MOTOR Co.'s

as revenue divided by
working capital.
working capital turnover
improved from 2015 to 2016
but then deteriorated
significantly from 2016 to
2017.

81
12. Average Inventory Processing Period

2013 2014 2015 2016 2017

Inventory 16.25 15.70 14.96 14.18 12.78

turnover

Average 22 23 24 26 29
inventory
processing
period

Average inventory processing period = 365 ÷ Inventory turnover

= 365 ÷ 12.78 = 29

Average inventory processing period

35

30

25

20

15 29
24 26
22 23
10

0
2013 2014 2015 2016 2017
Average inventory processing
22 23 24 26 29
period

INTERPERATION
Ratio Description
Average inventory An activity ratio equal to
processing period the number of days in the
period divided by
inventory turnover over
the period.
The company
FORD MOTOR Co.'s
average inventory
processing period
deteriorated from 2015 to
2016 and from 2016 to
2017.

82
13. Average Receivable Collection Period

2013 2014 2015 2016 2017

Receivables 14.18 11.60 12.73 12.75 13.74

turnover

Average 26 31 29 29 27
receivable
collection
period

Average receivable collection period = 365 ÷ Receivables turnover

= 365 ÷ 13.74 = 27

Average receivable collection period

32

31

30

29

28

27 31

26 29 29

25 27
26
24

23
2013 2014 2015 2016 2017
Average receivable collection
26 31 29 29 27
period

INTERPERATION

Ratio Description
Average receivable collection period An activity ratio equal to the number of
days in the period divided by receivables
turnover.

83
14. Operating Cycle

2013 2014 2015 2016 2017

Average inventory 22 23 24 26 29
processing period

Average receivable 26 31 29 29 27
collection period

Operating cycle 48 54 53 55 56

Operating cycle = Average inventory processing period + Average receivable

collection period
= 29 + 27 = 56

Operating cycle
58

56

54

52

50 56
55
54
53
48

46 48

44
2013 2014 2015 2016 2017
Operating cycle 48 54 53 55 56

INTERPERATION
Ratio Description The company
Operating cycle Equal to average inventory FORD MOTOR Co.'s
processing period plus operating cycle
average receivables deteriorated from 2015 to
collection period 2016 and from 2016 to
2017..

84
 15. Average Payables Payment Period

2013 2014 2015 2016 2017

Payables 6.41 6.17 6.14 5.93 5.64

turnover

Average 57 59 59 62 65
payables
payment
period

Average payables payment period = 365 ÷ Payables turnover

= 365 ÷ 5.64 = 65

Average payables payment period

66

64

62

60

58 65
62
56
59 59
54 57

52
2013 2014 2015 2016 2017
Average payables payment
57 59 59 62 65
period

INTERPERATION
Ratio Description
Average payables An estimate of the average
payment period number of days it takes a
company to pay its
suppliers; equal to the
number of days in the
period divided by payables
turnover ratio for the
period.
The company
FORD MOTOR Co.'s
average payables payment
period increased from
2015 to 2016 and from
2016 to 2017

85
Long-term Debt and Solvency Analysis
16. Debt to Equity Selected Financial Data (USD $ in millions)

2013 2014 2015 2016 2017

Automotive 1,257 2,501 1,779 2,685 3,356

debt
payable
within one
year

Financial 36,806 36,671 41,196 46,984 48,265

Services
debt
payable
within one
year

Automotive 14,426 11,323 11,060 13,222 12,575

long-term
debt
payable
after one
year

Financial 62,199 68,676 78,819 80,079 90,091

Services
long-term
debt
payable
after one
year

Total debt 114,688 119,171 132,854 142,970 154,287

Equity 26,383 24,805 28,642 29,170 34,890

attributable
to FORD
MOTOR
Company

Debt to 4.35 4.80 4.64 4.90 4.42

equity

86
Debt to equity = Total debt ÷ Equity attributable to FORD MOTOR Company
= 154,287 ÷ 34,890 = 4.42

Debt to equity
5

4.9

4.8

4.7

4.6

4.5
4.9
4.4 4.8

4.3 4.64

4.2 4.42
4.35
4.1

4
2013 2014 2015 2016 2017
Debt to equity 4.35 4.8 4.64 4.9 4.42

INTERPERATION
Ratio Description The company

Debt-to-equity ratio A solvency ratio calculated as FORD MOTOR Co.'s debt-to-

total debt divided by total equity ratio deteriorated from
shareholders' equity. 2015 to 2016 but then
improved from 2016 to 2017
exceeding 2015 level.

87
17. Debt to Capital Selected Financial Data (USD $ in millions)

2013 2014 2015 2016 2017

Total 114,688 119,171 132,854 142,970 154,287

debt

Equity 26,383 24,805 28,642 29,170 34,890

attributable
to FORD
MOTOR
Company

Total 141,071 143,976 161,496 172,140 189,177

capital

Debt to 0.81 0.83 0.82 0.83 0.82

capital

Debt to capital = Total debt ÷ Total capital= 154,287 ÷ 189,177 = 0.82

Debt to capital
0.835
0.83
0.825
0.82
0.815 0.83 0.83
0.81 0.82 0.82
0.805 0.81
0.8
2013 2014 2015 2016 2017
Debt to capital 0.81 0.83 0.82 0.83 0.82

INTERPERATION
Ratio Description
Debt-to-capital ratio A solvency ratio calculated
as total debt divided by
total debt plus
shareholders' equity.
The company
FORD MOTOR Co.'s
debt-to-capital ratio
deteriorated from 2015 to
2016 but then improved
from 2016 to 2017
exceeding 2015 level.

88
18. Interest Coverage Selected Financial Data (USD $ in millions)

2013 2014 2015 2016 2017

Net income 7,155 3,187 7,373 4,596 7,602

attributable
to FORD
MOTOR
Company

Add: Net (7) (1) (2) 11 26

income
attributable
to no
controlling
interest

Add: (147) 1,156 2,881 2,189 520

Income tax
expense

Add: 829 797 773 894 1,133

Interest
expense on
Automotive
debt

Earnings 7,830 5,139 11,025 7,690 9,281

before
interest
and tax
(EBIT)

Interest 9.45 6.45 14.26 8.60 8.19

coverage

Interest coverage = EBIT ÷ Interest expense

= 9,281 ÷ 1,133 = 8.19

89
 Interest coverage
16

14

12

10

8
14.26
6

9.45
4 8.6 8.19
6.45
2

0
2013 2014 2015 2016 2017
Interest coverage 9.45 6.45 14.26 8.6 8.19

INTERPERATION
Ratio Description The company
Debt-to-capital ratio A solvency ratio calculated FORD MOTOR Co.'s
as EBIT divided by interest interest coverage ratio
payments deteriorated from 2015 to
2016 and from 2016 to
2017.

90
19. MVA Spread Selected Financial Data (USD $ in millions)

2013 2014 2015 2016 2017

Market value 25,559 25,745 10,936 13,665 3,919
added (MVA)
Invested capital 133,983 142,840 148,836 160,188 176,866
MVA spread 19.08% 18.02% 7.35% 8.53% 2.22%

MVA spread = 100 × MVA ÷ Invested capital= 100 × 3,919 ÷ 176,866 = 2.22%

MVA spread
25.00%

20.00%

15.00%

10.00% 19.08% 18.02%

5.00%
7.35% 8.53%

2.22%
0.00%
2013 2014 2015 2016 2017
MVA spread 19.08% 18.02% 7.35% 8.53% 2.22%

INTERPERATION
Ratio Description The company
MVA The ratio of MVA to invested FORD MOTOR Co.'s MVA
spread capital. It measures the spread improved from 2015 to
efficiency with which 2016 but then deteriorated
investors' capital investment significantly from 2016 to
has translated into a franchise 2017.
value and into an aggregate net
present value premium.

91
20. MVA Margin Selected Financial Data (USD $ in millions)

2013 2014 2015 2016 2017

Market value 25,559 25,745 10,936 13,665 3,919
added (MVA)
Automotive sales 139,369 135,782 140,566 141,546 145,653
Increase 511 1,258 1,363 (407) (1,617)
(decrease) in
deferred revenue
MVA margin 18.27% 18.79% 7.71% 9.68% 2.72%
MVA margin = 100 × MVA ÷ (Automotive sales + Change in deferred revenue)
= 100 × 3,919 ÷ (145,653 + -1,617) = 2.72%

MVA margin
20.00%
18.00%
16.00%
14.00%
12.00%
10.00%
18.27% 18.79%
8.00%
6.00%
9.68%
4.00% 7.71%
2.00%
2.72%
0.00%
2013 2014 2015 2016 2017
MVA margin 18.27% 18.79% 7.71% 9.68% 2.72%

INTERPERATION

Ratio Description The company

MVA margin The ratio of MVA to sales.
It measures how efficiently
and prodigiously sales
translate into franchise
value.
FORD MOTOR Co.'s
MVA margin improved
from 2015 to 2016 but
then deteriorated
significantly from 2016 to
2017.

92
21. Return on Invested Capital (ROIC)

2013 2014 2015 2016 2017

Net 7,906 6,830 10,908 6,702 6,637
operating
profit
after
taxes
(NOPAT)
Invested 133,983 142,840 148,836 160,188 176,866
capital
ROIC 5.90% 4.78% 7.33% 4.18% 3.75%
ROIC = 100 × NOPAT ÷ Invested capital= 100 × 6,637 ÷ 176,866 = 3.75%

ROIC
8.00%

7.00%

6.00%

5.00%

4.00%
7.33%
3.00% 5.90%
4.78%
2.00% 4.18%
3.75%

1.00%

0.00%
2013 2014 2015 2016 2017
ROIC 5.90% 4.78% 7.33% 4.18% 3.75%

INTERPERATION
Ratio Description The company

ROIC A measure of the periodic, FORD MOTOR Co.'s ROIC

after tax, cash-on-cash yield deteriorated from 2015 to
earned in the business.. 2016 and from 2016 to 2017

93
 CHAPTER 7

FINDINGS RECOMMENDATIONS AND

CONCLUSION

94
 Measures to Improve Ratio analysis at FORD MOTOR CO:

 The trend in costs, sales, profits and other facts can be known by computing ratios
of relevant accounting figures of last few years. This trend analysis with the help
of ratios may be useful for forecasting and planning future business activities.
 Budget is an estimate of future activities on the basis of past experience.
Accounting ratios help to estimate budgeted figures. For example, sales budget
may be prepared with the help of analysis of past sales.
 Ratio analysis indicates the degree of efficiency in the management and utilisation
of its assets. Different activity ratios indicate the operational efficiency. In fact,
solvency of a firm depends upon the sales revenues generated by utilizing its
assets.
 Ratios are effective means of communication and play a vital role in informing the
position of and progress made by the business concern to the owners or other
parties.
 Ratios may also be used for control of performances of the different divisions or
departments of an undertaking as well as control of costs.
 Comparison of performance of two or more firms reveals efficient and inefficient
firms, thereby enabling the inefficient firms to adopt suitable measures for
improving their efficiency. The best way of inter-firm comparison is to compare
the relevant ratios of the organisation with the average ratios of the industry.
 Ratio analysis helps to assess the liquidity position i.e., short-term debt paying
ability of a firm. Liquidity ratios indicate the ability of the firm to pay and help in
credit analysis by banks, creditors and other suppliers of short-term loans.
 Ratio analysis is also used to assess the long-term debt-paying capacity of a firm.
Long-term solvency position of a borrower is a prime concern to the long-term
creditors, security analysts and the present and potential owners of a business. It is
measured by the leverage/capital structure and profitability ratios which indicate
the earning power and operating efficiency. Ratio analysis shows the strength and
weakness of a firm in this respect.
 The management is always concerned with the overall profitability of the firm.
They want to know whether the firm has the ability to meet its short-term as well
as long-term obligations to its creditors, to ensure a reasonable return to its owners

95
 and secure optimum utilisation of the assets of the firm. This is possible if all the
ratios are considered together.
 A company is sick when it fails to generate profit on a continuous basis and
suffers a severe liquidity crisis. Proper ratio analysis can give signal of corporate
sickness in advance so that timely measures can be taken to prevent the
occurrence of such sickness.
 Ratio analysis helps to take decisions like whether to supply goods on credit to a
firm, whether bank loans will be made available etc.
 Ratio analysis makes it easy to grasp the relationship between various items and
helps in understanding the financial statements.

FINDING:

1. Current ratio are increased from 1.20 to 1.23 in 2016-17 as compared to

previous year but current ratio are decreased from 1.25 to 1.20 2015-16
decreased because of increase in current assets.
2. Quickratio are increased from 1.07 to 1.08 in 2016-17 as compared to previous
year but quickratio is decreased from 1.11 to 1.07 in 2015-16 decreased because
of increase in current assets.
3. Cash ratio is increased from 0.94to 0.96 in 2016-17 as compared to previous
year but cash ratio is decreased from 0.98 to0.94 in 2015-16.
4. Net Fixed Asset Turnover are decreased from 4.41 to 4.12 in 2016-17 as
compared to previous year but Net Fixed Asset Turnover are decreased from
4.66 to 4.41 in 2015-16 decreased because inadequate growth in net property.
5. Total Asset Turnover isdecreased from 0.59 to 0.56 in 2016-17 as compared to
previous year but Total Asset Turnover is decreased from 0.62 to 0.59 in 2015-
16.
6. Equity Turnover are decreased from 4.85 to 4.17 in 2016-17 as compared to
previous year but Equity Turnover is decreased from 4.91 to 4.85 in 2015-16.
7. Inventory turnover are decreased from 14.18 to12.78 in 2016-17 as compared to
previous year but Inventory turnover are decreased from 14.96 to 14.18 in 2015-
16.

96
8. Receivables turnover are increased from 12.75 to 13.74 in 2016-17 as compared
to previous year but Receivables turnover are increased from 12.73 to 12.75 in
2015-16.
9. Payables turnover are decreased from 5.93 to 5.64 in 2016-17 as compared to
previous year but Payables turnover are decreased from 6.14 to 5.93 in 2015-16.
10. Working capital turnover are decreased from 7.79 to 6.84 in 2016-17 as
compared to previous year but Working capital turnover are increased from 6.94
to 7.79 in 2015-16.
11. Operating cycleis increased from 55 days to 56 in 2016-17 as compared to
previous year but operating cycleisincreased from 53 days to 55 in 2015-16.
12. Cash conversion cycle is decreased from -7 to -9 days in 2016-17 as compared
to previous year but Cash conversion cycle is decreased from -6 to -7 days
in2015-16.
13. Average inventory processing period are increased from 26 days to 29 in 2016-
17 as compared to previous year but Average inventory processing period are
increased from 24 days to 26 in 2015-16.
14. Average receivable collection period are decreased from 29 to 27 in 2016-17 as
compared to previous year but Average receivable collection period are
decreased from 31 to 29 (days) in 2014-16.
15. Average payables payment periodare increased from 62 to 65 in 2016-17 as
compared to previous year but Average payables payment period are increased
from 59 to 62 in 2015-16.
16. Debt to equity ratio are decreased from 4.90 to 4.42 in 2016-17 as compared to
previous year but Debt to equity ratio are increased from 4.46 to 4.90 in 2015-16
.
17. Debt to capital ratio are decreased from 0.83 to 0.82 in 2016-17 as compared to
previous year but Debt to capital ratio are increased from 0.82 to 0.83in 2015-16
.
18. Interest coverage ratio is decreased from 8.60 to 8.19 in 2016-17 as compared to
previous year but Interest coverageratio is decreased from 14.26 to 8.60in 2015-
16.

97
 CONCLUSION:

CONCLUSION:

The Ford Motor Co maintain their ratios very well but some ratios like current ratio
are not according to the ideal ratio in 2017current ratio of Ford Motor Co is increasing
that is good sign. The company improves their efficiency day by day. Ratios of Ford
help to analysis companies financial system and maintain the financial and non-
financial aspects. Company improves their financial condition but in 2015 company in
good position but in 2016 company loss their pervious ratios result in negative
manner. The working capital of Ford Motor Co is in good position. This study
conclude that there are suggestion to investors to invest in ford because their volatile
nature and take the benefits of it and earn profits or best returns.

Recommendation

Any investor willing to invest in Ford Motor Corporation should move ahead and
invest in the company. The company’s financial strength as depicted by the financial
ratios reveals that the company is able to meet its shot term obligations. This is
because the liquidity ratios reveal that the company’s current assets are able to pay off
the current liabilities.

98
 BIBLIOGRAPHY

 BIBLIOGRAPHY

BOOKS:

 Kothari C.R., Research Methodology

 Financial Management: Theory & Practice (with Thomson ONE – Business
School Edition 1-Year Printed Access Card) (Finance Titles in the Brigham
Family) 14th Edition — by Eugene F. Brigham and Michael C. Ehrhardt.
 The Basics of Public Budgeting and Financial Management: A Handbook for
Academics and Practitioners —by— Charles E. Menifield (Author)
 Shashi k. Gupta (2016) Financial Management, kalyani Publications
SEARCH ENGINES:

 http://financials.morningstar.com/balance-sheet/bs.html?t=PEP

 https://www.stock-analysis-on.net/NYSE/Company/FORD MOTOR
CO-Inc/Ratios/Short-term-Operating-Activity

 https://en.wikipedia.org/wiki/FORD MOTOR CO

 http://www.FORD MOTOR COindia.co.in/

 https://phdessay.com/financial-analysis-for-ford-motor-corporation/

References: Media Reports, Press Releases, Department of Industrial Policy and

Promotion (DIPP), Automotive Component Manufacturers Association of India
(ACMA), Society of Indian Automobile Manufacturers (SIAM), Union Budget 2015-
16, Union Budget 2017-18# - As per the Automotive Mission Plan 2016-26 prepared
jointly by the Society of Indian Automobile Manufacturers (SIAM) and government,
@ - as per the draft policy on e-vehicles prepared by NITI Aayog, Government of Ind

99
 ANNEXURE
BALANCESHEET OF FORD MOTOR CO

2017 2016 2015 2014 2013

Shares Outstanding 3972.3 3973.72 3968.63 3848.69 3944.44
Cash 18492 15905 14272 10757 14468
Marketable Securities 20435 22922 20904 20393 22100
Receivables 10599 11102 11284 11708 9828
Inventory 10277 8898 8319 7866 7708
Raw Materials 4397 3843 4005 3822 3613
Work In Progress - - - - -
Finished Goods 6779 5943 5254 5022 5058
Notes Receivable 52210 46266 90691 81111 77481
Other Current Assets 3889 3368 - - -
Total Current Assets 115902 108461 145470 131835 131585
Property Plant And Equipment 65189 59876 57629 59260 59092
Accumulated Depreciation 29862 27804 27466 29134 31476
Net Property Plant And Equipment 35327 32072 30163 30126 27616
Investment And Advances 31320 32133 30317 26574 23663
Other Non Current Assets 56182 49924 - - -
Deferred Charges 10973 9705 11509 13639 13315
Intangibles - - - - -
Deposits And Other Assets 8104 5656 7466 6353 5847
Total Assets 257808 237951 224925 208527 202026
Notes Payable - - - - -
Accounts Payable 23282 21296 20272 20035 19531
Current Portion Of Long Term Debt 51621 49669 - - -
Current Portion Of Capital Leases - - - - -
Accrued Expenses - - - - -
Income Taxes Payable - - - - -
Other Current Liabilities 19697 19316 - - -
Total Current Liabilities 94600 90281 20272 20035 19531
Mortgages - - - - -
Deferred Charges Taxes Income 815 691 502 570 598
Convertible Debt - - - - -
Long Term Debt 102666 93301 132854 119171 114688
Non Current Capital Leases - - - - -
Other Long Term Liabilities 24711 24395 42546 43577 40462
Total Liabilities 222890 208764 196268 183695 175610
Minority Interest 98 96 94 342 331
Preferred Stock - - - - -
Common Stock Net 41 41 41 40 40
Capital Surplus 21843 21630 21421 21089 21422
Retained Earnings 21218 15634 14414 24556 23658
Treasury Stock 1253 1122 977 848 506
Other Liabilities -6931 -6996 -6242 -20005 -18198
Shareholders Equity 34918 29187 28657 24832 26416
Total Liabilities And Shareholders Equity 257808 237951 224925 208527 202026

100
101