Based on the data in Table 2, Ford Company demonstrates the increase in the profitability ratios between 2008 and 2011. For example, the ROA increase from the loss of 5.9% to the gain of 11.78% between 2008 and 2011. The company recorded a loss in the ROA in 2008 due to the economic crisis facing the United States during the period. However, between 2009 and 2011, the company recorded the increase in the ROA. Similarly, the company recorded the increase in the Net Profit Margin from 2009 and 2011. The company recorded 544% increase in the net profit margin between 2009 and 2011 revealing that the company recorded the supernormal profits during the period. Analysis of the company current ratio reveals that the company posses the financial capability to settle its short-term financial obligation. Moreover, Ford also provides good record in efficiency ratio. From the company efficiency ratio, Ford demonstrates efficiency in its operating circle. The company asset turnover ratio is good and the company records 39% increase in the inventory turnover ratio between 2008 and 2011. Based on the company record on inventory turnover, the company records 39% increase in the total sales between 2008 and 2009. While the company-operating margin was negative between 2008 and 2009, however, the company improves its operating margin between 2010 and 2011.
Table 2: Ford Key Financial Ratios
2008
2009
2010
2011
Profitability Ratio
ROA (Return on Asset)
(5.90%)
1.32%
3.65%
11.78%
Asset Turnover
0.59
0.57
0.72
0.79
Net Profit Margin
(10.3%)
2.30%
5.09%
14.83%
Current Ratio
1.33
2.96
2.67
2.64
Efficiency ratio
Asset Turnover
0.59
0.57
0.72
0.79
Inventory Turnover
13.77
14.22
18.38
19.18
Operating Margin
(-2.82)
(2.39)
5.16
5.10
Based on the overall analysis of Ford financial ratio, this paper recommends that the company is good for an investment opportunity. Despite the financial results provided by the company, Ford records a decline in the pre-tax operating profits between first quarter of 2011 and first quarter of 2012. The company needs to redefine its strategic management to improve its financial performances.
Strategies to improve Ford Financial Performance
The report recommends that Ford needs to exploit worldwide market to improve its financial performances....
The company will need to increase the export promotion to the emerging markets. The strategy to achieve this objective is to implement the production of low price and affordable vehicles for the emerging markets. Implementing this strategy, Ford will enhance its competitive market advantages. Ford should exploit the emerging market such as China, India, Singapore and other emerging markets in the Latin America. Moreover, the company will need to focus on the differentiation strategy. Ford will need to improve on its brand to achieve competitive advantages over its competitors. Ford should implement Porter (1980) strategic tool that focuses on differentiation, cost leadership and segmentation strategy to achieve competitive market advantages. (Wright, 1987).
Evaluation of the Refusal of Federal government Bail out Fund on Ford
Analysis of the financial record of Ford Motor Company shows that it is unlikely that the Federal government will implement the bail out fund policy for Ford because the company demonstrates healthy financial performances. However, there are positive and negative impacts that the refusal of bail out fund will have on the financial performances of Ford Company.
The positive impact is that the refusal will make the company to reorganize its strategy management to improve the company financial performance. The inability to get the bail out fund from the government will make the company enhance its operational efficiencies and this strategy will assist the company to attract investors from the U.S. As well international investors. By focusing on the operational efficiency, the company will be able to attract more funds from investors and this will enhance the company financial efficiency.
On the other hand, the negative impact is that some non-sophisticated investors may decide to disinvest from the company because they will believe that the company is going bankrupt. Since it is a general belief that government only initiates the bail out fund policy for companies experiencing financial difficulties. By disinvesting from the company, Ford may face financial difficulties.
Conclusion
The report provides the financial analysis of the Ford Motor Company. The report reveals that the company demonstrates healthy financial records within the last four years. The report projects that the company will continue to record healthy financial records within the next four quarters. The report recommends that Ford Motor is a good company for investment opportunity.
References
Michael A. Hitt, R. Ireland, D. (2009). The Strategic Management: Globalization & Competitiveness: Cases. Cengage Learning. USA.
Ford (2012). Ford Earns First Quarter Pre-Tax Operating Profits of $2.3…
