Ford Financial Analysis Essay - 3224 Words

Writing Assignment: Financial Analysis Margaret Ison Ron Lentz, CPA, PhD Financial Management September 8, 2012 Henry Ford incorporated Ford Motor Company in 1903 at Dearborn, Michigan, USA and is known to have adapted practices that were not popular in those days. The Car Maker is known for their famous â€Å"Model T† and the unique innovation of interchangeable parts in moving assembly lines that makes it possible to assemble cars at low cost and high reliability. Ford Motor established an impressive financial track record almost throughout the 20th Century (barring the record loss of $7 billion in 1992) till the Millennium started (Alan Mullally, 2012). Ford motor Company is the second largest automobile company in the world†¦show more content†¦Ford uses derivative instruments to forecast their economic exposure with respect to forecasted revenues and costs (Capital Budgeting and Valuation of Investment Decisions , 2010). In the current market Ford is also vulnerable to interest, residual and liquidity risk; Interest rate risk relates to the gain or loss Ford could incur du e to a change in interest rates. They invest various types of securities which are subject to fluctuations in interest rates. Their investment strategy is based clearly on defined risk and liquidity guidelines to maintain liquidity, minimize risk, and earn a reasonable return on short-term investments. A rise in interest rates could have a material adverse impact on the financial statements. Residual risk in the possibility that the actual proceeds received at lease termination will be lower than projections or return volumes will be higher than projections. Basically, a customer may return a vehicle to Ford, and Ford obtains less for this vehicle then is expected. Although estimates are created for these situations, it can still have an adverse relationship on the financial statements, especially if many people return their vehicles in the same period. Because of all the risks stated above, added to the intense competition and the fact that the industry functions so closely to the changes in the economy, gives Ford liquidity risk. Liquidity risk is the possibility that Ford mayShow MoreRelatedFord Motor Company Financial Analysis Essay890 Words   |  4 PagesFord Motor Company Financial Insight Ford Motor Company’s financial analysis reveals their long-term commitment to future growth, innovation, and efficient management. Their financial statements expose their strategy for investing in long-term assets, sales and administration development and fixed assets. Furthermore, the financial statements demonstrate their resiliency to their initiatives while dealing with fluctuating market conditions. 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The Capital Asset Pricing Model defines â€Å"the relevant risk of an individual stock as the amount of risk that the stock contributes to the market portfolio† (Brigham Ehrhardt, 2014, p. 250). The risk of a stock can be measured by its beta. The higher the beta of a stock, the higher the risk. Stocks with a beta below one are less volatile than the market while stocks with a beta of greaterRead MoreEssay on Ford Motor Company Analysis1652 Words   |  7 PagesProject: Ford Motor Company Executive Summary Ford Motor Company is an American automobile manufacturer founded and headquartered in Dearborn, Michigan but incorporated in the state of Delaware. The company was started by Henry Ford in 1903 and is historically famous for the creation and implementation of the assembly line in manufacturing processes. Ford’s mission is to produce and sell automobiles – cars, trucks, SUVs, etc – from the ones initially designed and engineered by Henry Ford all theRead MoreThe Financial Position Of Ford Motor Company1084 Words   |  5 PagesFinancial ratios are significant tools of measurement of the soundness and stability of a firm within its internal structures and operations. The computation of the various financial ratios enables a firm in evaluating its financial and market position relative to the industry competition. This paper aims to assess the financial position of Ford Motor Company in comparison with General Motors Company. The evaluation will consider the comp utation of ratios such as; liquidity ratios, profitability