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Running head: FINANCIAL ANALYSIS
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FINANCIAL ANALYSIS
Financial Analysis
Argosy University Online
Module 1 Assignment 3
Katrina Caver
Argosy Online University states, “Finance is the study of the
acquisition and disposal of money and financial assets, central
to all organizations. When these organizations accurately apply
generally accepted accounting and finance principles, their
financial statements will reveal the firm’s performance,”
(2012). Financial analysis is a very important measuring tool
for determining a company’s stability. It analyzes the status of a
company from time to time, whether it is quarterly or yearly.
Many companies create an analysis report for the purpose of
keeping financial status updated and allow managers to make
proper changes as needed to improve managing finances, which
is part of its planning process. The planning process includes
planning for short-term (less than five years) and long-term
(more than five years).
Planning helps managers identify problems and assist managers
by allowing them to focus on solutions to solve them. It also
helps grant that while meeting goals for improvement, it gives
manager an idea that employees are all on the same page to
meeting goals. As (Argosy University Online, 2012) mentioned,
budgeting is usually used for short-term that allows managers to
be evaluated and make sure that they are conducting business
for the company properly and be able to make the appropriate
changes as needed before it’s too late, while strategic planning
is used for long-term that can help managers allocate the
essential resources and achieve long-term goals. Yes, without
planning for short-term and long-term, a company can fail.
Ratios, including liquidity, asset management, and financial
leverage, profitability, and market value are used for financial
analysis reporting. A profitability ratio is a measure of how
profitable the business is and used to measure a company's
performance. For a manager to know whether profits increased
from one time period to the next time period, it is very crucial
for the company as a whole. This allows a manager to take
information gathered from analysis and be able to make
adjustments that would be beneficial to the company. There is a
general decline in gross margin thus the company’s profitability
on goods and services are declining. Also, there is a rise in
operating margin, which implies that the company spends more
in production than in the previous financial years.
As a result, profits decrease. However, there is a steady upward
trend of net profit margin; the company is considered to be in
good standing. The liquidity ratio is a mathematical means of
determining the company’s ability to pay its short-term debts.
Anytime a company, as well as an individual is able to payoff
any debts in a short period of time prove that managers are
meeting the budget and not overspending. Current ratio is the
most significant of the 3 methods. From the calculations, there
is an improvement in liquidity of the company and therefore be
described as a positive gain. The company is performing quite
well compared to other companies in the market such as the
apple company. The reviewing of Ford Company’s balance sheet
and Income Statement yielded the results as displayed in the
chart below.
RATIOS
YEAR
2013
2012
2011
PROFITABILITY RATIO
i. Gross Margin
ii. Operating Margin
iii. Net Profit Margin
12.8%
2.9%
2.3%
13.1%
3.0%
1.8%
13.6%
-2.9
1.2
LIQUIDITY RATIO
i. Current Ratio
ii. Acid Ratio
iii. Cash Ratio
6.74
6.34
1.87
6.48
6.10
1.86
1.91
1.81
0.57
FINANCIAL LEVERAGE RATIO
i. Debit Ratio
ii. Debit to Equity
iii. Interest Coverage
0.87
6.64
6.56
0.91
10.86
8.25
0.92
10.87
9.22
MARKET RATIO
i. Price to Earnings
ii. Forward Price to Earnings
iii. PEG Ratio
iv. Dividend Yield
12.5
11.4
1.25
2.47%
12.7
11.6
1.2717
2.54%
12.6
11.4
1.28
2.50
ASSET MANAGEMENT RATIO
i. Cash Turnover
ii. Inventory Turnover
iii. Accounts Receivable Turnover
iv. Account Payable Turnover
v. Cash Conversion Cycle
10.15
16.62
1.68
6.56
183.22
8.53
15.77
1.63
0.93
-146.62
7.91
19.87
1726.55
1.56
-177.87
Appendices
FORD COMPANY
BALANCE SHEET FOR YEAR 2011-2013
View: Annual Data | Quarterly Data
All numbers in thousands
Period Ending
Dec 31, 2013
Dec 31, 2012
Dec 31, 2011
Assets
Current Assets
Cash And Cash Equivalents
14,468,000
15,659,000
17,148,000
Short Term Investments
22,100,000
20,284,000
18,618,000
Net Receivables
87,309,000
81,869,000
78,541,000
Inventory
7,708,000
7,362,000
5,901,000
Other Current Assets
-
-
-
Total Current Assets
131,585,000
125,174,000
120,208,000
Long Term Investments
3,679,000
3,246,000
2,936,000
Property Plant and Equipment
47,600,000
40,245,000
35,209,000
Goodwill
-
-
-
Intangible Assets
-
-
100,000
Accumulated Amortization
-
-
-
Other Assets
5,847,000
5,556,000
4,770,000
Deferred Long Term Asset Charges
13,315,000
15,185,000
15,125,000
Total Assets
202,026,000
189,406,000
178,348,000
Liabilities
Current Liabilities
Accounts Payable
19,531,000
19,308,000
63,093,000
Short/Current Long Term Debt
-
-
-
Other Current Liabilities
-
-
-
Total Current Liabilities
19,531,000
19,308,000
63,093,000
Long Term Debt
114,688,000
105,058,000
99,488,000
Other Liabilities
40,462,000
48,259,000
-
Deferred Long Term Liability Charges
598,000
470,000
696,000
Minority Interest
33,000
42,000
43,000
Negative Goodwill
-
-
-
Total Liabilities
175,312,000
173,137,000
163,320,000
Stockholders' Equity
Misc. Stocks Options Warrants
331,000
322,000
-
Redeemable Preferred Stock
-
-
-
Preferred Stock
-
-
-
Common Stock
40,000
40,000
38,000
Retained Earnings
23,658,000
18,077,000
12,985,000
Treasury Stock
(506,000)
(292,000)
(166,000)
Capital Surplus
21,422,000
20,976,000
20,905,000
Other Stockholder Equity
(18,231,000)
(22,854,000)
(18,734,000)
Total Stockholder Equity
26,383,000
15,947,000
15,028,000
Net Tangible Assets
26,383,000
15,947,000
14,928,000
Ford Motor Co. (F)
Income Statement for 2011-2013
Period Ending
Dec 31, 2013
Dec 31, 2012
Dec 31, 2011
Total Revenue
146,917,000
133,559,000
135,605,000
Cost of Revenue
128,094,000
116,107,000
117,225,000
Gross Profit
18,823,000
17,452,000
18,380,000
Operating Expenses
Research Development
-
-
-
Selling General and Administrative
13,176,000
11,494,000
10,884,000
Non Recurring
208,000
77,000
(36,000)
Others
-
-
-
Total Operating Expenses
-
-
-
Operating Income or Loss
5,439,000
5,881,000
7,532,000
Income from Continuing Operations
Total Other Income/Expenses Net
1,322,000
1,964,000
1,466,000
Earnings Before Interest And Taxes
7,830,000
8,433,000
9,498,000
Interest Expense
829,000
713,000
817,000
Income Before Tax
7,001,000
7,720,000
8,681,000
Income Tax Expense
(147,000)
2,056,000
(11,541,000)
Minority Interest
7,000
1,000
(9,000)
Net Income From Continuing Ops
8,224,000
6,253,000
20,713,000
Non-recurring Events
Discontinued Operations
-
-
-
Extraordinary Items
-
-
-
Effect Of Accounting Changes
-
-
-
Other Items
-
-
-
Net Income
7,155,000
5,665,000
20,213,000
Preferred Stock And Other Adjustments
-
-
-
Net Income Applicable To Common Shares
7,155,000
5,665,000
20,213,000
References
Argosy University Online (2012) Financial Management:
Assessment tools. Retrieved from http://myeclassonline.com
Argosy University Online (2012) Financial Management:Short-
term planning and long- term planning.
Retrieved from http://myeclassonline.com
Zacks Investment Research. (2015). Zacks.Our research. Your
success. Retrieved from www.zacks.com/stock/quote/F/balance-
sheet
Weston, J. (1990). Essentials of Managerial Finance. Hinsdale:
Dryden Press. p. 295. ISBN0- 03030700-3
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1Running head FINANCIAL ANALYSIS11FINANCIAL ANALYSIS.docx

  • 1. 1 Running head: FINANCIAL ANALYSIS 11 FINANCIAL ANALYSIS Financial Analysis Argosy University Online Module 1 Assignment 3 Katrina Caver Argosy Online University states, “Finance is the study of the acquisition and disposal of money and financial assets, central to all organizations. When these organizations accurately apply generally accepted accounting and finance principles, their
  • 2. financial statements will reveal the firm’s performance,” (2012). Financial analysis is a very important measuring tool for determining a company’s stability. It analyzes the status of a company from time to time, whether it is quarterly or yearly. Many companies create an analysis report for the purpose of keeping financial status updated and allow managers to make proper changes as needed to improve managing finances, which is part of its planning process. The planning process includes planning for short-term (less than five years) and long-term (more than five years). Planning helps managers identify problems and assist managers by allowing them to focus on solutions to solve them. It also helps grant that while meeting goals for improvement, it gives manager an idea that employees are all on the same page to meeting goals. As (Argosy University Online, 2012) mentioned, budgeting is usually used for short-term that allows managers to be evaluated and make sure that they are conducting business for the company properly and be able to make the appropriate changes as needed before it’s too late, while strategic planning is used for long-term that can help managers allocate the essential resources and achieve long-term goals. Yes, without planning for short-term and long-term, a company can fail. Ratios, including liquidity, asset management, and financial leverage, profitability, and market value are used for financial analysis reporting. A profitability ratio is a measure of how profitable the business is and used to measure a company's performance. For a manager to know whether profits increased from one time period to the next time period, it is very crucial for the company as a whole. This allows a manager to take information gathered from analysis and be able to make adjustments that would be beneficial to the company. There is a general decline in gross margin thus the company’s profitability on goods and services are declining. Also, there is a rise in operating margin, which implies that the company spends more in production than in the previous financial years. As a result, profits decrease. However, there is a steady upward
  • 3. trend of net profit margin; the company is considered to be in good standing. The liquidity ratio is a mathematical means of determining the company’s ability to pay its short-term debts. Anytime a company, as well as an individual is able to payoff any debts in a short period of time prove that managers are meeting the budget and not overspending. Current ratio is the most significant of the 3 methods. From the calculations, there is an improvement in liquidity of the company and therefore be described as a positive gain. The company is performing quite well compared to other companies in the market such as the apple company. The reviewing of Ford Company’s balance sheet and Income Statement yielded the results as displayed in the chart below. RATIOS YEAR 2013 2012 2011 PROFITABILITY RATIO i. Gross Margin ii. Operating Margin iii. Net Profit Margin 12.8% 2.9% 2.3% 13.1% 3.0% 1.8%
  • 4. 13.6% -2.9 1.2 LIQUIDITY RATIO i. Current Ratio ii. Acid Ratio iii. Cash Ratio 6.74 6.34 1.87 6.48 6.10 1.86 1.91 1.81 0.57 FINANCIAL LEVERAGE RATIO i. Debit Ratio ii. Debit to Equity iii. Interest Coverage 0.87 6.64 6.56 0.91 10.86 8.25 0.92 10.87 9.22
  • 5. MARKET RATIO i. Price to Earnings ii. Forward Price to Earnings iii. PEG Ratio iv. Dividend Yield 12.5 11.4 1.25 2.47% 12.7 11.6 1.2717 2.54% 12.6 11.4 1.28 2.50 ASSET MANAGEMENT RATIO i. Cash Turnover ii. Inventory Turnover iii. Accounts Receivable Turnover iv. Account Payable Turnover v. Cash Conversion Cycle 10.15 16.62 1.68 6.56 183.22 8.53 15.77 1.63
  • 6. 0.93 -146.62 7.91 19.87 1726.55 1.56 -177.87 Appendices FORD COMPANY BALANCE SHEET FOR YEAR 2011-2013 View: Annual Data | Quarterly Data All numbers in thousands Period Ending Dec 31, 2013 Dec 31, 2012 Dec 31, 2011 Assets Current Assets Cash And Cash Equivalents 14,468,000 15,659,000 17,148,000 Short Term Investments 22,100,000
  • 7. 20,284,000 18,618,000 Net Receivables 87,309,000 81,869,000 78,541,000 Inventory 7,708,000 7,362,000 5,901,000 Other Current Assets - - - Total Current Assets 131,585,000 125,174,000 120,208,000 Long Term Investments 3,679,000 3,246,000 2,936,000 Property Plant and Equipment 47,600,000 40,245,000 35,209,000 Goodwill - - - Intangible Assets -
  • 8. - 100,000 Accumulated Amortization - - - Other Assets 5,847,000 5,556,000 4,770,000 Deferred Long Term Asset Charges 13,315,000 15,185,000 15,125,000 Total Assets 202,026,000 189,406,000 178,348,000 Liabilities Current Liabilities Accounts Payable 19,531,000 19,308,000 63,093,000 Short/Current Long Term Debt - - - Other Current Liabilities - -
  • 9. - Total Current Liabilities 19,531,000 19,308,000 63,093,000 Long Term Debt 114,688,000 105,058,000 99,488,000 Other Liabilities 40,462,000 48,259,000 - Deferred Long Term Liability Charges 598,000 470,000 696,000 Minority Interest 33,000 42,000 43,000 Negative Goodwill - - - Total Liabilities 175,312,000 173,137,000 163,320,000 Stockholders' Equity Misc. Stocks Options Warrants 331,000 322,000
  • 10. - Redeemable Preferred Stock - - - Preferred Stock - - - Common Stock 40,000 40,000 38,000 Retained Earnings 23,658,000 18,077,000 12,985,000 Treasury Stock (506,000) (292,000) (166,000) Capital Surplus 21,422,000 20,976,000 20,905,000 Other Stockholder Equity (18,231,000) (22,854,000) (18,734,000) Total Stockholder Equity 26,383,000 15,947,000 15,028,000 Net Tangible Assets
  • 11. 26,383,000 15,947,000 14,928,000 Ford Motor Co. (F) Income Statement for 2011-2013 Period Ending Dec 31, 2013 Dec 31, 2012 Dec 31, 2011 Total Revenue 146,917,000 133,559,000 135,605,000 Cost of Revenue 128,094,000 116,107,000 117,225,000 Gross Profit 18,823,000 17,452,000 18,380,000
  • 12. Operating Expenses Research Development - - - Selling General and Administrative 13,176,000 11,494,000 10,884,000 Non Recurring 208,000 77,000 (36,000) Others - - - Total Operating Expenses - - - Operating Income or Loss 5,439,000 5,881,000
  • 13. 7,532,000 Income from Continuing Operations Total Other Income/Expenses Net 1,322,000 1,964,000 1,466,000 Earnings Before Interest And Taxes 7,830,000 8,433,000 9,498,000 Interest Expense 829,000 713,000 817,000 Income Before Tax 7,001,000 7,720,000 8,681,000 Income Tax Expense (147,000) 2,056,000 (11,541,000)
  • 14. Minority Interest 7,000 1,000 (9,000) Net Income From Continuing Ops 8,224,000 6,253,000 20,713,000 Non-recurring Events Discontinued Operations - - - Extraordinary Items - - - Effect Of Accounting Changes - -
  • 15. - Other Items - - - Net Income 7,155,000 5,665,000 20,213,000 Preferred Stock And Other Adjustments - - - Net Income Applicable To Common Shares 7,155,000 5,665,000 20,213,000 References Argosy University Online (2012) Financial Management:
  • 16. Assessment tools. Retrieved from http://myeclassonline.com Argosy University Online (2012) Financial Management:Short- term planning and long- term planning. Retrieved from http://myeclassonline.com Zacks Investment Research. (2015). Zacks.Our research. Your success. Retrieved from www.zacks.com/stock/quote/F/balance- sheet Weston, J. (1990). Essentials of Managerial Finance. Hinsdale: Dryden Press. p. 295. ISBN0- 03030700-3