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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.
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
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
-
-
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
