Ford Motor Company Case Study

Register to read the introduction… The company’s total assets are 190,554,000,000. Ford’s debt to equity ratio is 10.95 which is due to the capital intensive nature of the automotive industry. For 2012, Ford’s net income was 5,665,000,000 which indicates the company is currently 75% less than the over $20 billion profit in 2011. Additionally, the cash flow from investing activities has decreased from $6.9 billion in 2010 to -$14 billion in 2012. Short-term debt has increased in the last couple of years, it is still nearly 50% of the over $60 billion in 2009. Long-term debt has decreased by over 10% for the last several years. Finally, the auto giant’s assets are increasing but have not reached the 2009 levels. The current debt levels are higher than in most industries due to the nature of capital outlay for equipment and materials but Ford is steadily paying it’s debt and still returning increases in stockholder …show more content…
50). In the case of Ford Motor Company the ROE is 35.5%. According to Yahoo Finance, the average ROE for the automotive industry is 8.6% (Yahoo Finance), which means Ford Motor Company is significantly higher than the industry average.
Return on Equity Ratio Calcualtion: Net Income = $5,665,000 = 35.5%
Average Stockholder’s Equity $15,947,000 To understand why Ford Motor Company is higher than the industry average, the DuPont analysis can help dig deeper into the details by looking at the component parts. When the primary ratios for profitability, activity and solvency are multiplied the resulting product will equal the ROE calculation as follows, (Callahan, Stetz & Brooks 2007):
Net Profit Margin:
Net Income 5,665,000 / Sales 134,252,000 = 4.22

Total Asset Turnover Ratio:
Sales 134,252,000 / Average Total Assets 190,554,000 =