Ford Motor Financial Ratio Analysis Essay

2520 Words Mar 22nd, 2012 11 Pages
A well formulated financial ratio analysis report helps investors to quantify a company’s financial strengths and weaknesses and potential risks and opportunities and identify the company’s financial position. Using financial ratio analysis as a tool in conjunction with other business evaluation processes, and other company factors, is beneficial for the investors (Brealey, Meyers & Marcus, 2009).
The following report will provide the investor with a clear picture of the company’s current status as well as future projection in order to demonstrate investment opportunities. Specifically, this report examined xxx Company's financial ratios and other factors using a trend table over the past five years.
Return on assets (ROA) measures
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Ford was able to turn things around in 2009 in this area and the company also faired above the industry average. The net profit margin is the final amount a company makes for every dollar generated in revenue. This ratio measures how much out of every dollar in sales a company earns. The net profit margin is a useful ratio when comparing similar industries. A higher profit margin shown on the balance sheet indicates better control over costs compared to competitors (Brealey et al., 2009). However, there are cases of lower net profit margin numbers being a sign of a company's pricing war with its competitors. Ford yielded a slightly higher than the industry average net profit margin in 2009.
A quick ratio is also known as the quick asset ratio or the acid-test ratio. The quick ratio is a liquidity indicator used by determining which company assets can be immediately converted into cash divided by the company’s liabilities (Brealey et al., 2009). The quick ratio excludes inventory and other current assets which are more difficult to turn into cash. Therefore, a high ratio means a more liquid position, which tells how much cash the company can come up with in a short time.
A current ratio is a liquidity ratio that measures a company's ability in order to pay short-term obligations. The current ratio is used to determine the company’s ability to pay back its short-term liabilities such as debts using short-term

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