Principle 1: Money has a time value The hypothesis behind money has a time value is the value of money today is more valuable than the same amount in the future due to its potential earning capacity (Titman, Kewon & Martin, 2014, p. 127). If you have a dollar in your wallet today, that dollar will be worth less in a year’s time if the dollar remains in your wallet. Inflation has an effect on the time value as it increases the price of goods and services over time, decreasing the amount of goods you can buy. An example of this is when wages remain the same over a period of time, but inflation causes an increase in the price of goods, it will take a larger percentage of those wages to purchase them in the future.
It is not uncommon for a …show more content…
Once the vehicle is sold, the dealer is required to pay Ford the balance (Auto Blog, 2008). Before going further it should be explained Ford Motor Company has two distinct divisions on its annual financial reports: automotive and financial services (Ford Motor Credit). The annual report contains both consolidated and sector income statements, balance sheets, and statements of cash flow. The ratios calculated on Appendix F are from the consolidated reports and have combined assets and liabilities in those …show more content…
Ford, like other manufacturers, inventory includes not just finished products, but the raw materials used to make and assemble parts (Kokemuller, n.d.). Ford utilizes the just-in-time inventory management system that allows the use of technology to manage inventory at levels of demand. This is a very effective process of managing inventory that allows saves money. Calculating an inventory turnover ratio allows a business to see how efficient they are at turning their inventory into sales (cash). To calculate the inventory ratio, we divide sales by inventory. The calculation for Ford’s inventory turnover shows the company turned inventory into cash 14.91 times in 2015, and that it takes them 25 days to turn inventory into a sale. Ford’s inventory turnover declined from 2014 to 2015 and from 2013 to 2014 (Appendix F). Ford’s inventory turnover can be benchmarked against the following (Table 1) (Stock Analysis on Net,
It is not uncommon for a …show more content…
Once the vehicle is sold, the dealer is required to pay Ford the balance (Auto Blog, 2008). Before going further it should be explained Ford Motor Company has two distinct divisions on its annual financial reports: automotive and financial services (Ford Motor Credit). The annual report contains both consolidated and sector income statements, balance sheets, and statements of cash flow. The ratios calculated on Appendix F are from the consolidated reports and have combined assets and liabilities in those …show more content…
Ford, like other manufacturers, inventory includes not just finished products, but the raw materials used to make and assemble parts (Kokemuller, n.d.). Ford utilizes the just-in-time inventory management system that allows the use of technology to manage inventory at levels of demand. This is a very effective process of managing inventory that allows saves money. Calculating an inventory turnover ratio allows a business to see how efficient they are at turning their inventory into sales (cash). To calculate the inventory ratio, we divide sales by inventory. The calculation for Ford’s inventory turnover shows the company turned inventory into cash 14.91 times in 2015, and that it takes them 25 days to turn inventory into a sale. Ford’s inventory turnover declined from 2014 to 2015 and from 2013 to 2014 (Appendix F). Ford’s inventory turnover can be benchmarked against the following (Table 1) (Stock Analysis on Net,