Financial and Management Accounting - Analysis of General Motors and Ford Motors

Financial and Management Accounting
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Contents
1.0: Introduction..............................................................................................................................3
2.0: Brief overview of companies selected......................................................................................3
2.1: General Motors.........................................................................................................................3
2.2: Ford Motors..............................................................................................................................3
3.0: Financial Analysis....................................................................................................................4
3.1: Ratio Analysis...........................................................................................................................4
3.1.1: Profitability Analysis.............................................................................................................5
Gross Profit Margin.........................................................................................................................5
Net profit Margin.............................................................................................................................5
3.1.2: Liquidity Analysis.................................................................................................................5
Current Ratio...................................................................................................................................6
3.1.3: Asset Management Analysis or Efficiency Analysis............................................................6
Return on assets...............................................................................................................................6
Asset Turnover ratio........................................................................................................................6
3.1.4: Debt Management Analysis or Capital Structure Analysis...................................................7
Debt to Assets..................................................................................................................................7
3.1.5: Investors Analysis or Market Analysis..................................................................................7
Return on Capital Employed...........................................................................................................7
Return on Equity..............................................................................................................................8
4.0: Corporate Governance of both companies...............................................................................8
5.0: Corporate Social Responsibility...............................................................................................9
6.0: Latest Development in these two companies and their respective industry...........................10
7.0 Conclusion...............................................................................................................................10
Appendix........................................................................................................................................11
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1.0: Introduction
The present report is developed for carrying out an analysis of the examination of
financial statements of two companies listed in the same sector on the stock exchange of the
United States. The analysis is specifically aimed at examining the different aspects of the two
companies such as profitability, liquidity, asset management, debt management and market
returns. The analysis is carried out for three years to develop an insight into the latest
developments of the two companies and the sector. The comparison of the financial position of
the two companies with the use of ratio analysis is intended to facilitate the decision-making
process of investors regarding their investment decisions. This will help in developing an
understanding of the competitive position of the two companies in reference to the average of the
industrial sector. This is followed by carrying out an evaluation of the corporate governance
information of the two selected companies for gaining an analysis of the similarities and
differences in them. This is followed by making a comparison of the corporate social
responsibility reports of the two selected companies for analyzing whether they are adequately
meeting the needs of societies. The companies selected for the analysis purpose are General
Motors and Ford operating within the automotive sector of the US.
2.0: Brief overview of companies selected
2.1: General Motors
General Motors, American multinational companies that are involved in designing,
manufacturing and distribution of automobiles and the vehicle parts and deceives. The company
is listed on the NYSE (New York Stock Exchange) and is headquartered within the US. It is
recognized as largest American automobile manufacturer across the world and has also attained
rank on the fortune 500 ranking list in terms of total revenue. The company manufacture vehicles
in about 37 countries and its major brands include Chevrolet, Buick, GMC and Cadillac.
2.2: Ford Motors
Ford is also recognized as multinational automakers of the US that is involved in selling
of automobiles and commercial vehicles and devices. It was founded by Henry Ford in the year
1903 and its two major luxury brands include Ford and Lincoln. The company is listed on the
New York Stock Exchange and has attained eleventh rank in the Fortune 500 list in the terms of
global revenue. It has also being ranked as the second largest US automaker behind General
Motors and fifth largest on a global level. The company has about 213,000 employees in its 90
plants and facilities on a global level.
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3.0: Financial Analysis
In this section ratio analysis of two companies in Automobile sector of USA (General
Motors and Ford Motors) has been performed and results gathered have been compared with
industry average to evaluate the performance of each company. For calculation of industry
average only financial data of General Motors and Ford Motors has been considered and industry
average of year 2017 has been determined.
3.1: Ratio Analysis
Financial Data of Both Companies
Particulars General Motors Ford Motors
2015 2016 2017 2015 2016 2017
Gross profit
$
24,035.00
$
30,047.00
$
30,719.00
$
23,063.00
$
25,216.00
$
25,444.00
Net profit
$
9,687.00
$
9,427.00
$
(3,864.00)
$
7,373.00
$
4,596.00
$
7,602.00
Net Sales
$
152,356.00
$
166,380.00
$
145,588.00
$
149,558.00
$
151,800.00
$
156,776.00
Current Assets
$
78,007.00
$
76,203.00
$
68,744.00
$
145,470.00
$
108,461.00
$
115,902.00
Current Liabilities
$
71,466.00
$
85,181.00
$
76,890.00
$
81,262.00
$
90,281.00
$
94,600.00
Total Assets
$
194,520.00
$
221,690.00
$
212,482.00
$
224,925.00
$
237,951.00
$
257,808.00
Total Liabilities
$
154,649.00
$
177,854.00
$
177,481.00
$
196,283.00
$
208,781.00
$
222,918.00
Interest Expenses
$
443.00
$
572.00
$
575.00
$
773.00
$
894.00
$
1,133.00
EBIT
$
4,897.00
$
9,545.00
$
10,016.00
$
8,446.00
$
4,986.00
$
5,491.00
Total Capital
employed
$
123,054.00
$
136,509.00
$
135,592.00
$
143,663.00
$
147,670.00
$
163,208.00
Dividend per share
$
1.38
$
1.52
$
1.52 0.6 0.6 0.6
Market Value per
share (as on 31 Dec)
$
34.01
$
34.84
$
41.38
$
14.09
$
12.13
$
12.49
Shareholder's Equity
$
39,871.00
$
43,836.00
$
35,001.00
$
28,642.00
$
29,170.00
$
34,890.00
EPS
$
5.91
$
6.00
$
(2.65)
$
1.84
$
1.15
$
1.90
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