THE FORD MOTOR COMPANY

Running Head: FORD MOTOR COMPANY 1
FORD MOTOR COMPANY

FORD MOTOR COMPANY
Memorandum
To, CFO
Date: 30/03/2020
Subject: Understanding the financial aspect of Ford Motors Company
Sir,
This is to inform you that there are different types of the stock which are available are common
stock and treasury stock as it can be observed from the balance sheet. The company has acquired
the long term liabilities as well to support the operations of the business. As per the current
balance sheet analysis it can be seen that Capital in the form of the common stock remained at
$40 million whereas the treasury stock decreased from $1417 to $1613 respectively. The mindset
of the company is to acquire funds from the outside parties and this is because of the benefits
associated with it (Ford Motors Company, 2019).
The debt is a good source of finance as it allows the owners to avail the benefit of the tax
advantage on the interest on the loan amount taken. The debt financing allows the owners to
retain their powers within themselves. The drawback that is associated with repayment is that the
amount is required to be paid even when there is a shortage of money. Levering up looks easy at
times, yet each time the loan is taken, the credibility is assessed and it also affects the credit
rating. The issue of common stock is also one of the methods that can be used for financing as it
is a less expensive route and it is free from making the regular payments, but the risk associated
is quite high. Lastly the company also has an option to fund through treasury stock, which helps
in increasing the shareholders’ value but ties up the cash of the company (Campbell, 2017).