Ford Motor Company: Financial Analysis and Investment Advice

This report provides a comparative financial analysis of Ford Motor Company and Tesla Inc., evaluating their performance based on liquidity, profitability, and solvency ratios. The analysis covers the period from 2017 to 2019, examining key financial metrics such as current ratio, quick ratio, debt-to-equity ratio, net profit margin, and operating margin. The report highlights Ford Motor's strengths, including a better quick ratio and more favorable solvency metrics compared to Tesla, despite a lower net profit margin. The report also emphasizes the importance of reducing debt financing and focusing on equity to improve financial health. Based on the analysis, the report recommends Ford Motor Company as a potentially more viable investment option compared to Tesla, suggesting that investors and shareholders should consider investing in Ford Motors, which could help the company regain its financial health and provide better returns.

Running Head: FORD MOTOR COMPETITIVE ANALYSIS
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Table of Contents
Overall performance evaluation...............................................................................................................3
Recommendation.....................................................................................................................................4
References...................................................................................................................................................6

FORD MOTOR COMPANY
Comparative Analysis
Overall performance evaluation
In this report two companies have been analyzed on the basis of ratio analysis technique
to find out which is better and suitable for the purpose of future investment. Under this process
the ratio analysis technique has been used and it can be judged on the basis of liquidity,
profitability and solvency (Carreras-Simó & Coenders, 2019).
In terms of liquidity ratios, which are the real determinants of whether the company will
be able to settle the current costs with the help of the current assets the position of Ford motors is
overall feasible. The current ratio over the period of last three years for Ford Motors is 1.2 times
in year 2017, and it however decreased in the year 2018, but again improved a bit and reached to
1.19 times (Ford Motors Company, 2019). Further while comparing the position, with the world
class competitor Tesla Inc, the current ratio is 0.86 times in 2017 and reached to 1.13 times,
which is still lower than Ford. While the quick ratio showcases that Ford Company is able to
collect the cash in faster manner as the acid test ratio is 1.11 times, 1.05 times and 1.08 times. On
the contrary Tesla Inc. displayed the results as 0.56, 1.14 and 0.80 times. This implies that Ford
Motor has a better quick ratio, but the cash ratio reveals an upside, down position. This could be
a tricky situation but despite having cash in hand Tesla is not able to handle the current costs
well than Ford Motors and hence, Ford Motors scores well (Carreras-Simó & Coenders, 2019).
While analyzing the solvency of the companies and against the industry average it can be
ascertained that debt to equity ratio is highest for Tesla at 18.09 in the year 2019, and on the
other hand, the graph of acquiring the funds through equity was seen to have a falling effect.
This indicates that Ford Motors have changed the approach and hence the debt to equity ratio is
2.78 which is still higher and needs improvement. Due to high leverage the companies’ ability to

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handle the financial cost has become crucial at 0.56 times and 0.80 times respectively for Ford
Motors and Tesla Inc. The debt to total assets also displays that how well the assets have been
acquired through debt component. The figures imply that Ford Motors has acquired assets
through equity and cash more whereas, Tesla has been following the policy of acquiring the
assets through debt (Tesla Inc, 2019). Hence, too much financial leverage results in the loss to
the company and meanwhile Ford Motors understood the implications of high debt and hence,
the company changed the policy for the potential aspects upcoming in the future. Even the
industry averages states the debt to total assets ratio of 0.20 and Ford Motors falls within the
range with a higher margin when compared to Tesla Inc (Campbell, 2017).
In terms of profitability Ford motor is the clear choice as the net profit margin, though its
lower at 5% and fell to 0.047%, but in case of Tesla, the margins turns out to be negative at -
3.5%. The shareholders are getting minimal returns at 0.20%, but in case of Tesla, there are
negative returns. The operating margin has declined over the period for Ford Motors and is
currently valued at 0.36%, whereas Tesla has a value of -0.28%. Hence, clearly Ford motors
might have won against Tesla, but still lagging behind as per the industry averages (Gouda, El-
Hoshy & Hassan, 2018).
Recommendation
From the overall observations it can be seen that Tesla is lacking far behind than Ford
Motors and this indicates that Ford Motors is the real choice that could be made from the point of
view of an investor. As per the current scenario, Ford Motors is ahead of the industry averages
such as in quick ratio and current ratio but other than that the company also needs to improve the
situation by, getting rid of obsolete assets, invoicing the debtors faster, reducing the operating
costs. The company shall reduce the debt financing and shall focus on acquiring the funds

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through equity. If all these strategies are implemented it is recommended to the investors and
shareholder to invest in, Ford Motors positively. In this way the company can grip back the
financial health and can provide greater returns to the investors.

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References
Campbell, B. (2017). Why Such a Focus on External Sources of Funds to Finance
Development?. Mondes en développement, (2), 77-92.
Carreras-Simó, M., & Coenders, G. (2019). Principal component analysis of financial statements.
A compositional approach. Revista de Métodos Cuantitativos para la Economía y la
Empresa, 29.
Ford Motors Company, (2019). Annual Report. Retrieved from
https://www.sec.gov/Archives/edgar/data/37996/000003799618000015/f1231201710-
k.htm#s073DBBC8BA6A5AB5A5CE6555418BBB67
Gouda, O. E., El-Hoshy, S. H., & Hassan, H. T. (2018). Proposed three ratios technique for the
interpretation of mineral oil transformers based dissolved gas analysis. IET Generation,
Transmission & Distribution, 12(11), 2650-2661.
Tesla Inc, (2019). Retrieved from https://tesla.gcs-web.com/static-files/07bfcb70-aba1-4a27-
af09-4f101678320c