Comprehensive Income Statement Analysis of Ford Motors Report

This report presents an income statement analysis of Ford Motors, focusing on the years 2011 and 2012. The analysis begins with an overview of the purpose of income statement analysis, emphasizing the importance of evaluating revenue, expenditure, and assets to determine a company's financial health. The report then examines Ford Motors' income statement, utilizing common-size analysis to highlight the percentage of revenue allocated to various expenses. Key financial ratios, including profit margin, return on assets, interest coverage ratio, asset turnover, and return on shareholders’ equity, are calculated and interpreted to assess the company's profitability and efficiency. The analysis reveals that Ford Motor's net profit margin was low in 2012, indicating challenges in generating profit relative to sales. The report concludes that, based on the income statement analysis, the company's financial situation in 2012 was not strong.

Income statement Analysis

INCOME ANALYSIS 1
Purpose of Income Statement Analysis
The main purpose of income statement is to represents the financial situation of the
company. The income statement of the company shows the revenue and expenditure over the
particular period of time. The company prepares the income statement on monthly, quarterly and
annual basis. All the transaction related to receiving and payments are recorded in the income
statement that helps to examine whether the firm makes the profit or not. The sum up of revenue
has been subtracted from the sum up of expenditure which reflects that company makes profit or
not (Woodruff, 2018).
An analyst has to consider the various points while examine the financial status of the
company. The first thing that an analyst has to evaluate is the expenditure that the firm pays to
operate the business successful. It is required for the company to evaluate the expenditure in
order to control the expenses and enhance the financial performance (Robinson, 2020). The other
thing that analyst has to consider is the incomes that the company receives by selling the goods
and services. The high amount of income helps to determine the net profit of the company by
subtracting the expenditure from revenue amount. Assets are the main factor that has to be
considered while evaluating the financial status of the firm. Assets are the capital of the company
which can be used to operate the business by paying all the liabilities and expenditure that is
why; an analyst has to be examining the assets. Apart from the assets, an analyst has to evaluate
the liabilities of the company deeply to understand the long term and short term liabilities. The
long term liabilities of the company has high amount of interest which is difficult to pay for the

INCOME ANALYSIS 2
company that is why; the analyses of liabilities with the comparison of assets is required while
examine the financial status of the organization (Weygandt, Kimmel, & Kieso, 2019).
Income Statement Analysis of Ford Motors
Common-Size Analysis
Income Statement
2011 2012
Revenues 136264 100% 134252 100%
Cost expenses 128504 94% 127961 95%
Income before income taxes 8681 6% 7720 6%
Net income 20222 15% 5664 4%
Net income attribute to Ford Motor
Company 20213 15% 5665 4%
The cost of expenses is high in total percentage of revenue such as 95% of expenses in 100% of
revenue due to which its real income is 4% which is less. It states the low capability to generate
the profit.
Ratio Analysis
AUD in Million 2012

INCOME ANALYSIS 3
(Net) Profit margin (a/b) Net Profit 5664
Net Sales 134252
4%
Return on assets Net income 5664
Total average
assets 185807
3%
Interest Coverage Ratio EBIT 5665
Interest Expenses 713
7.95
Asset turnover Revenue 134252
Average Assets 185807
0.72
Return on shareholders’ equity Net income 5664
Shareholders’
Equity 15989
35%

INCOME ANALYSIS 4
According to financial ratio, it has been seen that the company net profit margin is less in
the year 2012 as the amount of net sale is high as compare to net profit. It states that the ability of
the company to generate the net profit is not good by selling the goods and services. Return on
shareholders’ equity ratio states that the company has high amount of net income is less as
compare to shareholders equity. The amount of shareholders’ equity is high but the company
fails to generate the high profit due to which it not capable to pay the return amount to
shareholders. According to the income statement analysis of the company, it has been seen that
the financial situation of the company is not good in the year 2012 (Ford Motor Company, 2012).

INCOME ANALYSIS 5
References
Ford Motor Company. (2012). Ford Motor Company 2012 Annual Report. Retrieved From:
http://www.annualreports.com/HostedData/AnnualReportArchive/f/NYSE_F_2012.pdf
Robinson, T. R. (2020). International financial statement analysis. John Wiley & Sons.
Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2019). Financial accounting. Wiley.
Woodruff, J. (2018). The Purpose of a Balance Sheet & Income Statement. Retrieved From:
https://smallbusiness.chron.com/purpose-balance-sheet-income-statement-61847.html