Dealership Financial Statement: Frozen Capital Analysis and Report

This report analyzes a dealership's financial statements to assess the extent of frozen capital, a critical factor impacting a dealership's financial health. The analysis focuses on key areas including warranty receivables, accounts receivable, used car inventory, used truck inventory, and parts inventory. The methodology involves calculating the average monthly sales or cost of sales for each category to determine the amount of capital tied up or "frozen" within the organization. The findings reveal the total frozen capital, which can be used to improve the dealer's cash availability and financial stability. The memo highlights the importance of reducing frozen capital to improve the dealer's financial condition and its ability to conduct business with Ford Motor Company.

DEALERSHIP FINANCIAL STATEMENT
1
Memo
To: Dealer Principal
From:
Date: 06-August-2018
Subject: Frozen capital with Dealer
The memo is drafted to understand the frozen capital of the dealer, which helps in depicting
the problems faced by the dealers. Warranty receivables, Accounts receivable, used car
inventory, used truck inventory, and Parts inventory is calculated to understand the level of
capital, which is frozen within the organisation of the dealer.
Warranty receivables:
Warranty receivables Amount Amount
YTD Warranty Labor $ 435,502
+ YTD Warranty Parts $ 227,996
+ YTD Body Shop $ -
Total warranty sales $ 663,498
÷ # months on statement 12
Average month's warranty sales $ 55,292
The above calculation indicates that average monthly warranty sales values which is been
blocked with the dealers are the level of $55,292. This blockage increases the frozen capital,
which is accumulated for the dealer. There is no frozen capital depicted in the annual report
of the organisation, while reduction in frozen capital could help in increasing cash availability
of the dealer.
Account receivables:
Account receivables Amount Amount
YTD Labor Sales Repair Shop $ 1,229,896
+ ESP Repair Shop $ 19,712
+ Sublet $ 40,640
+ Body Shop $ -
+ BS Sublet $ -
YTD Parts Sales + Wholesale $ 485,664
+ Counter Retail $ 65,442
+ Repair Shop $ 570,228
+ ESP Repair Shop $ 9,497

DEALERSHIP FINANCIAL STATEMENT
2
+ Body Shop $ -
(-) Allowance $ (1,025)
Total customer sales $ 2,420,054
÷ # months on statement 12
Average month's parts & service sales $ 201,671
The calculation indicates the value of $201,671, which is frozen capital for parts &service
sales with the organization. The amount is relevantly high, where reduction in frozen capital
could improve financial stability of the dealer.
Used Car Inventory:
Used Car Inventory Amount Amount
YTD Total Used Car Sales $ 1,164,630
- YTD Total Used Car Gross $ (124,542)
YTD Cost of Sales for Used Cars $ 1,040,088
÷ # months on statement 12
Average month's cost of sales for used cars $ 86,674
There is no from capital for the used car inventory listed within the balance sheet, while the
amount is at the level of $86,674, which is listed in the above calculations.
Used truck inventory:
Used truck inventory Amount Amount
YTD Total Used Truck Sales $ 1,440,359
- YTD Total Used Truck Gross $ (105,131)
YTD Cost of Sales for Used Trucks $ 1,335,228
÷ # months on statement 12
Average month's cost of sales for used trucks $ 111,269
The frozen capital for used trucks is at the level of $111,269, which can be reduced for
improving the current financial condition of the dealer.
Parts inventory:
Parts inventory Amount Amount
YTD Total Parts Sales $ 1,471,264

DEALERSHIP FINANCIAL STATEMENT
3
- YTD Total Parts Gross $ 429,214
(-) Allowance $ (2,215)
YTD Cost of Sales for Parts $ 1,898,263
÷ # months on statement 12
Average month's cost of sales for parts $ 158,189
The current frozen capital for the parts inventory is at the level of $158,189, which is blocked
with the organisation. The dealer needs to improve the collection period for minimising the
frozen capital period and improve its current assets.
Hence, from the evaluation of above calculation it could be detected that $613,094 is the
frozen capital of the dealer. Therefore, adequate measure can be taken into consideration for
reducing the frozen capital and improving cash availability of the dealer. The problem of high
frozen capital needs to be fixed first by the dealer for smoothly conducting its business with
Ford Motor Company.