A Business Analysis of Ford Motor Company

A Business Analysis of Ford Motor Company

Ford motor Company is the second largest automobile company in the world representing a $164 billion multinational empire. Ford is known as a manufacturer of automobiles, however, operates Ford Motor Credit Company, which generates over 3 billion in revenues. Ford, also, owns The Hertz Corporation, which is the largest car rental company in the world and has numerous other automobiles under the Ford name. Analyzing Ford, the emphasis and importance of financial statements, balance sheets, income statement, cash flows, and comparison to GM and Chrysler will be studied. Ford's financial health in the 21st century is the focus, and the pulse of financial health will be tested.

Analysis of Financial Statements

Revenues in 2011 reflect decreased income from automotive sales, and lower income from financial services. Net income was offset by a decrease in automotive cost of sales, lower selling, administrative, and other expenses and a decrease in interest expense. Ford recently reported better than expected 3rd quarter net income of 997 million. Earnings per share exceeded analyst's forecasts (Shook, 1990).

Analysts expect strong performances from assistance in cost cutting, and improved product line-up. The Ford Focus, Escape, and Fusion continue to draw large numbers of buyers into the showroom, which means a cash flow into the company's financial veins (Wall Street Journal, 2010). Ford has made significant progress in cutting costs with a 1 billion dollar reduction in structural costs in the 3rd quarter, and 4.6 billion dollar reduction since the beginning of the year (Shook, 1990). Ford's automotive operating cash flow was 1.3 billion in the 3rd quarter compared to a negative 3.4 billion in the past. The return on equity measures profit generated stakeholder's equity, which indicates Ford making a reversal (Jenkins 2010).

Ford's financial status improved, lowered cash spending and waste, and incurred benefits from restructuring; however, the company's finances remain exceptionally (Jenkins, 2010). Ford will ultimately need a rock solid recovery not dependent on government loans. It is expected that Ford's improved product line-up, continual cost cutting, and the difficulties at GM, and Chrysler generate strong results for Ford (Jenkins, 2010).

Balance Sheet, Liabilities, and Stockholder Equities

Ford's statistics fluctuates quarter to quarter, an established pattern since 2008, "The Year of the Big Borrow" by GM and Chrysler, which Ford declined. Ford would have benefited from the infusion of funds from the government; however, Ford would be a partner in socialism with the government.

Shunning government loans, Ford's top executives reconstructed the automaker's image, and set it apart from GM, and Chrysler (Mulally and Ford, 2008). Confident restructuring and new product plans will get Ford through the recession without relying on the government (Mulally and Ford, 2008).

Revitalization occurred because Ford pulled its boot straps up, and restructured and reorganized. "When Ford is seen pulling itself up by its bootstraps, making progress, proves that is a positive for us," Ford said (Ford, 2008). However, Ford wants to set up a $9 billion long-term line of credit from the government, and use it if America's auto market worsens or fails to recover (Moran, 2008).

Income Statements

Ford's balance sheet reveals the progress the company is achieving toward stability.

Balance Sheet

Balance sheet assets indicate an increase in total current assets covering the periods of June 2012-September 2012.

09/2011 12/2011 03/2012 06/2012

129,555,000 133,046,000 13,335,000 136,320,000

This is a positive flow of assets in the right direction for Ford to recover, and become the major producer of automobiles since inception in 1903 by Henry Ford.

Total Current Assets

09/2011 12/2011 03/2012 06/2012

129,555,000 133,046,000 136,335,000 136,320,000

Current asset projections places Ford in an excellent financial position, plus the increase indicates a positive influx of assets. Ford will succeed and remain in the black as the aforementioned figures indicate, with a 6,765,000 dollar positive shift in total current assets.

Total Assets

09/2011 12/2011 03/2012 06/2012

162,740,000 178,348,000 182,075,000 181,236,000

Ford has risen to the occasion, and let the cream come to the top with CEO Allan Mulally leading the way with his planning, and implementing of new and futuristic concepts. Ford shows a rise in total assets over a 4 month period of 18,496,000 dollars. This positive financial information shows Ford is getting in the black, and out of the red. The stakeholders obviously peer down the road and see Ford's ability to function once again as a giant automaker as Henry Ford intended Ford to be a giant among manufacturers of automobiles.

Allan Mulally's leadership style at the Ford is a coach and an authoritarian. Encouraging employees to participate but retaining the final say over the decision-making process. Employees feel involved in the process, motivated, and creative. Mulally feels communication is essential. Mulally states, "Everyone has to know the plan, its status, and areas that need special attention" (Mulally, 2009)

Total Liabilities

09/2011 12/2011 03/2012 06/2012

156,758,000 163,320,000 165,469,000 164,200,000

Total liabilities reveal a decrease in this 4 month calculation period. Ford shows a reduction in overall liabilities. The difference in the reduction is 7,442,000 dollars, which shows Ford working toward debt reduction.

Total Equity

09/2011 12/2011 03/2012 06/2012

5,982,000 15,028,000 16,606,000 17,036,000

Total equity mounted rapidly within the last 4 months of this report into the black column of 23,018,000 dollars. Ford's markets in the United States, Europe, and Asia made contributions with strategic planning, and implementation of Alan Mulally's goals, which speak highlyof his leadership abilities.