Conducting a Financial Ratio Analysis on Ford Motor Company
In Chapter 3, we took a look at Starbucks’ financial statements. Now we use Thomson One to analyze Ford Motor Company. Enter Ford’s ticker symbol (F) and select “GO.” If we select the tab at the top labeled“Financials,” we can find Ford’s key financial statements for the past several years. At the Financials” screen on the second line of tabs, select the “Fundamental Ratios” tab. If you then select the SEC Database Ratios from the pull-down menu, you can select either annual or quarterly ratios. Under annual ratios, there is an in-depth summary of Ford’s various ratios over the past 3 years. This information enables you to evaluate Ford’s performance over time for each of the ratio categories that we mention in the text (liquidity, asset management, debt management, profitability, and market-based ratios).
The text mentions that financial statement analysis has two major components: a
trend analysis, where we evaluate changes in the key ratios over time, and a peer analysis, where we compare financial ratios with firms that are in the same industry and/or line of business. We have already used Thomson One to conduct a trend analysis—next we use this tool to conduct a peer analysis. If we click on the “Peers” tab (on the first line of tabs) near the top of the screen, some summary financial information for Ford and a few of its peers will be presented. If you click on the “Peer Sets” tab (second line of tabs), you can modify the list of peer firms. The default setup is “Peers set by SIC Code.” To obtain a comparison of many of the key ratios presented in the text, just click on “Financials” (second line of tabs) and select “Key Financial Ratios” from the drop-down menu.
Discussion Questions
1. What has happened to Ford’s liquidity position over the past 3 years? How does Ford’s liquidity compare with its peers? (Hint: You may use both the peer key financial ratios and liquidity comparison to answer this question.)
2. Take a look at Ford’s inventory turnover ratio. How does this ratio compare with its peers? Have there been any interesting changes over time in this measure? Do you
consider Ford’s inventory management to be a strength or a weakness?
3. Construct a simple Du Pont analysis for Ford and its peers. What are Ford’s strengths and weaknesses relative to its competitors?
