Ford Motors Financial Statements and Financial Ratios Analyzed

Ford Motors: Brief Summary

Ford Motor Company, trading as "F" on the New York Stock Exchange (NYSE), is a prominent player in the auto manufacturing industry. The company is headquartered in Dearborn, Michigan, led by Executive Chairman William Clay Ford Junior and CEO James Hackett. Ford operates within the cyclical consumer sector, manufacturing a range of products that include Ford cars, trucks, and luxury Lincoln brand automobiles. With a global presence, Ford has manufacturing facilities and sales operations in various countries.

Ford employs approximately 190,000 individuals, contributing to its operations and growth. The company's success and financial performance can be assessed through key financial ratios. Profitability ratios, such as gross and net profit margins, offer insights into Ford's ability to generate profits and manage costs effectively. Return on assets (ROA), return on equity (ROE), and return on investment (ROI) measure Ford's efficiency in utilizing its assets and equity to generate returns for shareholders and investors.

Assessing Ford's Financial Performance for Informed Decision-Making and Growth Strategies

Understanding Ford's financial performance and analyzing these ratios over time allows stakeholders to evaluate the company's financial health, profitability, and efficiency. This information aids in making informed investment decisions, benchmarking against industry peers, and developing strategies for sustainable growth. Ford's strong presence in the auto manufacturing industry makes its financial analysis crucial for investors, stakeholders, and management to assess the company's position and make informed decisions.

From a financial perspective, Ford has a market Of approximately $21.5 billion.  Their beta is 1.25.  This indicates that the company is moderately riskier than the overall market.  Ford stock prices fluctuated from $3.98 to $10.56.  Their last dividend paid out was January 29 of 2020.  In the last four quarters, Ford has missed earnings estimates and three of the last four quarters.

Ford Financial Report Sources

“Ford Motors 2019 Company Analysis… For Beginners: Financial Statements and Financial Ratios: Defined, Discussed, and Analyzed for 5 Years” was written by, Paul Borosky, MBA., and owner of Quality Business Plan.  In this report, I used Ford's 2018 10k, Ford's 2017 10k annual report, 2016 10k annual report, 2015 10k annual report, and Ford's 2019 10k annual report as the basis for information gathering. 

Section 1: Ford Motors Income Statement Analyzed

In this section, I walk through a broad definition of what an income statement is and why it is important.  I then discuss and define income statement line items, such as revenues, gross profits, etc., in detail.  After each line item is defined and discussed, I finally offer a summary analysis of Ford's important income statement line item trends from 2015 to 2019, in most cases.

Importance of Understanding Ford’s Income Statement for Financial Analysis

Understanding Ford's income statement is essential for financial analysis, providing crucial insights into the company's revenue, expenses, and overall profitability. The income statement, also known as the profit and loss statement, summarizes Ford's financial performance over a specific period, typically a quarter or a year.

By analyzing the income statement, analysts can evaluate Ford's revenue generation and sales trends to assess the company's market position and product demand. It provides information on various expense categories, such as operating expenses, cost of goods sold, research and development expenses, and selling and administrative expenses. This breakdown helps stakeholders understand Ford's cost structure, cost management strategies, and potential risks to profitability.

Gaining Insights Through Multi-Period Analysis of Ford's Income Statement

Furthermore, the income statement reveals Ford's net income or loss, a key indicator of the company's profitability. It enables the calculation of important profitability ratios, such as gross and net profit margins, which provide insights into Ford's ability to generate profits from its operations and control costs.

Analyzing the income statement over multiple periods helps identify trends, growth patterns, and potential risks or opportunities. It allows for comparisons with industry peers and historical performance, facilitating a comprehensive understanding of Ford's financial health and performance.

Overall, a thorough understanding of Ford's income statement is vital for financial analysis, as it enables investors, stakeholders, and management to assess the company's revenue, expenses, profitability, and overall financial performance. This information aids in making informed investment decisions, evaluating operational efficiency, and formulating strategies for growth and sustainability.

Revenue Growth for Ford Motors:

In 2015, Ford had revenues of approximately $149.5 billion.  The firm would grow its revenues to approximately $160.3 billion in the next three years.  However, in 2019, revenues fell to $155.9 billion.  Ford Motors has enjoyed a moderate revenue growth rate of 1.1% over the last five years.  Unfortunately, revenues did slide by almost 3% in the last year.  This is quite worrisome, especially since 2019 was a time of economic expansion.  From an investor's perspective, quarterly earnings should be monitored to ascertain whether revenues fall for the next year.  If this is the case, it may indicate that the company is trending lower with revenues.  This may mean reduced net profits or future cost-cutting efforts.

Ford 2021 Summary Income Statement
Column1	2021	2020	2019	2018	2017
Revenues	136,341	127,144	155,900	160,338	156,776
COGS	114,651	112,752	134,693	136,269	131,321
Gross Profit	21,690	14,392	21,207	24,069	25,455
SG&A	11,915	10,193	11,161	11,403	11,527
Depreciation	7,318	8,751	9,689	9,385	9,241
R & D	-	-	-	-	-
Other	5,252	8,607	9,472	9,463	9,047
Total Operating Expenses	24,485	27,551	30,322	30,251	29,815
EBIT	4,523	(4,408)	574	3,203	4,881
Other Income	14,733	4,899	(226)	2,247	3,267
Interest Expense	1,803	1,649	1,020	1,228	1,190
EBT	17,780	(1,116)	(640)	4,345	8,159
Taxes	(130)	160	(724)	650	402
Net Income	17,910	(1,276)	84	3,695	7,628

 

Section 2: Ford Motors Balance Sheet Analyzed

I again go through each important line item from the balance sheet for Ford Motors balance sheet.  In reviewing each line item, I will define Ford's balance sheet line item, such as cash, property, plant and equipment, and liabilities between 2015 to 2019.  Next, I then offer a summary analysis of Ford's important balance sheet line items.

Importance of Understanding Ford’s Balance Sheet for Financial Analysis

Understanding Ford's balance sheet is crucial for financial analysis, providing key insights into the company's financial position, liquidity, and overall stability. The balance sheet presents a snapshot of Ford's assets, liabilities, and shareholder's equity at a specific time. Analysts can assess Ford's liquidity and ability to meet short-term obligations by examining the balance sheet. Key metrics such as the current and quick ratios can be derived from the balance sheet, providing insights into the company's short-term financial health and capacity to cover immediate liabilities.

Assessing Ford's Financial Position and Asset Management through the Balance Sheet

The balance sheet also reveals Ford's long-term debt levels, equity structure, and capitalization. This information is crucial for evaluating the company's leverage and solvency, helping stakeholders assess the potential risks and financial stability. Additionally, the balance sheet allows for analyzing Ford's asset composition, such as its inventory levels, property and equipment, and intangible assets. This assists in evaluating the efficiency of asset management and the company's ability to generate returns on invested capital.

Understanding Ford's balance sheet is essential for financial analysis as it provides a comprehensive view of the company's financial health, liquidity, leverage, and asset management. This information enables investors, stakeholders, and management to make informed decisions, assess risks, and formulate strategies for growth and profitability.

Cash:   Ford Motors ended 2015 with $14.2 billion in the bank.  The company would increase its cash position to $18.49 billion in the next two years.  However, the cash position would fall in 2018 to 16.7 billion, just to rebound in 2019 to $17.5 billion.  This trend indicates that the organization built a cash reserve between 2017 and 2015.  However, in the last two years, the organization seems to have fluctuated its cash position.  This could indicate the company is rebuilding its cash position from 2018 after an acquisition or reducing debt.  The cash fluctuation for Ford could also mean that the organization has been restructuring.  The restructuring has led to an increase and then a reduction of their cash position. 

From an investor perspective, if the cash increases in the next year, then this shows that the firm made some type of internal decision to reduce the cash position substantially and is in the process of rebounding.  If the cash position falls, investors should be concerned about Ford's liquidity position.

Ford 2021 Summary Balance Sheet
Column1	2021	2020	2019	2018	2017
Cash	20,540	25,243	17,504	16,718	18,492
Short Term Investment	29,053	24,718	17,147	17,233	20,435
Account Receivable	43,913	52,394	62,888	65,548	62,809
Inventory	12,065	10,808	10,786	11,220	11,176
Other	-	-	-	-	-
Current Assets	108,996	116,744	114,047	114,649	116,801
Net PPE	37,139	37,083	36,469	36,178	35,327
Goodwill	-	-	-	-	-
Other	-	-	-	-	-
Total Assets	257,035	267,261	258,537	256,540	258,496
Accounts Payable	22,349	22,204	20,673	21,520	23,282
Accrued Expense	-	-	-	-	-
Accrued Taxes	-	-	-	-	-
Notes Payable	49,692	51,343	53,946	53,493	51,621
LT Debt - Current	-	-	-	-	-
Other	-	-	-	-	-
Total Current Liabilities	90,727	97,192	98,132	95,569	94,600
LT Debt	88,400	110,341	101,361	100,720	102,067
Other	-	-	-
Total Liabilities	208,413	236,450	225,307	220,474	222,792
Common Stock	22,652	22,205	22,205	22,006	21,843
Treasury	1,563	1,590	1,613	1,417	1,253
Retained Earnings	35,769	18,243	20,320	22,668	21,218
Other	-	-	-	-	-
Total Equity	48,622	30,811	33,230	35,996	35,606
Total Equity & Liability	257,035	267,261	258,537	256,540	258,496

Section 3: Ford Motors Financial Ratios Analyzed

For this section, I have chosen several different financial ratios to review Ford Motors from 2015 to 2019.  In reviewing each of Ford's financial ratios, I first start with defining the financial ratio.  Next, I supply the financial formula for calculating the specific ratio.  Finally, I offer a brief analysis of Ford's Important Financial ratios. 

Importance of Understanding Ford’s Financial Ratios for Financial Analysis

Understanding Ford's financial ratios is crucial for financial analysis as they provide valuable insights into the company's performance, profitability, efficiency, and overall financial health. Financial ratios allow analysts to assess Ford's financial position by comparing and evaluating various aspects of its financial statements.

Profitability ratios, such as gross and net profit margins, reveal Ford's ability to generate profits from its operations. These ratios provide insights into the company's pricing strategy, cost management, and profitability.

Analyzing Ford's Financial Ratios: Insights for Liquidity, Leverage, and Efficiency

Liquidity ratios, such as the current and quick ratios, assess Ford's ability to meet its short-term obligations and manage its working capital effectively. These ratios indicate the company's liquidity position and capacity to handle unexpected financial challenges.

Additionally, leverage ratios, such as the debt-to-equity ratio, measure the proportion of debt financing in Ford's capital structure. They provide insights into the company's financial leverage and ability to meet long-term obligations.

Furthermore, efficiency ratios, such as asset and inventory turnover, evaluate how effectively Ford utilizes its assets to generate sales and manage inventory.

Analysts can identify trends, strengths, weaknesses, and areas for improvement within Ford's financial performance by analyzing these financial ratios and comparing them with industry benchmarks or competitors. This information is valuable for investors, stakeholders, and management to assess the company's financial health, make informed investment decisions, and formulate strategies for growth and sustainability.

Ford's Current Ratio:

In 2015, Ford Motor's current ratio was 1.92.  The gold standard for the current ratio is 1.0. This indicates that the company has substantially more current assets than operations needs.  From this, the organization should reduce its current ratio to approximately 1.0.  In the next four years, the organization would do exactly this.  Between 2016 and 2019, the current ratio fluctuated between 1.23 and 1.16, which was 2019.  This shows that the organization has taken steps to utilize its current assets better.

Ford's Total Asset Turnover:

Ford ended 2015 with a total asset turnover of approximately .66.  In the next four years. Their total asset turnover would fall to .60 in 2019.  This shows that the organization is underutilizing and continuing to utilize its total assets less year-over-year.  To mitigate this problem, the organization must divest some of its assets, mostly fixed assets, to better align with its projected sales.

Ford's Return on Assets:

As for profitability ratios, its return on assets ended 2015 at 3.28%.  The company would fluctuate between 2.96% in 2015 and 1.94% in 2016 in the next two years.  Unfortunately, in 2018 and 2019, the return on assets fell to 1.44% and .03%, respectively.  This means that the company made three cents for every dollar of assets.  For a manufacturer, this is a terrible position.  The organization needs to divest from some of its fixed assets to optimize better total assets controlled—shame on management.

Ford's Debt Ratio:

Ford Motor’s debt ratio ended 2015 at 53.4%.  The next year, the organization would drop its debt ratio to 39.2%.  In subsequent years, the firm would hold a solid 39% debt ratio, give or take a few basis points.  From an investor’s perspective, the company is doing an excellent job of keeping its debt low.  This shows that the company is well-positioned to write out recessionary times.  However, with interest rates being at historic lows, this also means that the company is missing out on opportunities to use debt for growth or research and development.  As a shareholder, I would expect the latter compared to the former.

Ford Motors Liquidity Ratios 2019
Ratios	2019	2018
Current Ratio	1.16	1.20
Cash Ratio	0.18	0.17
Quick Ratio	1.05	1.08
Net Working Capital	73,165	69,306
Ford Motors Asset Utilization 2019
Ratios	2019	2018
Total Asset Turnover	0.60	0.63
Fixed Asset Turnover	4.27	4.43
Days Sales Outstanding	153.46	143.16
Inventory Turnover	14.45	14.29
Accounts Receivable Turnover	2.38	2.55
Working Capital Turnover	2.13	2.31
AP Turnover	7.54	7.45
Average Days Inventory	0.04	0.04
Average Days Payable	0.02	0.02
Ford Motors Profitability Ratios 2019
Ratios	2019	2018
Return on Assets	0.03%	1.44%
Return on Equity	0.25%	10.27%
Net Profit Margin	0.05%	2.30%
Gross Profit Margin	13.60%	15.01%
Operating Profit Margin	0.24%	3.48%
Basic Earning Power	0.15%	2.17%
ROCE	0.24%	3.46%
Capital Employed	160,405	160,971
ROIC	-0.05%	4.49%

Ford Motors Long-term Debt 2019
Ratios	2019	2018
Debt Ratio	39.21%	39.26%
Debt/Equity	305.03%	279.81%
Times Interest Earned	0.37	4.54