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FORD CO.- INTRODUCTION
• Ford Co. is American based company founded by Henry Ford in June 16 1902.
The company is the fifth largest Automaker in the world.
• Headquarter- Dearborn, Michigan
• The company has 199,000 employees who facilitates operation in 67
continents. Also, it has been able to create or retain more than 85,000 jobs in
the last four years.
• The company recorded revenue of $151,800 million and net profit attributable
to shareholders of $4,596 million as per 2016 financial report.
FORD CO. INCOME STATEMENT – THE COMMON SIZE ANALYSIS

(Presented USD in millions except per shares)

CONT… OF COMMON ANALYSIS
DISCUSSION OF INCOME STATEMENT
• The analysis of income statement for 2014 and 2016 shows that the company
experienced an increase in revenue by $7,723 million.
• Further analysis showed that cost of sales forms a huge proportion of sales
revenue. However, the company was able to reduce cost of sales by 3.39%
(86.78-83.39).
• Also, the company had to cut selling, administration and other expenses by
0.18% due to increased efficiency.
• The financial services, operating and other expenses increased by 1.09% as a
result of increased use of debt.
• The overall effect resulted to increased net profit attributable to shareholders.
Consequently, other income generating components recorded improvement
from 2014 performance.
FORD CO. BALANCE SHEET -2014 & 2016
CONT… BALANCE SHEET -2014 & 2016
DISCUSSION OF BALANCE SHEET
• The analysis of company’s balance sheet shows the financial position of the company
i.e. the ability to meet its obligation as they fall due and maintain a healthy liquidity
level.
• The analysis shows that the company’s cash and cash equivalent increased by 47.86%
which is a healthy signal. However, increase beyond certain level increases the
liquidity risk and thus advisable to maintain cash that it is able to meet day to day
requirements of the company. The extra cash should be invested to reduce liquidity
risk and increase cash inflow from investment.
• The company increased use of long-tem debt and thus justifies the increase in finance
service, operating and other expenses as noted in the analysis of income statement.
• Also, the company increased equity but by a small proportion to reduce dilution. The
company uses fixed dividend policy in sharing of profit attributable to shareholders.
FORD CO. CASH FLOW STATEMENT
DISCUSSION OF CASH FLOW STATEMENT
• The cash flow statement provides an outlook of company cash inflows and
outflows. Positive cash flow shows that the company pays less than what it
receives and thus creating wealth for its shareholders. On the other hand,
negative cash flow signifies a company struggling to meet its financial
obligation since the cash inflows is not enough to meet arising obligation.
• The analysis above shows that Ford Company is in a healthy financial status
since it recorded a positive cash and cash equivalent of $76,271 million.
• Therefore, Ford Company is able to expand or acquire sophisticated
technology with surpluses to keep the pace in auto industry.
 RATIOS
The debt to equity ration measures the amount of debt used by the company relative to
shareholders equity. The analysis considered adjusted values of equity and debt to get
relatively accurate ration to provide a true picture of the company. The analysis below
shows Ford debt-to-equity ratio in 2016;

Debt to Equity = Debt/ Equity

= 115.4 / 12.5
= 9.23:1
The ratio is very high and thus Ford is aggressively using debt to finance its investments.
The risk exposure to company with high debt to equity is greatly exposed to risks.
However, it comes with high returns since calculated risk is positively correlated to
return.
The current ratio shows company’s ability to meet short-term obligation as they
fall due i.e. times the company can pay its current liabilities with current assets.
Current Ratio = Current Assets / Current Liabilities
= 108,461/ 90,281
= 1.20
Therefore, Ford can pay its short-term 1.2times with current assets. The ratio is
not bad but it requires a slightly higher ratio to reduce liquidity risk.
CONCLUSION
In conclusion, it is evident that Ford Company is financially stable since it
recorded an increase in its net profit after tax, increased net worth as per
the balance sheet and positive cash flow. Consequently, the company is
comfortable in meeting its short-term obligation and thus financial
resources are enough to meet both short and long term plans of the
company. However, the debt-to-equity ratio is critical and thus require
intervention to reduce risks of hostile takeover.
RECOMMENDATION
It is recommended that the company should;
• Increase its efficiency to reduce cost of sales which stands at 83.39% of the total revenue. The
move will increase the profit margin and net income after tax.
• Reduce the cash and cash equivalent by investing excess cash to reduce liquidity risks.
• The company should reduce use of debt since the debt is more than nine times the
shareholder equity which increases the power of creditors and thus subject to hostile
takeover.
• The auto industry is growing rapidly and thus important for Ford to undertake research and
development aggressively to maintain and gain market share.