Write about Financial ratios of Ford Motor Group
Introduction
Ford Motor Group is based in Michigan, USA and it trades under the initials F in NYSE. The
company registered a return on assets amounting to 3.6% in 2013 while in 2012 and 2011 the
company recorded a return on assets of 3.1 and 11.8 respectively. The return on revenues for the
same period amounted to 4.9%, 4.2 and 24.8 for the years 2013, 2012 and 2011 respectively. The
return on equity (ROE) for the same period was 33.8%, 36.6% and 281.6% for the same period.
General Motors also registered a ROE of 11.5%, 19.9% and 31.1% for 2013, 2012 and 2011. The
ROA for the same period was 2.4%, 3.6% and 5.9% respectively. The Return on Revenues for
the years 2013, 2012 and 2011 were 3.4%, 4.1% and 6.1%.
DuPont Analysis
ROE Analysis 2
ROEProfit marginAsset turnoverEquity multy plier
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
Ford & GM Dupont Analysis
Ford 2013
GM 2013
The Ford’s equity multiplier for 2013 was 7.657 while in 2012, the equity multiplier was 11.877
and 11.868 for 2011 respectively. The DuPont analyis indicated that the ROE for Ford was on
average higher that of GM while GM enjoyed a higher equity ratio (Yahoo Finance, n,d).
The net income for GM and Ford in 2013 amounted to 5346 M and 7,155M respectively while in
2012 the net income for both companies amounted to 6188M and 5665M respectively. Despite
the high ROE that Ford registered in 2012, GM had a high net income compared to Ford just as
much as it registered higher revenue throughout the three years.
DuPont Analysis
Ford Year ROE Profit Margin Asset Turnover Equity Multiplier
2013 33.806 4.870 3.645 7.657
2012 36.578 4.220 3.071 11.877
2011 281.616 14.834 11.785 11.868
DuPont Analysis
GM Year ROE Profit Margin Asset Turnover Equity Multiplier
2013 11.54 3.44 2.39 12.55
2012 19.89 4.06 3.62 17.07
2011 31.13 6.12 5.88 24.11
ROE Analysis 3
DuPont Analysis
Year ROE Profit
Margin
Asset
Turnover
Equity
Multiplier
Ford 2013 27.11% 13.00% 75.00% 76.60%
2012 35.52% 13.00% 73.00% 11.88%
2011 134.00% 14.00% 76.00% 11.88%
Competitor Year ROE Profit
Margin
Asset
Turnover
Equity
Multiplier
GM 2013 12.55% 12.00% 93.00% 390.10%
2012 17.07% 7.00% 102.00% 412.27%
2011 24.11% 13.00% 104.00% 379.34%
Using the formulas above the ROE registered similar results in ROE calculations. But the return
on Assets registered slightly different results. Using the formula (Net
Income/Revenue)(Revenue/Total Assets)(Assets/Equity) the results were similar to the results
of the formula NP/Equity.
Ford 2013 2012 2011
ROE Return On Equity
(ROE)
NP/Equity 27.12 35.52 134.50
ROA Return on average
Assets
NP/AV
Assets
3.66 3.08 11.33
GM
ROE Return On Equity
(ROE)
NP/Equity 12.55 17.07 24.11
ROA Return on average
Assets
NP/AV
Assets
3.39 4.21 6.36
ROE Analysis 4
The critical ratios below indicate that GM is highly geared and its debts are much more than
those of Fords. Hence Ford enjoys a higher liquidity ratio than GM. The current ratios for Ford
in 2013, 2012 and 2011 were 6.74 6.48 and 1.91 respectively while the current ratios for GM
were 1.31, 1.30 and 1.22 for the same period. The working capital of Ford is made up of 62.84%
debt while for GM it was 115.38 % for the year 2013.
Critical Ratios for Ford and GM
Ford GM
2013 2012 2011 2013 2012 2011
Earnings per share 1.82 1.48 5.33 2.71 3.10 4.94
Current Ratio 2.11 2.32 2.26 1.31 1.30 1.22
Debt/capital ratio 73.72 79.84 79.01 99.26 106.51 0.00
Debt as % of working capital 82.15 144.05 79.51 115.38 65.81 NA
Price earnings ratio 9.90 – 6.65 15.44 – 9.66
Dividend yield 3.31 – 2.22 0.00 – 0.00
Earnings
per share
Current
Ratio
Debt/capital
ratio
Debt as %
of working
capital
Price
earning
ratio
Dividend
yield
0.00
20.00
40.00
60.00
80.00
100.00
120.00
140.00
160.00
Ford and GM Critical Ratios
Ford 2013
Ford 2012
Ford 2011
GM 2013
GM 2012
GM 2011
Ford (Billions) Year 2013 Year 2012 Year 2011
Net income 7.15 5.67B 20.21
Revenue 146.92 195.06 135.61
ROE Analysis 5
Assets 202.03 189.41 178.35
Equity 26.38 15.95 15.03
GM (Billions) Year 2013 Year 2012 Year 2011
Net income 5.35 6.19 9.19
Revenue 155.43 152.26 150.28
Assets 166.34 149.42 144.60
Equity 42.61 36.24 38.12
To conclude, the performance of Ford compared to GM is relatively similar. The operations of
GM were slightly higher in the year 2012 compared to the operations of Ford especially on
equity for the same period. Ford has more assets compared to GM. To improve on its liquidity
and ROE Ford has to cut down on its debt and reduce its operating expenses.
