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Ford`s Analysis on Profitability and Asset management - Essay Example

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This paper "Ford`s Analysis on Profitability and Asset management" seeks to discuss the profitability of the Ford company, revealing its detailed financial statistics during the last years, and its Efficiency along with Inefficiency in asset management…
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Ford`s Analysis on Profitability and Asset management
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Ford`s Analysis on Profitability and Asset management Ford`s profitability Ford organization maintained a constant gross margin of 13% from 2012 to 2013. However, gross margin dropped to 12% in 2014. The operating margin for the company was at 4% in 2012 and 2013 but reduced to 2% in 2014. The figures indicate constant small percentage in dollar revenue after payment of variable costs in 2012 and 2013 and a decline in the organization`s aptitude to cover operational expenses in 2014.Thus, affecting the stability of the company. Operating efficiency reduced drastically from 2012 to 2013 and 2014 as represented by a pre-tax margin of 6%, 5%, and 3% respectively. Ford increased its profit margin from 4% in 2012 to 5% in 2013 proving effective cost control measures. Nevertheless, a profit margin of 2% in 2014 showed the impact of competition to profit margins. Pre-Tax ROE was 48% in 2012, 27% in 2013 and 18% in 2014.Tax ROE was 35% in 2012, 28% in 2013 and 13% in 2014. The decline of ROE figures in 3 years indicates reduced profits generation from shareholders equity (Nasdaq, 2015).
Efficiency in asset management
Inventory turnover of Ford was at 15.35 in 2012 and improved to16.25 in 2013 but declined to 15.70 in 2015. Receivables turnover increased from 2012 to 2013 from 23.61 to 24.7 but dropped in 2014 to 23.46.Payables turnover was 6.23 in 2012, 6.94 in 2013 and 6.54 in 2014. Inventory, receivables and payables turnover indicate the number of times inventory sales, effectiveness in credit management and the rate of paying off suppliers. The assessment shows that all turnovers increased from 2012 to 2013 and dropped in 2014. Therefore, efficiency in asset management increased from 2012 to 2013 but decreased in 2014 (Stock Analysis on Net, 2015).
Inefficiency asset management
Ford`s asset management strategies are failing the company leading to less success in the motor industry. The turnover ratios indicate signs of inefficiency.
Reference
Nasdaq. (2015). Ford Company Financials. Retrieved August 8, 2015, from Nasdaq website: http://www.nasdaq.com/symbol/f/financials?query=ratios
Stock Analysis on net. (2015). Ford Motor Co.(F). Retrieved August 8, 2015, from Stock Analysis on net website: https://www.stock-analysis-on.net/NYSE/Company/Ford-Motor-Co/Ratios/Short-term-Operating-Activity Read More
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