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Financial accounting - Essay Example

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Ford Motor Company is one of the leading automobile manufacturing companies of the world which was founded by Henry Ford in the year 1909 (Yahoo Finance, 2012). It is headquartered at Dearborn, Michigan, USA. The company has remained under family ownership ever since (Bender, Slade, and Thorpe, 2009, p. 4). …
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Download file to see previous pages It is headquartered at Dearborn, Michigan, USA. The company has remained under family ownership ever since (Bender, Slade, and Thorpe, 2009, p. 4). Ford Motor conducts its business in two different business segments namely, automotives and financial services sector. This report entails about the assets utilised by the company to carry on its business activities. This report also analyses the technological and other means through which the organisation generates revenue out of its assets. The process of asset valuation used by Ford Motors has also been included in this study. Finally the various sources of funds utilised by the company to conduct its operational activities have been discussed in this study. Assets The consolidated balance sheet of Ford Motors Company includes various types of assets owned by the company. Some of those items are: cash and cash equivalents, marketable securities, finance receivables, investment in operating leases, inventories, property, deferred income taxes and intangible assets. As at 31 December 2011, Ford Motors had $18,618 million as marketable securities (Ford Motor Co., 2012). Marketable securities are a form of assets which helps in storing excess cash that can help to generate return for the company (Fabozzi, and Peterson, 2003, p. 645). Ford Motors is found to have invested in the marketable securities of automotive and financial services sector. Total assets of the company in the form of investment in operating leases were $12,838 million as on 31 December 2012 (Ford Motor Co., 2012, p. FS-4). Those operating leases mostly consisted of lease contracts for vehicles with all its different types of existing customers. Accounts receivables are mainly in the form of finance receivables which amounted to $69,976 million as at 31 December 2011. Other receivables amounted to $8,565 million (Ford Motor Co., 2012, FS-4). The finance receivables correspond to the automotive and financial services sector. The notes receivables in the automotive sector are primarily related to the purpose of restructuring the businesses of the company and loans with the suppliers. Ford Motor Credit Company LLC which is a wholly owned subsidiary of Ford motors offers different types of automotive financing products all around the world. Ford Credit's business activities mostly consist of supporting its dealers and financing the vehicles. This results in a large portfolio of leases and finance receivables for the company. The total inventories of the company as at 31 December 2011 were $5,901 million (Ford Motor Co., 2012, FS-4). The inventories of the company consisted of raw materials, work-in-process and supplies which amounted to $2,847 million at the end of the financial year 2011. The finished products amounted to $3,982 million and total inventory is calculated as $5,901 million after adjusting on the basis of (Last in First Out) LIFO. Thus the inventories of Ford motors are lean in nature because they follow the build to order strategy (Ford Motor Co., 2012, FS-38). The inventories of the company which is primarily the service part obsolescence amounted to an ending balance of $249 million as at 31 December 2012 (Ford Motor Co., 2012, p. FSS-1). Use of Technology and Revenue Generation Revenues are recognised by the companies in United States mostly in accordance with the US GAAP (Nikolai, Bazley, and Jones, 2009, p. 931). Revenues from the automotive business segment of Ford Motors are generally generated through sales of automobiles and its accessories. Revenues are recorded in the books of account of the company only after the risks and rewards of ownership related to the products are completely transferred to its ...Download file to see next pagesRead More
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