The Rivalry Between Ford Motor Company and General Motors - Essay Example

He announced the plan with the name of “One Ford” which gave the company an entirely new strategy for entering into the global market. The management of GM is striving hard too, to remove its weaknesses but the pace at which Ford is moving will increase its market share and sales to the new level by the time GM will look up. It is analyzed that if Ford keeps moving at the same pace, it will become the best-selling automaker in the United States, taking the place of GM (Kenwell, 2013). Liquidity ratios measure the ability of the company to pay off its short-term debts by utilizing its current assets.

The current ratio and acid test ratios are important liquidity ratios. The current ratio determines the ability of the current resources of the company to meet its liability, and the acid test ratio determines the ability of a business to pay its short-term obligations by using its most liquid assets. The current ratio of Ford was 0.81 in 2013 but declined to 0.69 in 2014. Although the ratio of GM declined too from 1.31 in 2013 to 1.27 in 2014, it was still higher than GM, and the decline was insignificant as compared to its competitor.

However, the acid test ratio of Ford was higher than GM i.e. 0.5 in 2014 as compared to 0.27 of GM. It indicates that although the current assets of the GM are higher Ford has the most liquid assets that make it more capable of paying off its current obligations. The reason behind the lower quick ratio of GM is its high inventory. While on the other hand, Ford is applying six sigma and just-in-time inventory techniques which keep its inventory low and quick assets higher in percentage. Receivable turnover measures the times the company collects its debtors in a given period.

The receivable turnover of Ford was 230 times in 2014 which was significantly higher than 17 times of GM in the same year. Although the receivable turnover of Ford declined in 2014 as compared to 2013 it was a huge difference from GM.