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Chapter 3 - Thompson One Problem

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1) What has happened to Frod’s liquidity position over the past 3 years? How does Frod’s liquidity compare with its peers?
Ford Motor Company balance sheet for the years of 2009, 2010 and 2011 show that the company liquidity fluctuating with current liabilities ratio 1.39 in 2009, 12.3 in 2010, and 1.27 in 2011, the quick or acid test ratio is changing as well from 1.28 in 2009, to 1.13 in 20010, and 1.75 in 2011.
There are several reasons why the liquidity ratios might have changed for Ford Motor Company over the past 3 years. The US economy was in one of its worst recession since the great depression in the 1930s as a result consumption of auto was at an all time low; as a result Ford Moto Company could have had lots of money tied up in inventory.
In relation to Ford’s peers the current ratio for Honda 1.31, Nissan 1.45, and Toyota 1.10. Ford’s Current Ratio is average compare to its peers in the industry during the same period. Creditors like when companies have a high CR ratio although a high current ratio can be both good and bad for companies.

2) Take a look at Ford's inventory turnover ratio. How does this ratio compare with its peers? Have there been any interesting changes over time in this measure? Do you consider Ford's inventory management to be strength or a weakness?
The management of firms assets is important to its free cash flow as well as its stock price, it is also very important that companies keep enough assets on hand in order to increase sales and by extension make sure that it remains profitable. Looking at Ford Motor company inventory income statement, the inventory turnover ratio for 2011 is 17.32, which is almost twice as high as most of its peers. What this inventory ratio is telling us is that Ford’s inventory is turned over 12.37 times per year, according to financial data in the same industry; Ford is holding lower levels of

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