...market were discussed, with the focus being on the risks of an investment. Basic financial statements and ratios were discussed briefly. Next cross sectional and time series techniques to compare the financial statements and ratios were revealed. Most of the information from the theories was later on used in the empirical part of the thesis. In the empirical study, initially the financial statements of different companies were taken to compute the ratios, risk, average return, to make trends and common size statements. Then a quantitative interpretation of the risk and return charts, common size statements, trend statements was executed alongside the qualitative discussion of individual figures and tables. General Motors, Ford, Nissan and Toyota are the four automotive company used for the purpose. Finally a clear picture of the performance of these companies from 2008 to 2011 was available. A very high risk but lower rate of return...
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...------------------------------------------------- General Motors I. Background and Industry General Motors, along with its competitors, are part of the Automotive Manufacturer (Major) industry of the Consumer Goods economic sector. Companies in this industry make passenger cars and light trucks, as well as chassis for those vehicles. Demand is driven by employment and interest rates while the profitability of the individual company depends on manufacturing efficiency, product quality, and affective marketing. Large companies have economies of scale in purchasing and marketing while smaller companies can compete by focusing on specialized markets. The U.S. industry alone is highly concentrated with the top four companies account for about 75 percent of sales. General Motors Company is one of the world’s largest auto manufacturers which designs, manufactures, and markets cars, crossovers, trucks, and automobile parts worldwide. It operates in five segments: GMNA (GM North America), GME (GM Europe), GMIO (GM International Operations), GMSA (GM South America), and GM Financial. Financing activities are primarily conducted by General Motors Financial Company. The company markets its vehicles primarily under the Buick, Cadillac, Chevrolet, GMC, Opel, Holden, and Vauxhall brand names, as well as under the Alpheon, Jiefang, Baojun, and Wuling brand names. It also sells cars and trucks to dealers for consumer retail sales, as well as to fleet customers, including daily rental car...
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... Recommendation regarding the future of the corporation I. Overview of Corporation For our final project I chose to study the automotive company Ford Motor company and to analyze their financials from 2006-2010 which was right before the massive economic recession. Ford was able to stay afloat during these rough years however this economic downturned caused one of largest competitors General Motors to receive billions of dollars in bailout money from the United States government. I chose to study Ford because I actually had started investing in their company in my own starting in 2006 and I wanted to study how Ford’s finances were positioned when I began investing and see if it was a great buy or I should have instead invested at the time in Toyota a large multi-national competitor that is based in Asia and also operate in the United States which I had thought about investing the money in back in 2006 however I choose Ford instead. “Mulally who was named president and CEO of Ford, in 2006, the famous American Ford Motor company is a leader in automobile manufacturing industry some of the most purchased products are the Ford Focus, Ford F-150 pickup and the Ford Mustang is always a must have with the sports car enthusiast. Ford Motor Company's family of brands includes cars, crossovers, trucks and SUVs from Ford, Lincoln and Mercury brands. Ford also has thousands of dealerships around the United...
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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...
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...ASSIGNMENT 1 (BASED ON CASE STUDY) LECTURER: MR. MICHAEL TINGGI DUE DATE: 9TH MARCH 2013 Done by: Satnam Singh 13030035 CASE 1 1.0 An accountant prepared a balance sheet for a business. In the balance sheet, the equity of the owner was shown next to the liabilities. This confused the owner, who argued: My equity is my major asset and so should be shown as an asset on the balance sheet. How would you explain this misunderstanding to the owner? As an accountant, we must first establish what the definition of asset is and what the definition of equity is. An asset is defined as a resource with economic value that an individual, corporation or country owns or controls with the expectation that it will provide future benefits (Gilbertson et al, 2008). Whereas, equity is the amount of the funds contributed by the owners (the stockholders) plus the retained earnings (or losses) invested to purchase assets, therefore cannot be recognized as asset (Gilbertson et al, 2008). The difference can be further explained by the Accounting equation of Assets, which shows: ASSETS = LIABILITIES + OWNER’S EQUITY From the equation we can derive that assets are comprised by liabilities and owner’s equity. Therefore, equity cannot be shown as an asset on the balance sheet because equity is the balance of assets minus the liabilities of the owner. So when we look at the Accounting Equation rearranged, it shows: OWNER’S EQUITY = ASSETS – LIABILITIES Equity cannot be regarded...
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... Its primary markets based on vehicles sold Japan (30%), North America (29%), Europe (12%), and Asia (14%). Since the global economic crisis and litigation, sales have significantly decreased in North America and Europe. Toyota sales are influenced by the quality, safety, reliability, design, price, performance, economy and utility of the vehicle. Majority of Toyota marketing depends on the geographical demographic and demand. Toyota is a brand that needed little marketing efforts until 2009. Their name said it all. Toyota’s timely introduction of new and redesigned vehicles also makes up for a number of sales. Most of their marketing effort happens during the unveiling or redesign of vehicles. Toyota does not stop short of bring their most artful designs to auto shows to boost consumer sales. Their new market is in India where they are in demand to produce quality vehicles at an affordable price. Finance Toyota Motor Corporation sales are at an all time low. Their revenues have decreased even more since 2009. The revenue received by other Financial Services and other segments are decreasing due to consumers inability to pay or provide sufficient collateral to cover debts. The foreign currency fluctuations is causing exchange rate to rise. Though Toyota has had some financial setbacks, they have lowered operating cost and cost of production. Human Resources Because people make our automobiles, nothing gets started until we train and educate our people." As seen in...
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...Inventory Management In the current business scenario, the organisations are striving to strike a balance between what is demanded and what is needed, considering the intense competition and need for cost cutting in order to combat that. This very control is known as inventory management. Basically, inventory is assets (materials or goods) which are stocks of an organisation. Managing inventory is a crucial task in both manufacturing and service organisations which primarily focuses on inventory’s capacity. Inventory management primarily deals with asset management, demand forecasting, inventory carry cost, pricing of goods, forecast, and validations of goods. Managing inventory in manufacturing and services organisation may not be always similar. There are certain ways in which inventory is managed similarly while there are ways in which it is managed differently (Michalski, 2009). Cost flow is a significant process in inventory management which is a little dissimilar in manufacturing and service firms. As shown in fig.1, in manufacturing firms cost inputs include direct labour, direct material , and manufacturing overhead, while in service organisations it includes supplies, overhead, and wages and salaries. When it comes of balance sheet assets, work-in-process inventory and finished goods inventory are considered in manufacturing firms, while only work-in-process services are considered in case of service firms. In terms of income statement, they both include cost of goods...
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...INTERNATIONAL FINANCIAL ECONOMICS UNIVERSITY OF AMSTERDAM Koito Manufacturing, Ltd. Jasper Dijkstra Jack Driessen Mark Jager Xin Wang Maarten Dalm 5876362 0516511 10192921 10216081 Question 1 Many economists argue that the keiretsu system has been a formidable impediment to the entry of Western companies into the Japanese market. However, the absence of liberal market competition may preclude Japanese firms from implementing more cost-effective sourcing strategies at the global standard. Furthermore, it is often argued that the keiretsu system has been partly responsible for the decade-long recession: while there was need for quick changes, the negative features of the keiretsu form of governance maintained the economic slump. The interdependence of suppliers, unproductive cost management and top-down decision making based upon continuity and consensus all contributed to the decade-long recession. We will now discuss the corporate governance issues that may arise, seen from different perspectives. a) From the perspective of financiers. Financiers are always looking for the best investment possibilities. The keiretsu system can make it difficult for (individual) financiers to invest in the best possible option. This is because of the fact that a keiretsu will not allow foreign or alien companies into their system. On the other hand, when the leading company of the keiretsu needs money, financiers can more or less be obliged to invest: the money is invested in a...
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...Introduction Ford Motor Company’s success is based upon flexibility, innovation, and the ability to provide affordable vehicles for the masses. Initially the company designed one model car (the Model A), that could be mass produced by an assembly line approach. As a result, the two-cylinder, eight horsepower engine was affordable at the price of $850.00, in 1903. In 2008, the Ford Motor Company established its “One Ford” business model, which was a comprehensive plan to sell numerous models globally. This approach expanded the company’s commercial opportunities from models that were designed with the local market in mind. So, although Ford escaped the bankruptcy and restructuring that befell its American rivals General Motors and Chrysler in 2009, the automaker still found itself needing to change its business model to remain solvent and to respond to changing customer tastes. Therefore, Ford’s business plan included bringing additional models to North America, such as its B-Max crossover, along with developing global engine and transmission technologies. Today, Ford continues to offer a large portfolio of reliable, affordable automobiles at reasonably competitive prices and remains as one of the industry leaders. Background The Ford Motor Company was started in 1903 by Henry Ford in Dearborn, Michigan and made its first sale, a Model A, on July 15, 1903. Some major milestones experienced by the Ford Motor Company happened in 1922 when Edsel Ford urged his father to purchase...
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...013-8119088 Unimas: tmichael@feb.unimas.my Gmail: mtinggi@gmail.com CASE STUDY Lecturer : Mr. Michael Tinggi CASE 1 1. An accountant prepared a balance sheet for a business. In the balance sheet, the equity of the owner was shown next to the liabilities. This confused the owner, who argued: My equity is my major asset and so should be shown as an asset on the balance sheet. How would you explain this misunderstanding to the owner? 2. The accountant goes on to explain that the the balance sheet shows how much a business is worth. Do you agree with this statement? Discuss. CASE 2 3.0 Valuing Brands as part of intangible product in the Balance Sheet. Millward Brown Optimor, part of WPP marketing services group, recently produced a report which ranked and valued the top ten world ranking brands for 2007 as follows: Ranking Brand Value ($M) 1 Google 66,434 2 GE (General Electric) 61,880 3 Microsoft 54,951 4 Coca-cola 44,134 5 China Mobile 41,214 6 Marlboro 39,166 7 Wal-Mart 36,880 8 Citi 33,706 9 IBM 33,572 10 Toyota 33,427 We can see that the valuations placed on the brands are remarkable; they show how much of a company’s value can b tied up in brand equity. Discuss your observation here. ...
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...quality, flexibility, low cost, or durable products/services. Toyota Motor Corporation a globally recognized leader in the automotive industries focuses on quality as its operation capability. If the company had focused on low cost instead of quality its operations would have an altogether different look. Two ways that Toyota’s operation might have changed as a result of a cost minimization focus which would be the most appropriate in this case are reduction in models they offer and a reduction in marketing and advertising. Since its inception in the 1930’s Toyota has offered over 150 different models across its major markets in Asia, Europe and North America. However, not all of the models offered have been profitable for the company which has resulted in many models being discontinued. With a cost minimization focus Toyota who has had great success with such models as the Camry and Corolla both of which were ranked in the top 10 of best cars to purchase. The company can focus more of its revenue into producing more of these particular models and enhancing their features while also discontinuing some of their less profitable models which would reduce the company's expenditure. This changes the company's dynamics in terms of their operation as they would possibly have to reduce the size of their production plants and reduce their workforce which would also save them money. It is reported that during the recession Toyota spent over 50 million...
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...Introduction Ford Motor Company aka “Ford” is an American multinational automaker headquartered in a suburb of Detroit, Michigan founded by Henry Ford and incorporated in 1903, 109 years ago. Ford introduced methods for large-scale manufacturing of cars through the use of the world famous assembly lines. Ford Motor Company engages in the development, manufacture, distribution, and service of vehicles, parts, and accessories worldwide. Ford markets cars, trucks, parts, and accessories through retail dealers in South America, Europe, Turkey, Russia, and the Asia Pacific region (SEC). Ford is the second-largest US-based automaker behind General Motors and the 5th largest in the world behind its domestic counterpart, GM and foreign rivals Volkswagen, Toyota, and Hyundai. The company operates through two sectors, Automotive and Financial Services. Under the Automotive sector, the company sells automobiles and commercial vehicles under the Ford brand and luxury cars under the Lincoln brand. Ford also owns small stakes in Mazda of Japan and Aston Martin of the United Kingdom. The financial services sector provides financing products, which include retail installment sale contracts for new and used vehicles; leases for new vehicles to retail customers, government entities, daily rental car companies, and fleet customers; wholesale financing that comprise loans to dealers to finance the purchase of vehicle inventory; and loans to dealers to finance working capital, purchase dealership real estate...
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...Discussion of Mark-to-Market standards for Investment securities Relevance vs. Reliability – “Going back to the basics” In a recent Wall Street Journal article titled “A Scion Drives Toyota Back to Basics”, Toyota’s incoming president, Akio Toyoda, said that the company his grandfather founded 72 years ago has become too fancy for its own good. Mr. Toyoda maintains kakushin, or “revolutionary change”, spawns technological innovation that comes at a cost. His conclusion is that these increased production costs have led Toyota astray from its core ideas of thrift and efficiency. Consequently, Mr. Toyoda has called for a return to these core beliefs by going back to the basics. The basics of accounting are relevance and reliability. In a perfect world, asset valuation would always be equally relevant and reliable. The real world, however, requires accountants to choose between the two. Traditionally conservatism, which favors reliability over relevance, has won out. That is until recently when some kakushin hungry accountants decided this is the right time for a “revolutionary change” in financial reporting standards. Newly adopted FMV, or mark-to-market, requirements are evidence of this fundamental shift. Unfortunately, this departure from reliability to relevance could not have come at a worse time. The current credit crisis has brought these two principles to a dangerous crossroads where, like Aiko Toyoda, it is now the responsibility of the SEC, AICPA, and FASB...
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...SECTION A: MULTIPLE CHOICE (Each correct answer is worth 2 marks) Write the LETTER of the best answer for each of the questions in the box provided in the answer column. Question 1 The statement “That for every debit entry, there shall be a corresponding credit entry” refers to A. Double - entry Concept B. Disclosure Concept. C. Objectivity Concept D. Entity Principle Question 2 Which of the following equations cannot be derived from the basic accounting equation? A. Assets = Liabilities + Capital B. Assets – Liabilities = Capital C. Capital = Liabilities – Assets D. Assets – Capital = Liabilities Question 3 An entity formed under law, having perpetual succession and limited liability, and appears as a legal person is a (an) A. company. B. sole trader. C. partnership. D. unregistered club. Question 4 The total of “Discount Allowed” column in the Cash Receipts Journal is posted to the A. debit of discount allowed account. B. debit of discount received account. C. credit of discount allowed account. D. credit of discount received account. Question 5 The purpose of the Sales Journal in a service enterprise is to record A. cash sales of goods and services of a company. B. credit...
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...what the ratio tells an investor or creditor about the company. Next, we will examine how BMW’s performance has progressed over the past five years compared to itself. Finally, we will look at BMW’s ratios against their direct competitors. Considering the fact that BMW creates luxury automobiles and does not merely make basic vehicles, we felt that it would not be fair to compare them to simple automotive industry averages. Therefore, the direct competitors that we will be comparing BMW to will be Toyota (more specifically their Lexus line), Mercedes, and Audi because of their direct relation to making luxury automobiles in the high end of the automotive market. Liquidity Liquidity ratios simply show how much of current resources a company has to be able to cover currently maturing liabilities or debts (Hill). For example, does a company have enough cash on hand to pay the current payments on their equipment? These ratios then, inherently look at items on the balance sheet that are classified as current which typically means that they are maturing in less than one year. The first ratio that we use to evaluate BMW’s liquidity is the current ratio. This ratio is calculated by dividing current assets by current liabilities. What this then tells the investor is how many dollars of current assets does the company have for every dollar of current liabilities. Therefore, the higher the current ratio is the better the company is doing. Upon examination of the trend over the years...
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