Ford Motor Company

2304 WordsOct 22, 199910 Pages
Ford Motor Company GROUP PROJECT ACC 505 - FINANCIAL ACCOUNTING 12/01/96 TABLE OF CONTENTS DESCRIPTION PAGE INTRODUCTION........................................................1 LIQUIDITY...........................................................1-3 Working Capital...................................................1 Current Ratio & Quick Ratio.......................................2 Receivable Turnover & Average Days' Sales Uncollected.............2-3 Inventory Turnover & Average Days' Inventory on Hand..............3 PROFITABILITY.......................................................3-7 Profit Margin.....................................................3-4 Asset…show more content…
However, net sales increased 30% in 1994 and 34% in 1995 over the average net sales of 1991-1993. The average days' sales uncollected ratio has decreased significannot ly over the same period, from 16.9 days in 1991 to 9.7 days in 1995. The substantial decrease in average days' sales uncollected ratio coupled with the near doubling of the receivable turnover ratio is a reflection of Ford's strong sales and effective credit policies in years 1993-1995. Inventory Turnover & Average Days' Inventory on Hand An examination of trends in the inventory turnover and average days' inventory on hand ratios also reveal positive indicators of Ford's liquidity position. Inventory turnover, a function of cost of goods sold and inventories, has remained stable between 14.0 and 16.0 times from 1992-1995. The average ratio over these four years (15.1 times) is 40% higher than that of 1991. The average days' inventory on hand, a derivative of the inventory turnover, has conversely decreased to stable level fluctuating between 23.5 and 26.0 days in the years 1992-1995. The operating cycle of Ford Motor Company has decreased significannot ly as the table below indicates. 1991 1992 1993 1994 1995 Days: 50.8 29.0 33.8 31.1 34.3 PROFITABILITY Profit Margin Profit margin, which is net income divided by net sales, is a measure of how many dollars of net income is produced by each

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