Ford Motor Company’s Balance sheet
OMM 622 Financial Decision-Making
Instructor: Wayne Hollman
July 18, 2014
In every business, there are statements that come out that are called financial statements. For every company there are three of these statements that must always be looked at. They are the Balance sheet, the Income Statements, and the Cash Flow Statements. To break them down are as follows: The Balance sheet basically tells that company’s employees or the investors how much money the company has, how much that company owes, and what is left for the stockholders of the business.
The cash flow statement shows the company where they are spending their money, sort of like a checking account statement.
The income statement, is a record of all of that company’s profits. It will show you how much money your company has made or lost.
Briefly explain the purpose of a balance sheet
“Let’s say you are going to the bank to borrow some money to add some major renovations to your home. The bank institute may ask you to provide them a list of your current income of finances. So when you get home you pull out your statements and write down for the bank everything that is of value, like checking or saving accounts, bonds, mutual funds, cars, or boats or homes. Then you would make a list of all your dent owed, house payments, car payments, and any other loans such as school loans, or other debt. After you do this you subtract everything you owe, by everything you have and then you will have you “Net Worth” After you do this, you have then created your very own personal balance sheet.
In a business it is no different, the government requires a business put together a balance sheet for the company to share with the employees and the shareholders of that company, so that investors can see the company’s finance situation. This will show what the value of the things the company owns, the amount of debt the company owes, and how much money the company has to work with. The balance sheet is usually the first thing you want to see for a company. (Joshua Kennon)”
Analyze Ford Motor Company’s balance sheet from its 2012 Annual Report.
“Ford Motor Company continued on our path to deliver profitable growth in 2012 by following our proven One Ford plan, despite the ongoing challenges in the global market. Along the way, we achieved several important milestones, including restoring Ford’s investment grade status and reclaiming the Ford Blue Oval, resuming regular dividend payments to our shareholders and achieving 14 straight quarters of operating profit.”
According to the financial statements Ford had a pretty profitable year. It looks like the profit more than their debt, so they have a pretty good Net Value. They had the cash available to put back into the company in the form of a pension plan. They had innovation products that seemed to be extremely profitable for the company. It looks like they will have a profitable year to follow as well.
“Our 2012 full year pre-tax operating profit, excluding special items, was $8 billion, or $1.41 per share. We delivered record results of $8.3 billion in North America, continued solid performance from Ford Credit of $1.7 billion, positive results in South America, continued investment in Asia Pacific Africa and began a challenging transition in Europe. We remain committed to strengthening our balance sheet. We ended 2012 with automotive gross cash of $24.3 billion, exceeding debt by $10 billion. We also have a strong liquidity position of $34.5 billion, an increase of $2.1 billion over 2011.We also worked to de-risk our pension obligations, contributing $3.4 billion in cash contributions to our worldwide funded plans.”
Epstein, L. (2014). Financial decision making: An introduction to financial reports. San Diego, CA: Bridgepoint Education, Inc.