Ford Motor Company2004 Annual Report

Mandy BennettACG 2021 Section 002

Executive Summary

The Ford Motor Company has had many disappointment in the past several years, but has slowly gained more confidence by introducing newer models and increasing technology. The company still has many problems that need to be worked out. The total liabilities are extremely high, resulting in low working capital. Accounts receivable are also remaining unpaid for far too long. Overall, the company seems to be improving from years past, but still has a long way to go.

http://www.ford.com/en/company/investorInformation/companyReports/annualReports/2004annualReport/2004_pdfs.htm

IntroductionWilliam Clay Ford, Jr. was appointed CEO of the Ford Motor Company on October 30, 2001.The home office is located in Dearborn, MIThe last fiscal year ended on December 31, 2005 (The 2004 reports are used for this project, as the 2005 reports have not been released.)The Ford Company deals in automobile sales (Ford, Lincoln, Mercury, Volvo, Jaguar, Land Rover, and Aston Martin). They also provide many customer services, such as Ford Credit, Hertz, and Auto Service.While Ford has many dealerships around the world, their main location is in the United States.

Audit Report

Ford Motor Company employs Pricewaterhouse Coopers LLC to perform the financial audit.

They simply state that the yearly reports are adequate in all aspects.

Stock Market Information

$7.95 - The most recent price of the company’s stock.$12.73 – Twelve month high.$7.57 – Twelve month low.$.40 (5%) – Dividend per share.The above information is accurate as of March 1, 2006.The stock for the Ford Company has been decreasing steadily for the past year, so I would not recommend buying, although if the stockholder already owned stock, I would consider holding it. The Company has several plans to increase the value of the stock.

Industry Situation and Company Plans

The Ford Motor Company has made many achievements during 2004, and plans to continue into 2005. In 2004, Ford reduced it’s costs by almost $900 million, and improved performance. They also improved per-unit revenue of $745 in North America. The new Ford F-series, and the Ford Escape set sales records in 2004, and will hopefully have continued success in 2005. Ford is also optimistic about it’s new Ford Escape Hybrid model. This model was named “North American Truck of the Year,” and appeals to all types of people. Overall, Ford plans to continue to improve its performance for 2005.

Income Statement

The Income Statement is prepared in multistep format.

Within the year, the net income for the Ford Company has increased seven fold. Both the gross profit, and income from operations have increased greatly as well.

2003 2004Gross Profit $8,575 $11,278

Income from Operations

$902 $3,634

Net Income $495 $3,487

*All numbers in millions

Balance Sheet

Assets = Liabilities +

Stockholders Equity

2003 $299,397 $287,087 $11,651

2004 $292,654 $275,732 $16,045

While the total assets in 2004, have decreased, the Stockholders equity has increased. The biggest change is the decrease in liabilities in 2004.*All numbers in millions

Statement of Cash Flows

Cash flows from operations are much more than the net income:

The company is not growing through investing, and in fact lost money, due to it’s investing activities.Net Income has greatly improved from 2003.

Cash Flows from Operations

Net Income

2003 $17,280 $495

2004 $24,514 $3,487

*All numbers in millions

Accounting Policies

Ford presents its financial statements on two bases: Sector basis for Automotive and Financial Services Consolidated basis

With this additional information, the reader is better able to understand the operating performance, financial position, cash flow and liquidity of the two very different businesses.

Financial Analysis Liquidity Ratios

2003 2004

Working CapitalRemained stable through 2004.

205,594-139,872=

$65,722202,491-139,162=

$63,329

Current Ratio$1.47 for every $1 in liabilities.

205,594/139,872=

1.46202,491/139,162=

1.47

Receivable TurnoverVery low turnover rate, down

from previous years.

138,260/112,701=

1.23 times147,134/114,710=

1.28 times

Ave. Days Sales Uncollected

Extremely long collection time.

365/1.23=

297 Days365/1.28=

285 Days

Inventory TurnoverTurnover has remained stable.

129,685/9,151=

14.17 times135,856/9,958=

13.64 times

Ave. Days Inventory on Hand

Taking longer to sell from previous years

365/14.17=

25.76 Days365/13.64=

26.76 Days

Financial Analysis Profitability Ratios

2003 2004

Profit MarginVery low profit margin,

but up from previous years.

495/138,260=

0.4%3,487/147,134=

2%

Asset TurnoverLow turnover rate.

138,260/299,397=

0.46 times147,134/296,025=

0.5 times

Return on Assets

Earnings are low, but improving for 2004.

495/299,397=

0.2%3,487/296,025=

1.2%

Return on Equity

Returns greatly improved for 2004.

495/11,651=

4%3,487/13,848=

25%

Financial Analysis Solvency Ratio

2003 2004

Debt to Equity

Company needs to reduce its liabilities, and increase equity. The ratio is slowly decreasing, but is still of great concern.

(287,087/11,651)=

2464%

(275,732/16,045)=

1718%

Financial Analysis Market Strength Ratios

2003 2004

Price/Earnings per Share

Earnings have increased greatly with the price staying fairly stable in 2004.

16.00/0.27=

59.26

14.64/1.91=

7.66

Dividend YieldThe yield has been increasing

for the past couple years.

0.4/16.00=

2.5%

0.4/14.64=

3%

Mandy Bennett

Ford Motor Company