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Explain Compute and Interpret Solvency Ratios for Business Segments Selected balance sheet and income statement information from Ford Motor Company and its two prin cipal
Explain Compute and Interpret Solvency Ratios for Business Segments Selected balance sheet and income statement information from Ford Motor Company and its two prin cipal business segments, Automotive and Financial Services, for 2010 follows Total Liabilities Equity $ millions Automotive Financial services Other Ford Motor, Consolidated...... Pretax Interest Not Income Expense Income $9,422 $ 894 $6,313 $ 79,631 $17,298 1,820 2,808 1,315 134,317 11,935 (4,446) - (3,021) 5,280) 50 $6,796 $3,702 $4,607 $208,668 $29,283 Required a.Compute return on equity (ROE), times interest eamed ratio and total liabilities-to-equity for the com- pany's two business segments and the company as a whole. (Use year-end equity for return on equity calculation) b. What is your overall assessment of the company's credit risk? Explain. What differences do you ob- serve between the two business segments? Do these differences correspond to your prior expectations given each company's business model? c.Discuss the implications of the analysis of consolidated financial statements and the additional insight that can be gained from a more in-depth analysis of primary business segments Innelliidity. Solvency. and Coverage Ratios
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