Question 1:
Please refer to the financial statements provided in Appendix 1:
- For each of the following, please provide a calculation of the appropriate ratio amount for 2017 and 2018 years. Show your calculations (22 Marks). See Notes to specific financial statement items in calculations.
- Please provide commentary to your observations, and your assessment of how the change in year-over-year ratios is reflective of the financial performance and health of the company. Please refer to the state of short-term liquidity, solvency and profitability (23 Marks).
Answers: 1 a. and 1.b
| Ratio | Calculation | Commentary |
| Gross Profit Rate (Note 2) | | |
| Profit Margin (Note 1,2) | | |
| Return on Assets (Note 1) | | |
| Asset Turnover (Note 2) | | |
| Debt to Asset Ratio | | |
| Times Interest Earned (Note 3) | | |
| Free Cash Flow | | |
| Current Ratio | | |
| Inventory Turnover | | |
| Working Capital | | |
| Accounts Receivable Turnover (Note 4) | | |
Note 1: Ignore Income/Loss attributable to non-controlling interests.
Note 2: Consider all revenue items to be sales.
Note 3: Include all interest expense items to be part of the cost of financing.
Note 4: Consider all receivable items to be trade receivables.
FORD MOTOR COMPANY AND SUBSIDIARIES CONSOLIDATED INCOME STATEMENT (in millions, except per share amounts) For the years ended December 31, , 2016 2017 2018 145,653 $ Revenues Automotive Ford Credit Mobility Total revenues (Note 4) 141,546 $ 10,253 1 11,113 148,294 12,018 26 160,338 10 151,800 156,776 Costs and expenses Cost of sales Selling, administrative, and other expenses Ford Credit interest, operating, and other expenses Total costs and expenses 126,195 10,972 8,847 146,014 131,321 11,527 9,047 151,895 136,269 11,403 9,463 157,135 894 Interest expense on Automotive debt Interest expense on Other debt 1,133 57 1,171 57 57 169 2,247 123 1,780 6,784 4,345 Other incomel (loss), net (Note 5) Equity in net income of affiliated companies Income before income taxes Provision forl(Benefit from) income taxes (Note 7) Net Income Less: Income/(Loss) attributable to noncontrolling interests Net income attributable to Ford Motor Company 2,184 4,600 11 4,589 $ 3,267 1,201 8,159 402 7,757 26 7,731 $ 650 3,695 18 3,677 $ EARNINGS PER SHARE ATTRIBUTABLE TO FORD MOTOR COMPANY COMMON AND CLASS B STOCK (Note 8) Basic income 1.16 $ Diluted income 1.15 $ 0.93 1.94 1.93 0.92 3,695 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (in millions) For the years ended December 31, 2016 2017 2018 Net income 4,600 $ 7,7575 Other comprehensive income (loss), net of tax (Note 21) Foreign currency translation (1,024) 314 (523) Marketable securities (8) (34) (11) Derivative instruments 219 (265) 183 Pension and other postretirement benefits 56 37 (56) Total other comprehensive income/(loss), net of tax (757) 52 (407) Comprehensive income 3,843 7,809 3,288 Less: Comprehensive income/(loss) attributable to noncontrolling interests 10 24 18 Comprehensive income attributable to Ford Motor Company $ 3,833 S 7.785 $ 3,270 The accompanying notes are part of the consolidated financial statements. FS-3 FORD MOTOR COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (in millions) December 31, 2017 December 31, 2018 $ ASSETS Cash and cash equivalents (Note 9) Marketable securities (Note 9) Ford Credit finance receivables, net (Note 10) Trade and other receivables, less allowances of $412 and $94 Inventories (Note 12) Other assets Total current assets 18,492 $ 20,435 52,210 10,599 11,176 3,889 116,801 16,718 17,233 54,353 11,195 11,220 3,930 114,649 56,182 28,235 35,327 3,085 10,762 8.104 258,496 $ 55,544 29,119 36,178 2.709 10,412 7,929 256,540 $ $ 23,282 $ 19,697 3,356 48,265 94,600 21,520 20,556 2,314 51,179 95,569 Ford Credit finance receivables, net (Note 10) Net investment in operating leases (Note 13) Net property (Note 14) Equity in net assets of affiliated companies (Note 15) Deferred income taxes (Note 7) Other assets Total assets LIABILITIES Payables Other liabilities and deferred revenue (Note 16) Automotive debt payable within one year (Note 18) Ford Credit debt payable within one year (Note 18) Total current liabilities Other liabilities and deferred revenue (Note 16) Automotive long-term debt (Note 18) Ford Credit long-term debt (Note 18) Other long-term debt (Note 18) Deferred income taxes (Note 7) Total liabilities Redeemable noncontrolling interest (Note 20) EQUITY Common Stock, par value $.01 per share (4,000 million shares issued of 6 billion authorized) Class B Stock, par value $.01 per share (71 million shares issued of 530 million authorized) Capital in excess of par value of stock Retained earnings Accumulated other comprehensive income/loss) (Note 21) Treasury stock Total equity attributable to Ford Motor Company Equity attributable to noncontrolling interests 24,711 12,575 89,492 599 815 222.792 23,588 11,233 88,887 600 597 220,474 98 100 40 40 1 1 22,006 21,843 21,906 (6,959) (1.253) 22,668 (7,366) (1,417) 35,932 34 Total equity 35,578 28 35,606 258,496 $ Total liabilities and equity 35,966 256,540 S The following table includes assets to be used to settle liabilities of the consolidated variable interest entities ("VIES"). These assets and liabilities are included in the consolidated balance sheet above. See Note 22 for additional information on our VIEs. December 31, December 31, 2017 2018 ASSETS Cash and cash equivalents $ 3,479 $ 2,728 Ford Credit finance receivables, net 56,250 58,662 Net investment in operating leases 11,503 16,332 Other assets 64 27 LIABILITIES Other liabilities and deferred revenue $ 2 $ 24 Debt 46,437 53,269 The accompanying notes are part of the consolidated financial statements. FS-4 FORD MOTOR COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (in millions) For the years ended December 31, 2016 2017 2018 $ 4,600 $ 9,023 3,695 9,280 (972) 609 (306) 400 206 529 Cash flows from operating activities Net income Depreciation and tooling amortization Other amortization Provision for credit and insurance losses Pension and other postretirement employee benefits ("OPEB") expensel(income) Equity investment (earnings Mosses in excess of dividends received Foreign currency adjustments Net (gainMloss on changes in investments in affiliates Stock compensation Pensado Net change in wholesale and other receivables Provision for deferred income taxes Decrease/Increase) in accounts receivable and other assets Decrease/Increase) in inventory Increase/(Decrease) in accounts payable and accrued and other liabilities Other Net cash provided byl(used in) operating activities 672 2,667 (178) 283 (139) 210 (1.449) 1.473 7,757 $ 9,122 (669) 717 (608) 240 (403) (7) 246 (836) (350) (2,297) (970) 6,089 65 18,096 (2,855) (42) 191 (2,408) (197) (2,239) (828) 6,781 17 15,022 (803) 6,595 57 19,850 Cash flows from investing activities Capital spending Acquisitions of finance receivables and operating leases Collections of finance receivables and operating leases Purchases of marketable and other securities Sales and maturities of marketable and other securities Settlements of derivatives Other Net cash provided by/(used in) Investing activities (6,992) (56,007) 38,834 (31,428) (7,785) (62,924) 50,880 (17,140) (7,049) (59,354) 44,641 (27,567) 29,898 100 (29) (19,360) 29,354 20,527 358 825 112 (25,302) (177) (16,261) Cash flows from financing activities Cash dividends Purchases of common stock Net changes in short-term debt Proceeds from issuance of long-term debt Principal payments on long-term debt Other Net cash provided by (used in) financing activities Effect of exchange rate changes on cash, cash equivalents, and restricted cash Net increase/(decrease) in cash, cash equivalents, and restricted cash (3,376) (145) 3,864 45,961 (38,797) (107) 7,400 (265) 1,683 $ (2,584) (131) 1,229 45,801 (40,770) (151) 3,394 (2,905) (164) (2,819) 50,130 (44,172) (192) (122) (370) (1,731) 489 $ 2,619 $ $ Cash, cash equivalents, and restricted cash at January 1 (Note 9) Net increase/(decrease) in cash, cash equivalents, and restricted cash (, Cash, cash equivalents, and restricted cash at December 31 (Note 9) 14,336 $ 1,683 16,019 $ 16,019 $ 2,619 18,638 $ 18,638 (1,731) 16,907 $ The accompanying notes are part of the consolidated financial statements. FS-5 FORD MOTOR COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENT OF EQUITY (in millions) Equity Attributable to Ford Motor Company Cap.in Excess of Accumulated Equity Par Retained Other Attributable Value Earnings Comprehensive to Non- Capital of (Accumulated Income (Loss) controlling Total Stock Stock Deficit) (Note 21) Stock Total Interests Equity $ 41 $ 21,421 $ 14,980 $ (6,257) S (977) $ 29,208 $ 15 $29.223 4,589 4,589 11 4,600 Treasury (756) (756) (1) (757) Balance at December 31, 2015 Net income Other comprehensive income (loss), net of tax Common stock issued (including share- based compensation impacts) Treasury stock/other Cash dividends declared (a) Balance at December 31, 2016 209 209 (145) (145) (3.376) (7.013) $ (1.122) $29.729 S 209 (3) (148) (5) (3,381) 17 $ 29,746 (3,376) 16,193 $ $ 41 $21,630 $ $ $ 41 $21,630 $ 6 6 16,193 566 7.731 (7,013) $ (1,122) $ 29,729 $ 572 7,731 17 $ 29,746 572 26 7,757 54 54 (2) 52 Balance at December 31, 2016 Adoption of accounting standards Net income Other comprehensive income (loss), net of tax Common stock issued (including share- based compensation impacts) Treasury stock/other Cash dividends declared (a) Balance at December 31, 2017 207 207 (131) (131) (2.584) (6,959) $ (1.253) $ 35,578 $ 207 (2) (133) (11) (2,595) 28 $ 35,606 (2,584) 21,906 $ $ 41 $21,843 $ $ 41 $21,843 $ $ 21,906 3,677 (6,959) $ (1,253) $ 35,578 $ 3,677 28 $35,606 18 3,695 (407) (407) (407) Balance at December 31, 2017 Net income Other comprehensive income/(loss), net of tax Common stock issued (including share- based compensation impacts) Treasury stock/other Dividend and dividend equivalents declared (a) Balance at December 31, 2018 163 163 (164) (164) (2,915) (7,366) S (1,417) $ 35,9325 163 (164) (12) (2,927) 34 $ 35,966 $ 41 $ 22,006 $ $ (2,915) 22,668 $ (a) We declared dividends per share of Common and Class B Stock of $0.85, 90.65, and $0.73 per share in 2016, 2017, and 2018, respectively. The accompanying notes are part of the consolidated financial statements. FS-6 FORD MOTOR COMPANY AND SUBSIDIARIES CONSOLIDATED INCOME STATEMENT (in millions, except per share amounts) For the years ended December 31, , 2016 2017 2018 145,653 $ Revenues Automotive Ford Credit Mobility Total revenues (Note 4) 141,546 $ 10,253 1 11,113 148,294 12,018 26 160,338 10 151,800 156,776 Costs and expenses Cost of sales Selling, administrative, and other expenses Ford Credit interest, operating, and other expenses Total costs and expenses 126,195 10,972 8,847 146,014 131,321 11,527 9,047 151,895 136,269 11,403 9,463 157,135 894 Interest expense on Automotive debt Interest expense on Other debt 1,133 57 1,171 57 57 169 2,247 123 1,780 6,784 4,345 Other incomel (loss), net (Note 5) Equity in net income of affiliated companies Income before income taxes Provision forl(Benefit from) income taxes (Note 7) Net Income Less: Income/(Loss) attributable to noncontrolling interests Net income attributable to Ford Motor Company 2,184 4,600 11 4,589 $ 3,267 1,201 8,159 402 7,757 26 7,731 $ 650 3,695 18 3,677 $ EARNINGS PER SHARE ATTRIBUTABLE TO FORD MOTOR COMPANY COMMON AND CLASS B STOCK (Note 8) Basic income 1.16 $ Diluted income 1.15 $ 0.93 1.94 1.93 0.92 3,695 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (in millions) For the years ended December 31, 2016 2017 2018 Net income 4,600 $ 7,7575 Other comprehensive income (loss), net of tax (Note 21) Foreign currency translation (1,024) 314 (523) Marketable securities (8) (34) (11) Derivative instruments 219 (265) 183 Pension and other postretirement benefits 56 37 (56) Total other comprehensive income/(loss), net of tax (757) 52 (407) Comprehensive income 3,843 7,809 3,288 Less: Comprehensive income/(loss) attributable to noncontrolling interests 10 24 18 Comprehensive income attributable to Ford Motor Company $ 3,833 S 7.785 $ 3,270 The accompanying notes are part of the consolidated financial statements. FS-3 FORD MOTOR COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (in millions) December 31, 2017 December 31, 2018 $ ASSETS Cash and cash equivalents (Note 9) Marketable securities (Note 9) Ford Credit finance receivables, net (Note 10) Trade and other receivables, less allowances of $412 and $94 Inventories (Note 12) Other assets Total current assets 18,492 $ 20,435 52,210 10,599 11,176 3,889 116,801 16,718 17,233 54,353 11,195 11,220 3,930 114,649 56,182 28,235 35,327 3,085 10,762 8.104 258,496 $ 55,544 29,119 36,178 2.709 10,412 7,929 256,540 $ $ 23,282 $ 19,697 3,356 48,265 94,600 21,520 20,556 2,314 51,179 95,569 Ford Credit finance receivables, net (Note 10) Net investment in operating leases (Note 13) Net property (Note 14) Equity in net assets of affiliated companies (Note 15) Deferred income taxes (Note 7) Other assets Total assets LIABILITIES Payables Other liabilities and deferred revenue (Note 16) Automotive debt payable within one year (Note 18) Ford Credit debt payable within one year (Note 18) Total current liabilities Other liabilities and deferred revenue (Note 16) Automotive long-term debt (Note 18) Ford Credit long-term debt (Note 18) Other long-term debt (Note 18) Deferred income taxes (Note 7) Total liabilities Redeemable noncontrolling interest (Note 20) EQUITY Common Stock, par value $.01 per share (4,000 million shares issued of 6 billion authorized) Class B Stock, par value $.01 per share (71 million shares issued of 530 million authorized) Capital in excess of par value of stock Retained earnings Accumulated other comprehensive income/loss) (Note 21) Treasury stock Total equity attributable to Ford Motor Company Equity attributable to noncontrolling interests 24,711 12,575 89,492 599 815 222.792 23,588 11,233 88,887 600 597 220,474 98 100 40 40 1 1 22,006 21,843 21,906 (6,959) (1.253) 22,668 (7,366) (1,417) 35,932 34 Total equity 35,578 28 35,606 258,496 $ Total liabilities and equity 35,966 256,540 S The following table includes assets to be used to settle liabilities of the consolidated variable interest entities ("VIES"). These assets and liabilities are included in the consolidated balance sheet above. See Note 22 for additional information on our VIEs. December 31, December 31, 2017 2018 ASSETS Cash and cash equivalents $ 3,479 $ 2,728 Ford Credit finance receivables, net 56,250 58,662 Net investment in operating leases 11,503 16,332 Other assets 64 27 LIABILITIES Other liabilities and deferred revenue $ 2 $ 24 Debt 46,437 53,269 The accompanying notes are part of the consolidated financial statements. FS-4 FORD MOTOR COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (in millions) For the years ended December 31, 2016 2017 2018 $ 4,600 $ 9,023 3,695 9,280 (972) 609 (306) 400 206 529 Cash flows from operating activities Net income Depreciation and tooling amortization Other amortization Provision for credit and insurance losses Pension and other postretirement employee benefits ("OPEB") expensel(income) Equity investment (earnings Mosses in excess of dividends received Foreign currency adjustments Net (gainMloss on changes in investments in affiliates Stock compensation Pensado Net change in wholesale and other receivables Provision for deferred income taxes Decrease/Increase) in accounts receivable and other assets Decrease/Increase) in inventory Increase/(Decrease) in accounts payable and accrued and other liabilities Other Net cash provided byl(used in) operating activities 672 2,667 (178) 283 (139) 210 (1.449) 1.473 7,757 $ 9,122 (669) 717 (608) 240 (403) (7) 246 (836) (350) (2,297) (970) 6,089 65 18,096 (2,855) (42) 191 (2,408) (197) (2,239) (828) 6,781 17 15,022 (803) 6,595 57 19,850 Cash flows from investing activities Capital spending Acquisitions of finance receivables and operating leases Collections of finance receivables and operating leases Purchases of marketable and other securities Sales and maturities of marketable and other securities Settlements of derivatives Other Net cash provided by/(used in) Investing activities (6,992) (56,007) 38,834 (31,428) (7,785) (62,924) 50,880 (17,140) (7,049) (59,354) 44,641 (27,567) 29,898 100 (29) (19,360) 29,354 20,527 358 825 112 (25,302) (177) (16,261) Cash flows from financing activities Cash dividends Purchases of common stock Net changes in short-term debt Proceeds from issuance of long-term debt Principal payments on long-term debt Other Net cash provided by (used in) financing activities Effect of exchange rate changes on cash, cash equivalents, and restricted cash Net increase/(decrease) in cash, cash equivalents, and restricted cash (3,376) (145) 3,864 45,961 (38,797) (107) 7,400 (265) 1,683 $ (2,584) (131) 1,229 45,801 (40,770) (151) 3,394 (2,905) (164) (2,819) 50,130 (44,172) (192) (122) (370) (1,731) 489 $ 2,619 $ $ Cash, cash equivalents, and restricted cash at January 1 (Note 9) Net increase/(decrease) in cash, cash equivalents, and restricted cash (, Cash, cash equivalents, and restricted cash at December 31 (Note 9) 14,336 $ 1,683 16,019 $ 16,019 $ 2,619 18,638 $ 18,638 (1,731) 16,907 $ The accompanying notes are part of the consolidated financial statements. FS-5 FORD MOTOR COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENT OF EQUITY (in millions) Equity Attributable to Ford Motor Company Cap.in Excess of Accumulated Equity Par Retained Other Attributable Value Earnings Comprehensive to Non- Capital of (Accumulated Income (Loss) controlling Total Stock Stock Deficit) (Note 21) Stock Total Interests Equity $ 41 $ 21,421 $ 14,980 $ (6,257) S (977) $ 29,208 $ 15 $29.223 4,589 4,589 11 4,600 Treasury (756) (756) (1) (757) Balance at December 31, 2015 Net income Other comprehensive income (loss), net of tax Common stock issued (including share- based compensation impacts) Treasury stock/other Cash dividends declared (a) Balance at December 31, 2016 209 209 (145) (145) (3.376) (7.013) $ (1.122) $29.729 S 209 (3) (148) (5) (3,381) 17 $ 29,746 (3,376) 16,193 $ $ 41 $21,630 $ $ $ 41 $21,630 $ 6 6 16,193 566 7.731 (7,013) $ (1,122) $ 29,729 $ 572 7,731 17 $ 29,746 572 26 7,757 54 54 (2) 52 Balance at December 31, 2016 Adoption of accounting standards Net income Other comprehensive income (loss), net of tax Common stock issued (including share- based compensation impacts) Treasury stock/other Cash dividends declared (a) Balance at December 31, 2017 207 207 (131) (131) (2.584) (6,959) $ (1.253) $ 35,578 $ 207 (2) (133) (11) (2,595) 28 $ 35,606 (2,584) 21,906 $ $ 41 $21,843 $ $ 41 $21,843 $ $ 21,906 3,677 (6,959) $ (1,253) $ 35,578 $ 3,677 28 $35,606 18 3,695 (407) (407) (407) Balance at December 31, 2017 Net income Other comprehensive income/(loss), net of tax Common stock issued (including share- based compensation impacts) Treasury stock/other Dividend and dividend equivalents declared (a) Balance at December 31, 2018 163 163 (164) (164) (2,915) (7,366) S (1,417) $ 35,9325 163 (164) (12) (2,927) 34 $ 35,966 $ 41 $ 22,006 $ $ (2,915) 22,668 $ (a) We declared dividends per share of Common and Class B Stock of $0.85, 90.65, and $0.73 per share in 2016, 2017, and 2018, respectively. The accompanying notes are part of the consolidated financial statements. FS-6
