Financial Analysis

2- to 3-page Microsoft Word document, double-spaced, using 12-point Times New Roman font, one-inch margins, and APA formatting for citations.  

Prompt: First, use AnnualReports.com to access the following financial reports for each of your selected firms for the previous three fiscal years: the profit and loss statement, the balance sheet statement, and the sources and uses of funds statement. This information can also be retrieved from each corporation’s official website. 

In a 2- to 3-page paper, discuss the cash flow management practices of each company for the last three fiscal years, including cash, accounts receivables, accounts payables, fixed assets, and inventory. The Companies are Ford and General Motors 

 As you retrieve this information, consider both companies’ financial ratios, including activity ratios, debt ratios, and profitability and market ratios. Also, consider what you, as a financial manager, would have done differently or suggested as improvements. 

Specifically, the following critical elements must be included: 

I. Background: Describe both of the firms and their management, including their strategic objectives. Provide sufficient detail to support the rest of your analysis. 

II. Evaluation of the Firms 

         A. Analyze both companies’ cash flow management practices for the last three fiscal years, including cash, accounts receivables, accounts payable, fixed assets, and inventory. Cite specific examples and figures to illustrate. 

         B. Analyze both companies’ working capital cash flow management practices, including cash, accounts receivables, accounts payables, fixed assets, and inventory. Cite specific examples and figures to illustrate.  

Running Head: WORKING CAPITAL MANAGEMENT 1

WORKING CAPITAL MANAGEMENT 6

Working Capital Management

Author’s Name:

Institutional Affiliation

Working Capital Management

General Motors

General Motors is a global automobile company operating across six continents with over 155,000 employees as of 2020. As of 2020, the company produced over 6,800,000 vehicles, revenue of $122 billion (General Motors, 2021). General Motors’ main objective is to conjure a world with” zero crashes, emissions, and congestion.” The company has four main intensive management strategies to increase its profits and operations. These encompass penetration into new markets, developing new markets and developing new products. The company has diversified its operations in new geographical locations such as India and China; there is increasing its market share through market development. Through market penetration, the company has increased market share by diversifying its portfolio connected to the General Motors brand. Product development has led to the development of self-driving and fully electric motors to increase sales. To achieve zero emissions, the company has created a sustainability management strategy of reducing greenhouse gases (GHG) by at least 31% (General Motors, 2021).

Ford Motor Company

Ford Motor Company, based in Michigan Detroit is one of the top automobile companies worldwide. Its primary operations include manufacturing of cars SUV’s and luxury vehicles and financing, marketing, and distribution (Ford, 2021). The company operates within the six continents. Ford Motor’s company mission is to create and distribute the most trusted vehicles, reducing congestion, reducing accidents, and reducing emissions. To achieve this objective, the company has invested heavily in technology that transforms futuristic manufacturing. Ford has also partnered with retail such as domino’s, Walmart, Lyft to pioneer in the self-driving vehicle project.

Additionally, Ford has announced its plan for manufacturing all-electric vehicles through a joint venture with Zotye, an automobile manufacturer based in China (Ford, 2021). This venture will improve electric vehicles’ lineup by at least 40 and develops 16 new models of full battery vehicles by 2022. This investment plan will oversee that Ford increases its investments planning in electrification by at least US$11 billion. To achieve this investment, the planning company plans to make its products more competitive by reducing the car lineup for passenger models and continuous production for over luxury cars such as Mustang sports cars in the US.

Working Capital management practices-Ford Motor

Working capital is a measurement of the difference between assets and liabilities. As of 2020, Ford Motor’s working capital was 34. 84 B (Annual Reports, 2020). The working capital increased in both 2018-2018 and 2019-2020. Nevertheless, there was a decrease in financial receivables in 2019 as compared to 2019, as well as an increase in inventories. Hence, the increase in working capital was, as a result, non-current assets. Both the inventory and receivables increased in 2017-2018, which contributed to an increase in working capital (Annual Reports, 2018). To increase the working capital further, the company should focus on handling receivables by faster collections (Sagner, 2014).

Figure 1: Ford consolidated Balance Sheet, (2019). Sourced from: Annual Reports (2019)

General motors

As of 2020, general motors had working capital of $6.54 billion, with a working capital ratio of 1.75. The change in working capital in 2019, was lower due to increase in inventories and payable, especially in the months such as December, where production is halted (Annual Reports, 2019). Additionally, in 2019, the working capital was $617 million, due to the low payables. Moreover, there is a net decrease in non-current assets, in 2019, as compared to 2018, which might have contributed to the reduced in working capital.

Cashflow management practices

General motors

The company net cash generated from operating activities decreased between 2018 and 2019, but there was growth between 2019 and 2020, surpassing the 2018 level. The net cash input in investing, increased between 2018 and 2019, but there was a significant decline from 2019 to 2020 (Annual Reports, 2020). Receivables in 2019, the net cash used in investing decreased due to an increase in receivables of about $6.2 billion. Additionally, there was a $3.6 billion decline in finance receivables. Additionally, patches of leased vehicles declined by $0.3 billion.

There was a significant difference in the net cash generated from financing activities in 2018 to 2019. However, the figure rose between 2019-2020. The increased cash used for financing was mainly due to an increase in repayments of debts of $9.2 billion and declining borrowings of $4.8 million. In 2019, the net cash used in investing decreased due to an increase in receivables of about $6.2 billion. Additionally, there was a $3.6 billion decline in finance receivables (Annual Reports, 2019) Additionally, patches of leased vehicles declined by $0.3 billion. Additionally, the current assets decreased in 2019 as compared to 2018. There was an increase in inventory between 2018 and 2019, meaning more money was used in the patches of raw materials during that year (Annual Reports, 2019).

General Motors Consolidated Cash Flow Statement (2017-2020). Sourced from: Annual Reports (2019)

Ford Motor Company

The net cash generated from operating activities in Ford Motor increased in 2020 from $2,9 billion in 2019 to $4.5 billion. The figure also increased between 2018 to 2019. However, this figure reduced between 2017- 2018. The net cash that was used to investing also increased from 2018 to 2019 (Annual Reports, 2019) The net cash also increased between 2018 and 2019.

Additionally, the net cash that generated from financing activities declined, both between 2017-2018, and reduced between 2018 and 2019. In 2019 there was a decrease in inventory which increase the net cash from operating activities. There was an increase in finance receivables in 2019-2020, but a decrease between 2018-2019 (Annual Reports, 2020). The increase in receivables in 2020 contributed to an increase in cash flow from operating activities. Non-current assets increased between 2018-2019 due to an increase in receivables (Sagner, 2014).

Ford Consolidated Cash Flow Statement (2020) Sourced from: Annual Reports (2019)

References

Annual Reports (2020) Ford Motor Company. Retrieved 10 March 2021, from https://www.annualreports.com/Company/ford-motor-company

Annual Reports (2019) Ford Motor Company. Retrieved 10 March 2021, from https://www.annualreports.com/Company/ford-motor-company

Annual Reports (2018) Ford Motor Company. Retrieved 10 March 2021, from https://www.annualreports.com/Company/ford-motor-company

Ford (2021). About Us. Retrieved 10 March 2021 from

https://corporate.ford.com/about/purpose.html

General Motors (2021). About Us. Retrieved 10 March 2021 from

https://corporate.ford.com/about/purpose.html

Sagner, J. (2014). Working capital management: applications and case studies. John Wiley & Sons.

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