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Accouting of Ford Motor Company Essay Example

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Accouting of Ford Motor Company

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Accouting of Ford Motor Company. The situation has been deteriorated from 2007 where the current ratio was 1.The acid test ratio of Ford has declined from 2007 figure. However, this is the case for all other market players as well. The acid test ratio of Ford is close to industry average. Thus, the company, although is not able to meet its short term obligation through its liquid assets yet, is doing the same as all other competitors in the market.The stock turnover period for Ford shows that the company is doing well in replacing its inventories every 24 days. Although the performance has degraded over the last year but it is still better than industry average and against all competitors.Debtors collection period specifies the average number of days the company has to wait before it gets payment by debtors.

The period should ideally be as small as possible to avoid probability of bad debts.Creditors collection period specifies the average number of days in which the company pays its debts. The period should ideally match with debtors collection period so that liquidity problems do not arise.As shown from above, Ford’s creditors collection period is closer to industry average. It is neither too late nor too quick, although the collection period has been shortened as compared to 2007 figures. This shows that Ford paid its debts relatively quickly as compared to 2007.As shown from above, Ford’s equity is wiped out. This is extremely dangerous situation for company’s financial well being. The company is highly geared as shown above. Considering that the liquidity position is alarming, it is highly likely that the company will not be able to pay its obligations and in fact, may become insolvent in near future.Automobile industry has been badly affected due to current global economic crisis. This is evident from above ratio analysis as well. However, Ford’s performance has deteriorated to the extent that there are doubts whether the company will be able to continue its operations. There is a need to take prompt and strong measures to rescue Ford. The company management is confident that they can improve the situation using ONE Ford plan (Ford, 2009).As per the annual report, the inventories ‘are stated at the lower of cost and the market. United States inventories are measured on Last-In-First-Out (LIFO) method. Cost of other inventories. Accouting of Ford Motor Company.

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Works Cited

Ford. 2009. Ford Motor Company – 2008 Annual Report. Ford

BMW. 2009. BMW – Annual Report 2008. BMW Group.

General Motor Corporation. 2009. Form 10-K – General Motor Corporation. March 5, 2009.

Toyota. 2008. Annual Report 2008. Toyota Motor Corporation.

Honda. 2008. Annual Report 2008. Honda Motor Company.

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