Any successful business owner or investor is constantly evaluating the performance of the
companies they are involved with, comparing historical figures with its industry
competitors, and even with successful businesses from other industries. To complete a
thorough examination of any companys effectiveness, however, more needs to be looked at
than the easily attainable numbers like sales, profits, and total assets. Luckily, there are
many well-tested ratios out there that make the task a bit less daunting. Financial ratio
analysis helps identify and quantify a companys strengths and weaknesses, evaluate its
financial position, and shows potential risks. As with any other form of analysis, financial
ratios arent definitive and their results shouldnt be viewed as the only possibilities.
However, when used in conjuncture with various other business evaluation processes,
financial ratios are invaluable. By examining Ford Motor Companys financial ratios, along
with a few other company factors, this report will give a clear picture of how the company
is doing now and should do in the future.
This is a trend table of Fords financial ratio for the previous five years:
Ford Motor Co. (DE)
Ratios 12/31/2004 12/31/2003 12/31/2002 12/31/2001 12/31/2000
Return on Equity (%) 22.65 7.9 5.08 -70.04 29.07
Return on Assets (%) 1.19 0.29 0.1 -1.97 1.9
Return on Investment 8.13 5.62 5.87 2.23 11.24
Gross Margin 0.021 0.021 0.023 0.02 0.026
Operating Margin (%) 6.22 4.94 5.56 2.07 10.42
Net Profit Margin (%) 2.03 0.3 -0.6 -3.36 2.04
Quick Ratio 0.29 0.35 0.35 0.22 0.2
Current Ratio 0.47 0.52 0.51 0.37 0.33
Working Capital/Total Assets -0.22 -0.18 -0.16 -0.23 -0.28
Total Debt to Equity 8.61 13 25.67 18.3 6.05
Long Term Debt to Assets 0.35 0.38 0.41 0.44 0.35
Interest Coverage 1.69 1.18 1.11 0.3 1.76
This is a trend table of industrial average financial ratio for the previous five years in
comparison:
Industry Averages
Ratios 12/31/2004 12/31/2003 12/31/2002 12/31/2001 12/31/2000
Return on Equity (%) 17.22 4.20 -90.92 -0.37 16.89
Return on Assets (%) 3.56 0.71 -2.08 4.18 4.62
Return on Investment 9.42 4.31 5.42 2.16 13.39
Gross Margin .018 .018 .019 .019 .020
Operating Margin (%) 5.42 4.09 -3.02 7.05 8.11
Net Profit Margin (%) 2.89 1.43 -0.67 3.79 3.88
Quick Ratio 0.86 0.91 0.71 0.71 0.80
Current Ratio 1.36 1.46 1.13 1.57 1.26
Working Capital/Total Assets 0.10 0.10 0.01 0.04 .06
Total Debt to Equity 7.26 11.67 19.23 14.82 8.05
Long Term Debt to Assets 0.35 0.49 0.95 0.45 0.21
Interest Coverage 8.85 3.00 0.13 -1.63 6.48
The analysis of these ratios shows how Ford stands as a company for the past five years.
Return on equity (ROE) reveals how much profit a company earned in comparison to the
