Ford Motor Company and JPMorgan Chase & Co
Evaluate the vulnerability of each company to external forces such as a recession, higher interest rates, and global competition.
Based on the financial trends of each company, predict how these trends will impact financial performance in future periods. Explain your rationale for this prediction.
Select five (5) financial ratios most appropriate to determining which of these two (2) companies would be a better investment. Perform a financial analysis and draw a conclusion to make this determination.
State and support your opinion of each company's common stock as an investment opportunity.
Assume that you can only pick one (1) of these companies. Provide a solid defence for the company that you would choose.
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Financial Statement Analysis of Ford Motors and JPMorgan Chase
Financial Trends of Ford Motors
Table 1 shows the trend income statement of Ford Motors for a 4 year trend (2009 - 2012). The table was generated by taken year 2009 as the base and then the performance of the year 2010, 2011 and 2012 is shown as percentage value of 2009's data.
Table 1 Trend Analysis of Ford Motors Income Statement
Ford 2012 (%) 2011(%) 2010 (%) 2009 (%)
Total Revenue 115.45 117.18 110.90 100
Sales, General and Admin. 117.41 116.60 124.75 100
Operating Income 187.34 231.09 252.08 100
Net Income 208.50 743.95 241.48 100
As can be seen from Table 1, the total revenue of Ford Motors has increased from 100% of 2009 to about 115.45% in 2012. The increase is relatively flat over year 2010, 2011 and 2012, with the highest percent growth occurring in year 2011. Ford has also seen a positive growth in both operating income (252.08%, 231.09% and 187.34% respectively in 2010, 2011 and 2012) and net income (208.50%, 743.95% and 241.48% respectively in 2010, 2011 and 2012). These performances are far better than 100% in 2009 Irrespective these growths, Ford has not been able to cut its selling, general and admin. expenses in year 2010 to 2012.
The common size ratio balance sheet of Ford Motors, analyzed in time series, is shown in Table 2. As can be seen from the table, Ford Motors has not been able to generate more cash than before. However, Ford's net receivables increased greatly in 2011 (44.04% of total assets) and 2012 (43.21% of total assets). This suggests that Ford Motors hold enough cash to pay for current liabilities. The company's long term investment has decreased from 40.75% of total assets in 2009 to 1.7% of total assets in 2012. Ford's accounts payable has remained relatively flat from 2010 to 2012. Long term debt decreased from 68.55% of total liabilities and equity in 2009 to 55.22% of total liabilities and equity in 2012. The total equity is showing signs of recovery and finally it is 8.38% of total liabilities and equity in 2012 from - 4.07% in 2008 suggesting the liability caused by the previous year's losses has been marginalized finally in 2011.
Future Impact of the Trends on the Performance of Ford Motors
Based on the trend analysis of Ford's income statement and time series of common size ratio of Ford's balance sheet, I expect a positive impact on the financial performance of the company in future periods.
Table 2 Common Size Ratio Balance Sheet of Ford Motors in Time Series
Ford 2012 (%) 2011 (%) 2010 (%) 2009 (%)
Cash & Cash ...
The expert evaluates the vulnerability of each company to external forces such as a recession, higher interest rates and global competition.