Analysing the GM motors &subsidiaries by ratios
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· Your instructor will divide the class into two discussion clusters.
· Respond to one of the following in your assigned cluster thread:
o As a lender, state which financial ratios you would use and how you would use them to evaluate a company. Identify the limitations that a banker would have to take into account when evaluating the financial performance of a company.
o As an investor, state which financial ratios you would use and how you would use them to evaluate a company. Identify the limitations that an investor would have to take into account when evaluating the financial performance of a company.
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Solution Summary
The answer contains the analysis of financial statement of GM motors and subsidiaries by computation of current ratioacid test ratio, debt ratio, long term debt to total capitalisation, return on total assets, return on common equity,net working capital, gross profit ratio, net profit ratio and cash ratio
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GENERAL MOTORS CORPORATION AND SUBSIDIARIES
As a lender, state which financial ratios you would use and how you would use them to evaluate a company. Identify the limitations that a banker would have to take into account when evaluating the financial performance of a company.
Banker as a lender has to consider the liquidity position of the company.He has to compute the following ratios and has to make the judgement.
current ratio Current assets current assets 394718 0.963895258 As a lender to the company, the banker has to consider the current ratio
current liabiliites current liabiliites 409503 of the company.The standard ratio is 2:1.here, in the present case
GM motors has the current ratio of less than 1
acid test ratio Liquid assets current asset-inventory 382471 0.933988274 Further, banker has to consider the liquidity ratio.
current liabilities current liabilities 409503 here, standard liquidity ratio is 1:1.But GM's liquidity
position is less than 1.Therefore, banker needs to be careful in the
debt ratio Total debt discharge of the ...
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