Data Case Ford and Microsoft
Question 1-3
Please refer to the attachment for the financial data and calculations.
Question 4a
FORD vs. industry comparison
Microsoft vs. Industry comparison
Internal liquidity and financial strength
Twice higher Ford’s Quick & Current ratios (2.19 & 2.32) in comparison with industry indices (0.85 & 1.06) represent higher ability of the company to use its cash and easily convert current assets in to cash to immediately extinguish its liabilities.
Ford has significantly lower Long term debt/Equity & Total debt/Equity ratios (24.9 & 29.9) in comparison with average company in this industry (46.7 & 106.7). The liquid asset side gives comfort on one hand with regards to repayment capacity. On the other hand due to the weak financial performance, the company may face difficulties in raising additional debt from the market, if necessary.
The company's quick and current ratio’s (1.41 & 1.45) are lower than the industry's average (2.9 & 2.97), but nevertheless are at a comfortable level (above 1%). The balance sheet is rather liquid and the decrease in these ratio’s can be explained by the fact that the company has introduced a share buy-back programme since 2006, whereby the shares are bought from the existing liquid assets.
Further the company has not had substantial long term debt, which could affect negatively its profitability due to higher funding costs in the current market.
Operating performance
Although gross margin exceeds industry’s average (25% vs. 16%), operating and net profit margins of 4.7% & -1.6% respectively are below the industry indices (5.9% & 3.8%) due to high Ford’s interest ...