Financial Accounting

Using Financial Accounting

Information
Reports by Erwin Rhodes
ACC-549-MBOL1
Presented to: Dr. Tim Wiseman
Saint Leo University
Financial Accounting

Company Analysis
Ford Motors
Ford Motor Company was established in 1903 by automobile and manufacturing
innovator Henry Ford in Dearborn, Michigan. Being first to execute a moving sequential
construction system for car engineering, Ford could manufacture their items in a large quantity
than their rivals. In 1908 the Model T was acquainted and went ahead with offer more than 15
million vehicles, building up Ford as the significant player in the early car industry with half
price of the overall industry by the 1920s. The organization opened up to the world in 1956 and
from that point forward has become a huge nearness in the worldwide car market. The Ford
Motor Company item portfolio incorporates autos, trucks, and SUVs from the accompanying
brands: Lincoln, Ford, Mazda, Aston-Martin, Volvo, Jaguar, and Land Rover. Notwithstanding
its center car business, Ford has an account division, a sections and administration division, and
they additionally at present own Hertz Corporation, the biggest auto rental business on the
planet. In respect to other enormous car makers in 2003, Ford was number two locally and
internationally (behind GM), as far as a number of vehicles sold.
Portage's viewpoint is testing. In the third quarter of 2005, Ford posted a pre-charge
benefit loss of more than 51.3 billion in their automotive operations, with a $1.1 billion
misfortune in North America. The misfortunes of 2005 which keep on 2008 are because of
various reasons:
 increasing expenses of wares; specifically steel and vitality, have expanded assembling
costs significantly
 continuous and rising medicinal services costs, especially "legacy" advantages paid to
retirees and their families
 ducking out real parts supplier Visteon from liquidation
 Vehicle deals slacking by 81,000 units, regardless of remarkable "Worker Pricing" deals
offered amid summer 2005.
Deals are particularly slacking in the productive SUV and truck markets where interest is
dropping because of heightening fuel costs. This misfortune is frustrating which proceeded till
2008. The negative net pay seen in 2002 was because of the pricy wellbeing review of blemished
"Firestone" tires utilized on various Ford and Mercury trucks and SUVs. The instability of Ford's
stock, in tams of its Beta rating, is in the area of 1.6 which shows that putting resources into their
stock has genuinely high hazard. Components of far-reaching rebuilding have been reported and
usage started. Part of the rebuilding includes lessening workforce, generally from cushy
positions. In all the more long term rebuilding, the organization needs to shed over-limit in
assembling. Shedding over-limit includes shutting down and uniting producing offices. These
terminations are forestalled by understandings made with the United Auto Workers (UAW)
through 2007. A key component in Ford's prosperity is its association with the UAW and
capacity to get concessions from the union. Concessions over social insurance costs, which cost
upwards of 52000 for each new vehicle sold, and plant combinations are required for Ford to be
leaner, more proficient, and more financially savvy in its business. Notwithstanding authoritative
rebuilding being indispensable to the future accomplishment of Ford, the organization
understands the need to restore their piece of the overall industry, especially in the U.S. local
business sector. They have started endeavors to do this with the acquaintance of numerous new
Financial Accounting

vehicles with rouse and stimulate their product offering. The passage has declared arrangements
to expand its half-breed vehicle generation tenfold to 250,000 every year by 2010. This could be
seen as an endeavor to position itself as the household pioneer in the quickly developing cross
breed market in the U.S. The authoritative rebuilding falls off well and new item offerings are a
hit with shoppers Ford stands a decent opportunity to see an additional 100 years as an industry
pioneer.
Current budgetary results report an account of an organization that is developing and
enhancing its financial wellbeing. For the entire year, our pre-charge working benefit of $8.6
billion (barring exceptional things) was among the best in our history and Automotive working-
related income hit a record, subsequent to no less than 2001. These full-year results reflect an
Automotive sector operating profit that was the highest in more than a decade, with record
profits in North America and Asia Pacific Africa since at least 2000, about breakeven results in
South America, and a loss in Europe – but a lower loss than the prior year. Ford Credit was
solidly profitable. Ford is the second-largest U.S. based automaker (preceded by General Motors)
and the fifth-largest in the world based on 2010 vehicle sales. At the end of 2010, Ford was the
fifth largest automaker in Europe. Ford is the eighth-ranked overall American-based company in
the 2010 Fortune 500 list, based on global revenues in 2009 of $118.3 billion. In 2008, Ford
produced 5.532 million automobiles and employed about 213,000 employees at around 90 plants
and facilities worldwide. Today, Ford is at 20th number in sales, 54th in profits, 122th in assets,
353 in market share and 163th in Global 2000.
Recent Developments
Worldwide monetary development project to be in the 3% range drove by the United
States and China. Worldwide industry deals are required to develop to between 88 million and 92
million units after assessed offers of 88 million units in 2014. U.S. monetary development is
relied upon to be in the 3% territory. Shopper feeling is enhancing, alongside lower fuel costs,
which will help customer spending, giving backing to development. South America faces
proceeded with business sector instability and arrangement vulnerability. A feeble recuperation is
normal in Brazil while Argentina and Venezuela will stay in retreat. In Europe, development in
the Euro Area impeded after the principal quarter of 2014 yet is anticipated at simply above 1%
in 2015. Development in the United Kingdom is anticipated to stay in the 2.5% to 3% territory.
In Russia, the mix of lower oil costs, geopolitical occasions, and rubble deterioration will prompt
a sharp decrease in GDP and higher swelling. In Asia Pacific, China's monetary development is
anticipated to be in the 7% to 7.5% territory; purchaser wage development will bolster an
expansion in vehicle deals however at a more direct pace this year. With some promising
indications of change, development in India is anticipated to transcend 6% in 2015, upheld by an
ideal strategy atmosphere. Generally, in spite of difficulties in some key markets, we anticipate
that the worldwide economy will develop in 2015 and be strong of our projection for higher
worldwide industry volume this year.
Common Size Analysis
Margins % of Sales 2011-12 2012-12 2013-12 2014-12 2015-12
Revenue 100.00 100.00 100.00 100.00 100.00
COGS 83.18 86.18 87.19 87.60 84.58
Gross Margin 16.82 13.82 12.81 12.40 15.42
SG&A 8.50 9.07 8.97 9.80 10.03
Financial Accounting

R&D — — — — —
Other -0.02 0.06 0.14 — —
Operating Margin 8.35 4.69 3.70 2.60 5.39
Net Int Inc. & Other -1.98 1.06 1.06 0.41 1.46
EBT Margin 6.37 5.75 4.77 3.01 6.85

Interpretation
Common size analysis shows that costs of sales have been increased slightly and gross
margin have been decreased initially which is a somewhat bad signal but somehow show healthy
comeback in 2015. Over all expenses show mix effects and net income produced by the company
at the end of the 2015 shows a healthy increase expressing sound condition of the corporation.
Horizontal Analysis
Balance Sheet Items (in %) 2011-12 2012-12 2013-12 2014-12 2015-12
Cash & Short-Term Investments 27.25 27.50 27.99 26.07 27.68
Accounts Receivable 44.04 43.21 43.22 44.51 45.34
Inventory 3.31 3.86 3.82 3.77 3.70
Other Current Assets — — — — —
Total Current Assets 74.60 74.57 75.02 74.36 76.72
Net PP&E 12.54 13.09 13.67 14.45 13.41
Intangibles 0.06 0.05 — — —
Other Long-Term Assets 12.80 12.30 11.31 11.20 9.87
Total Assets 100.00 100.00 100.00 100.00 100.00
Accounts Payable — — — — —
Short-Term Debt 22.60 20.34 18.84 18.79 19.12
Taxes Payable — — — — —
Accrued Liabilities 1.48 1.35 1.33 1.43 1.06
Other Short-Term Liabilities 16.87 16.84 16.53 16.78 15.95
Total Current Liabilities 40.95 38.53 36.69 36.99 36.13
Long-Term Debt 33.18 34.79 37.93 38.36 39.95
Other Long-Term Liabilities 17.44 18.31 12.32 12.75 11.19
Total Liabilities 91.57 91.63 86.94 88.10 87.27
Total Stockholders' Equity 8.43 8.37 13.06 11.90 12.73
Total Liabilities & Equity 100.00 100.00 100.00 100.00 100.00

Interpretation
The asset side of the corporation shows that current assets have been increased slighty as
compared to previous years expressing that company has sound current financial position
containing moderate level of cash holdings to meet its current obligations. Other long-term assets
have been decreased showing that the company has a declining volume of fixed assets to produce
more. There should a huge increase in the acquisition of new equipment. As far as other side of
financial statement is concerned, current liabilities have been declined as compared to the
previous years. Payables have been decreased showing a somewhat good side of the company.
While non-current liabilities have been decreased consisting of small other non-current liabilities
portion of the corporation. In brief, liabilities are difficull to cover with the available level of
assets in the time of distress.
Cash Flow Analysis
Cash flow analysis tells the use of cash in operating, investing and financing activities.
Cash generated from operating activities have been decreased as compared to previous year due
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to excessive tax rate. Cash used in financing activities have been increased showing that
company have made heavy capital expenses on tangible and intangible assets. Making
investment in assets is a positive step on the part of the corporation. In financing activities,
repayment of borrowings and dividend payouts cause the cash to outflow more as compared to
previous year. Cash flow ratio analysis will tell the exact situation of the statement which are as
follows.

Cash Flow Ratios 2011-12 2012-12 2013-12 2014-12 2015-12

Operating Cash Flow Growth % YOY -14.75 -7.55 15.47 38.90 11.46

Free Cash Flow Growth % YOY -25.65 -35.22 8.15 83.10 27.40
Cap Ex as a % of Sales 3.15 4.09 4.49 5.18 4.81
Free Cash Flow/Sales % 4.03 2.65 2.62 4.89 6.00
Free Cash Flow/Net Income 0.27 0.63 0.54 2.21 1.22

Interpretation
Operating cash flow ratio measures how finely current liabilities are covered by the cash
produced from a corporation's operations. This ratio is positive these days and showing that
company is not making investments and possessing high cash to meet its obligations. Free cash
flow ratio represents the cash that a corporation is capable to produce after subtracting the money
needed to expand or maintain its asset base. This ratio also shows that company is not in a
process of heavy investments. Investments are good for company but sometimes it take company
to point of low level liquidity. Free cash flow to sales and net income ratios are sound of the
company expressing that company is generating cash out of income and sales in current years.
Financial Ratios
Profitability

Profitability 2011-12 2012-12 2013-12 2014-12 2015-12

Tax Rate % — 26.63 — 26.62 28.10
Net Margin % 14.83 4.22 4.87 2.21 4.93
Asset Turnover (Average) 0.79 0.73 0.75 0.70 0.69
Return on Assets % 11.78 3.07 3.65 1.55 3.40
Financial Leverage (Average) 11.87 11.95 7.66 8.41 7.85
Return on Equity % 281.62 36.58 33.81 12.45 27.59
Return on Invested Capital % 21.37 5.04 5.92 2.47 5.05
Interest Coverage 2.96 11.83 9.45 6.36 14.26

Interpretation
Profitability ratios tells the competence with which corporation turns business activity
into profits. Net margin of the corporation has been decreased showing a negative sign. Asset
Financial Accounting

turnover shows nearly same results as in the previous. Return on assets reveals decrease
expressing that corporation is not utilizing its assets properly. Return on capital and equity shows
that corporation is not utilizing equity well in order to earn huge profits. Interest coverage ratios
have been increased which is not a good sign as company is not paying its debt obligations in
time.
Liquidity

Liquidity/Financial Health 2011-12 2012-12 2013-12 2014-12 2015-12

Current Ratio 1.82 1.94 2.04 2.01 2.12
Quick Ratio 1.74 1.83 1.94 1.90 2.02
Financial Leverage 11.87 11.95 7.66 8.41 7.85
Debt/Equity 3.94 4.16 2.90 3.23 3.14
Interpretation
A liquidity ratio tells the current financial condition of the company. In other words, how
much cash is held by the company to meet its obligations? Current ratio shows good result.
Quick ratio has also good results. Financial leverage ratio measures the sensitivity of a
company's earnings per share. It shows positive results. These ratios explain that the company
liquidity situation is good and can meet its obligations. The debt equity ratio shows the financial
mix that a company is using in running business operations. It shows that company is equally
inclined to equity and debt financing. In other words, company is using its both kinds of funds
rather than utilizing any of one.
Efficiency Ratios

Efficiency 2011-12 2012-12 2013-12 2014-12 2015-12

Days Sales Outstanding 208.93 218.70 210.74 228.17 237.70
Days Inventory 19.03 20.92 21.47 22.52 23.35
Payables Period 50.22 58.42 55.34 57.21 58.15
Cash Conversion Cycle 177.74 181.20 176.87 193.47 202.90
Receivables Turnover 1.75 1.67 1.73 1.60 1.54
Inventory Turnover 19.18 17.45 17.00 16.21 15.63
Fixed Assets Turnover 5.98 5.68 5.59 4.99 4.96
Asset Turnover 0.79 0.73 0.75 0.70 0.69

Interpretation
The efficiency ratios tell how well a corporation uses its assets to produce revenues and
its capability to manage those assets. Day sales have been increased and slight increase in day’s
inventory which is good sign for the company expressing that inventory moves out of the stores
as fast as possible. Payable periods are not sound showing that company have issues in paying its
Financial Accounting

obligations in time. Cash conversion cycle measures the time it takes to convert its investment in
inventory and other resources and the corporation ratio is showing opposite results. The turnover
ratios show slight decrease in the revenues with respect to assets, inventory, and fixed assets.
Price-Earning Ratio
The price earnings ratio, often called the P/E ratio or price to earnings ratio, is a market
prospect ratio that calculates the market value of a stock relative to its earnings by comparing the
market price per share by the earnings per share. In other words, the price earnings ratio shows
what the market is willing to pay for a stock based on its current earnings. Investors often use
this ratio to evaluate what a stock's fair market value should be by predicting future earnings per
share. Companies with high P/E ratios are more likely to be considered "risky" investments than
those with low P/E ratios, since a high P/E ratio signifies high expectations.

Year 2011 2012 2013 2014 2015

P/E 6.4 9.1 10.9 10.2 11.7

Interpretation
An organization with a high P/E proportion ordinarily showed positive future execution
and stockholders will pay more for this current organization's shares and vice versa. Companies
with high P/E ratios are more likely to be considered "risky" investments than those with low P/E
ratios, since a high P/E ratio signifies high expectations so same is the situation of Ford.
Summary
The ratio analysis of the financials shows that company would not be a good choice to
invest. The profitability situations, efficiency ratios and even stock stream is not so impressive to
take a chance to invest. As far future is concerned, Ford needs to focus on its stock streams
profitability condition and also stabilize efficiency ratios to attract the general public. A company
with outstanding even level of profitability and stability would be much better to invest.
Personally, I would not prefer to make investments in Ford as its financials are not so striking.
For any investment, we need to examine stability in profits to meet its obligation in the time of
distress.
Hyundai
Hyundai Motor Co. (HMC) was built up in Korea in 1967. The organization's first model
(Cotina) was discharged, in collaboration with Ford Motor Company, in 1968. In 1998, Hyundai
obtained a 51% stake in Kit however has subsequent to diminished its offer to 37%. In 2004,
Hyundai was South Korea's biggest auto producer and the world's seventh biggest auto creator
offering 2.3 million units. Hyundai as of now offers around twelve autos and minivans, and in
addition trucks, transports, and other business vehicles. Some prominent sections in their item
lineup incorporate the Santa Fe, Sonata, Accent, Elantra, Tucson, and Tiburon, all of these have
received the label "Best Bet" in Jack Gillis' The Car Book 2005. Group A 8 Hyundai's standpoint
is on the rise. Hyundai's guardian organization, Hyundai Motor Group, started putting vigorously
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in the quality, outline, producing, and long haul examination of its vehicles beginning in 1998.
This venture paid off in 2004 when Hyundai tied with Honda for starting brand quality in a
review from J.D. Power and Associates. Hyundai's increment in both quality (named "Best Value
Car Award Winner" - Smart Money magazine 2005) and wellbeing (got "Car Excellence in
Safety Award"- Popular Mechanics 2005) alongside its low costs will permit it to keep on
grabbing new piece of the overall industry. Mirroring this pattern of low costs and expanded
piece of the overall industry, in 2004 Hyundai reported a sensational increment in yearly incomes
to 50.7 billion dollars and just a little pick up in net wage to 1.78 billion dollars (sec Figure 8 in
Appendix A). Hyundai's development is energized by expanding global deals. From January-
September 2005, deals in Russia expanded 100% and deals in the U.S. expanded 10% year-on-
year. To take care of this new demand. Hyundai has been putting resources into assembling
plants in North America. India. China. Turkey and innovative work focuses in North America,
Japan and Europe. In June 2004. Hyundai opened its first plant in the U.S. In 2006. Hyundai
arrangements to begin development on another generation plant in Europe. Balancing these
positive universal deals patterns, Hyundai has as of late keep running into inconvenience in its
household (Korean) plants. In August 2005, the creation of 25.683 vehicles was deferred because
of a strike by the organization's unionized specialists. Later, Kia's specialists joined the strike
making Kia delay the generation of 21.273 vehicles. The financial impacts of these strikes have
affected a bit as Hyundai had beat these strikes.

Today, Hyundai is at 75th number in deals, 84th in benefits, 186th in resources, 353 in
piece of the overall industry and 108th in Global 2000. Hyundai vehicles run the range from
spending autos to extravagance cars to business trucks. Its autos are sold in 180 nations through
somewhere in the range of 6,000 dealerships. Hyundai produces about portion of its deals in
South Korea, however its vehicles are additionally famous in developing markets, for example,
China and India. The organization works twelve assembling plants in China, the Czech Republic,
India, Russia, South Korea, Turkey and the US. It sold 3.6 million traveler autos in 2010, yet just
500,000 in the US, where it works together as Hyundai Motor America. Hyundai additionally
claims a 34% stake in Kia Motors.

Recent Developments

In spite of unpredictable economic situations, Hyundai Motor made an extraordinary stride

towards the future in 2014. Deals have risen once more accomplishing the most noteworthy ever
yearly offers of 4.96 million units. Additionally, Hyundai Motor has strengthened its business
sector existence, like quality, item competitiveness, and brand esteem. Hyundai Motor positioned
first in JD Power's Initial Quality Study (IQS) in the US and second in the Vehicle Dependability
Study (VDS) in China. Our leader car, Genesis, and also the new Sonata and new i10 likewise
got awesome audits, exhibiting Hyundai Motor's solid item aggressiveness. Avante (Elantra)
turned into the primary Hyundai Motor's Model to achieve the 10 million deals imprint, and
deals volumes of nine models surpassed 100,000 units in nations including South Korea, US, and
China in 2014, exhibiting the ubiquity of the Hyundai Motor brand around the world. Hyundai
Financial Accounting

confirmed its intensity in future innovation was perceived the Tucson (ix35) weel-known Fuel
Cell power-train was documented as one of Ward's '10 Best Engines'. Hyundai Motor's image
esteem has expanded essentially once more climbing to 40th from 43rd in 2013 as per the
worldwide brand counseling firm, Interbrand. Blue Drive is the name of Hyundai Motor's low
carbon green innovation technique intended to lessen CO2 emanations. The methodology
concentrates on enhancing fuel effectiveness and driving the extension of the green vehicle
market

Common Size Analysis

Margins % of Sales 2011-12 2012-12 2013-12 2014-12 2015-12

Revenue 100.00 100.00 100.00 100.00 100.00
COGS 75.71 76.92 77.72 78.57 79.59
Gross Margin 24.29 23.08 22.28 21.43 20.41
SG&A 7.56 3.98 3.76 3.74 3.47
R&D 0.81 0.81 0.83 0.89 0.94
Other 5.50 8.30 8.16 8.35 8.60
Operating Margin 10.38 9.99 9.52 8.46 7.40
Net Int Inc & Other 3.05 3.75 3.87 2.69 1.99
EBT Margin 13.43 13.74 13.40 11.15 9.39

Interpretation

Common size analysis shows that costs of sales have been increased and gross margin
have been decreased which is a somewhat bad signal. Increase in research and development
charges shows that the company has enhanced the process of innovation in developing new and
distinguish products. Over all expenses have been decreases and net income produced by the
company at the end of the 2015 shows a slight decline.
Horizontal Analysis

Balance Sheet Items (in %) 2011-12 2012-12 2013-12 2014-12 2015-12

Cash & Short-Term Investments 14.38 15.90 16.68 17.67 14.25
Accounts Receivable 3.51 3.03 2.65 2.54 2.52
Inventory 5.70 5.57 5.30 5.04 6.06
Other Current Assets 21.10 20.63 19.48 18.92 17.94
Total Current Assets 44.69 45.13 44.11 44.17 40.78
Net PP&E 17.60 17.06 16.09 15.31 17.45
Intangibles 2.43 2.37 2.35 2.60 2.56
Other Long-Term Assets 35.28 35.44 37.46 37.93 39.21
Total Assets 100.00 100.00 100.00 100.00 100.00
Accounts Payable 6.09 5.63 5.04 4.78 4.11
Short-Term Debt 14.80 12.09 10.48 11.22 12.77
Taxes Payable 0.85 0.45 0.45 0.45 0.40
Financial Accounting

Accrued Liabilities — — — — —
Other Short-Term Liabilities 8.56 8.84 7.95 7.44 7.52
Total Current Liabilities 30.29 27.02 23.92 23.90 24.79
Long-Term Debt 24.79 25.11 25.47 25.63 25.51
Other Long-Term Liabilities 11.02 11.64 11.68 11.31 11.26
Total Liabilities 66.10 63.77 61.08 60.84 61.56
Total Stockholders' Equity 33.90 36.23 38.92 39.16 38.44
Total Liabilities & Equity 100.00 100.00 100.00 100.00 100.00

Interpretation

The asset side of the corporation shows that current assets have been decreased as
compared to previous years expressing that company has declining current financial position
containing moderate level of cash holdings to meet its current obligations. Other long-term assets
have been increased showing that the company has a volume of fixed assets to produce more.
There is a huge increase in the acquisition of new equipment. As far as other side of financial
statement is concerned, current liabilities have been declined as compared to the previous years.
Payables have been decreased showing a somewhat good side of the company. While non-
current liabilities have been decreased consisting of moderate other non-current liabilities portion
of the corporation. In brief, liabilities are difficult to cover with the available level of assets in the
time of distress.
Cash Flow Analysis

Cash Flow Ratios 2011-12 2012- 2013- 2014- 2015-

12 12 12 12
Operating Cash Flow Growth % YOY -74.65 -17.55 79.38 -77.37 75.50

Free Cash Flow Growth % YOY -88.86 — — — —

Cap Ex as a % of Sales 4.29 4.71 4.50 4.77 5.29

Free Cash Flow/Sales % 1.10 -0.88 1.82 -3.38 -2.92

Free Cash Flow/Net Income 0.13 -0.09 0.18 -0.35 -0.35

Interpretation
Operating cash flow ratio measures how finely current liabilities are covered by the cash
produced from a corporation's operations. This ratio is negative in the past showing that
company is making investments and possessing low cash to meet its obligations and in 2015 it is
positive and company has stopped investments. Free cash flow ratio represents the cash that a
corporation is capable to produce after subtracting the money needed to expand or maintain its
asset base. This ratio shows nothing meaning that company has no extra cash. Free cash flow to
Financial Accounting

sales and net income ratios are weak of the company expressing that company is not fully
generating huge cash out of income and sales.
Financial Ratios
Profitablity

Profitability 2011-12 201212 2013-12 2014-12 2015-12

Tax Rate % 19.89 22.42 21.96 23.11 23.13
Net Margin % 8.31 9.84 10.14 9.78 8.23
Asset Turnover (Average) 0.67 0.76 0.73 0.68 0.64
Return on Assets % 5.57 7.50 7.41 6.70 5.24
Financial Leverage (Average) 3.15 2.95 2.76 2.57 2.55
Return on Equity % 21.26 22.78 21.10 17.80 13.41
Return on Invested Capital % 8.28 10.30 9.93 7.91 6.68
Interest Coverage 14.17 21.42 28.20 35.28 34.14

Interpretation
Profitability ratios tells the competence with which corporation turns business activity
into profits. Net margin of the corporation has been decreased showing a negative sign. Asset
turnover shows mix results. Return on assets reveals a decearse in 2015 expressing that
corporation is not utilizing its assets properly. Return on capital and equity shows that
corporation is not utilizing equity well in order to earn huge profits. Interest coverage ratios have
been decreased a bit which is somewhat a good sign as company is paying its debt obligations in
time.
Liquidity

Liquidity/Financial Health 2011-12 2012-12 2013-12 2014-12 2015-12

Current Ratio 1.38 1.48 1.67 1.84 1.85
Quick Ratio 1.18 1.26 1.40 1.57 1.59
Financial Leverage 3.15 2.95 2.76 2.57 2.55
Debt/Equity 0.76 0.73 0.69 0.65 0.65

Interpretation
A liquidity ratio tells the current financial condition of the company. In other words, how
much cash is held by the company to meet its obligations? Current ratio shows good result.
Quick ratio has also good results. Financial leverage ratio measures the sensitivity of a
company's earnings per share. It shows positive results. These ratios explain that the company
liquidity situation is good and can meet its obligations. The debt equity ratio shows the financial
mix that a company is using in running business operations. It shows that company is equally
Financial Accounting

inclined to equity and debt financing. In other words, company is using its both kinds of funds
rather than utilizing any of one but more is equity.
Efficiency Ratios

Efficiency 2011-12 2012-12 2013-12 2014-12 2015-12

Days Sales Outstanding 26.98 16.51 16.27 15.09 14.87
Days Inventory 62.34 36.34 36.55 37.24 37.71
Payables Period 53.04 40.34 37.94 36.48 35.82
Cash Conversion Cycle 36.28 12.51 14.88 15.85 16.76
Receivables Turnover 13.53 22.11 22.43 24.19 24.55
Inventory Turnover 5.86 10.04 9.99 9.80 9.68
Fixed Assets Turnover 2.78 4.12 4.22 4.14 4.06
Asset Turnover 0.67 0.76 0.73 0.68 0.64

Interpretation
The efficiency ratios tell how well a corporation uses its assets to produce revenues and
its capability to manage those assets. Day sales have been decreased and slight increase in day’s
inventory which is good sign for the company expressing that inventory moves out of the stores
as fast as possible. Payable periods are also sound showing that company is paying its
obligations in time. Cash conversion cycle measures the time it takes to convert its investment in
inventory and other resources and the corporation ratio is showing opposite results. The turnover
ratios show somewhat positive increase in the revenues with respect to assets, inventory, and
fixed assets.
Price-Earning Ratio

Year 2011 2012 2013 2014 2015

P/E 10.7 7.2 7.6 5.7 6.3

Interpretation
A corporation with a high ratio of P/E generally showed progressive future performance
and stockholders are keen to pay more for the corporation's shares and vice versa.Companies
with high P/E ratios are more likely to be considered "risky" investments than those with low P/E
ratios, since a high P/E ratio signifies high expectations. Hyundai stock investment is somehow
less risky than Ford.
Summary
The ratio analysis of the financials shows that company would also not be a good choice
to invest. The profitability situations is not so impressive to take a chance to invest. As far future
is concerned, Hyundai needs to focus on its profitability to attract the general public. A company
Financial Accounting

with outstanding even level of profitability and stability would be much better to invest.
Personally, in comparison with Ford, I would not prefer to make investments in Hyundai as its
financials are comparatively better. For any investment, we need to examine stability in cash
flow streams, sound liquidity conditions to meet its obligation in the time of distress, huge
acquisition of tangible and intangible assets to increase sales and high market capitalization as all
these factors are good in Hyundai than Ford.
Industry Analysis
Porter's Five Forces Analysis
Michael Porter recognized five strengths that impact an industry. These strengths are
Degree of Rivalry, Threat of Substitutes, and Barriers to Entry, Buyer Power, and Supplier
Power. Like different commercial enterprises working under a free market, industrialist
frameworks, seeing the car business through the viewpoint of Porter's Five Forces can be useful
in comprehension the powers influencing everything.
Level of Rivalry
In spite of the high focus proportions found in the U.S. market, which normally indicate
that a lesser level of rivalry is found in the business, competition in the U.S. furthermore, the
worldwide car industry is exceptional. Plainly, the focus proportions don't recount the entire
story. The car business in the U.S. is no more the play area of the Big 3 (GM. Passage. also,
Daimler Chrysler): worldwide organizations contend in the U.S. market, while U.S.
organizations have globalized themselves. In the 1980s. The Japanese auto producers Honda and
Toyota entered a genuinely restrained U.S. advertise and have been extremely centered on
developing their shares of the business sector. The immense assorted qualities of adversaries as
far as societies and related methods of insight have increased competition in the business. Market
development is moderate in the built up business sectors of the U.S. what's more, Western
Europe and organizations must battle savagely to take out additions or avoid misfortunes in the
piece of the overall industry. Be that as it may, development is conceivably tremendous in the
quickly industrializing countries of China and India: in these blasting markets, organizations
could exploit the chances to harvest nice looking prizes. The level of contention in the car
business is further increased by high settled expenses connected with assembling autos and
trucks and the low exchanging costs for buyers when purchasing diverse makes and models.
Risk of Substitutes
The risk of substitutes to the car business is genuinely gentle. Various different types of
transportation are accessible, yet none offer the utility, accommodation, autonomy, and worth
managed via cars. The exchanging costs connected with utilizing an alternate method of
transportation, for example, train, might be high as far as individual time (i.e.. freedom), comfort,
and utility (e.g.. baggage limit), yet not as a matter of course fiscally (e.g.. round trek train
admission on MARTA would doubtlessly be less costly than the expense of fuel devoured on a
comparable round excursion, every day stopping. auto protection, and support). The exemption
to this announcement happens in the worldwide urban ranges with high populace densities. In
these ranges, the substitutes accessible (e.g.. strolling, mass travel, bikes. and so on.) can be less
unreasonable than autos and in this way elective methods of transportation are regularly favored.
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Additionally, there are characteristic basic social and social mentalities that keep individuals
from owning autos in a few dish of the world. Numerous countries are not as spread out an as
portable as the U.S.: they are compelled either by geology, race, class, or religion and the
requirement for individual transportation is not as incredible, yet. The American long for "an
auto or two in each carport" is not what whatever remains of the world as of now needs or needs.
Nonetheless, the promoting arms of the worldwide car makers are positively working hard to
change this worldview, and with uncommon generation volumes around the world, all signs
demonstrate that they are succeeding. Most with the capacity and intends to claim a vehicle, who
live in a general public with the vital framework (e.g... streets and powering stations), will do as
such.
Barriers to Entry
The obstructions to entering the car business are important. For another company, the
initial investment required to build up assembling ability to achieve least productive scale is
restrictive. A car producing office is entirely particular and in the case of disappointment couldn't
be effectively retooled. In spite of the fact that the hindrances to new organizations are generous,
set up organizations are entering new markets through vital associations or through purchasing
out or converging with different organizations. Truth be told. The boundaries of the section for
new (or diverse) markets might be very low: in the 1980s. U.S. organizations Team A 4 for all
intents and purposes welcomed Japanese creators into the U.S. by neglecting to offer quality
vehicles in the lower value markets. The majority of the huge car organizations have globalized
and entered outside business sectors with changing degrees of progress. In the more up to date,
undeveloped markets of Asia, Africa. Furthermore, South America, the boundaries to section
comparably exist. Be that as it may, a local start-up, with neighborhood information and aptitude,
can possibly contend in its home business sector against the worldwide firms who are not yet
settled there. Such an operation, if fruitful, would clearly be grabbed up by one of the worldwide
mammoths and fused into its fold.
Purchaser and Supplier Power
In the relationship between the car business and its suppliers, the force pivot is
significantly tipped in the business' support. The car business is involved intense purchasers who
are by and largely ready to direct their terms to their suppliers. There are particular qualities that
make individuals from the car business effective purchasers:
(I) There is not a stupendous multiplication of organizations assembling autos, and the
four biggest car organizations in the U.S.
(II) have about 90% of the estimation of shipments and worth included the U.S. are
institutionalized products and these parts are just utilized on vehicles: and
(III) In reverse combination can and occurs, as found in summer 2005 when Ford obtained
battling parts creator Visteon.
In the association between the car business and its definitive customers, buyers of
completed vehicles, the force hub is tilted in the purchasers' support. Customers employ the best
power in this relationship because of the genuinely institutionalized nature of the car item (a
vehicle) and the low exchanging costs connected with picking from contending brands. Be that
as it may, the car business remains insignificantly capable because of the expansive client to
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make proportion. The car business is an active spot. With the powers above at play, and with
history as an aide, it is protected to say that the car business will keep on changing, develop, and
adjust.
Presently we will examine two noteworthy organizations in the car business to
accumulate a superior comprehension of the car business' progression on an organization by the
company premise. For understanding into the relative incomes and net earnings for each of the
organizations broke down in the present decade.
Key Economic Factors and Trends Affecting the Automotive Industry
Cash Exchange Rate Volatility
The U.S. Central bank has finished budgetary resource buys, and the subsequent
movements in capital streams have added to descending weight on a few developing business
sector monetary forms. Sometimes, that weight is disturbed by high expansion, shaky strategy
situations, or both. Moreover, the yen and euro have deteriorated as an aftereffect of strategy
changes by the Bank of Japan, and European Central Bank. The frail yen, specifically, includes
huge potential descending weight vehicle evaluating crosswise over numerous business sectors
all around. In many markets, trade rates are business sector decided, and all are affected by a
wide range of macroeconomic and strategy components, and in this manner liable to stay
unpredictable. Be that as it may, in a few markets, trade rates are vigorously affected or
controlled by governments.
Abundance Capacity
As indicated by IHS Automotive, a car explores firm, the assessed car industry
worldwide creation limit for light vehicles of around 116 million units surpassed worldwide
generation by around 29 million units in 2014. In North America and Europe, two districts where
a huge offer of industry income is earned, overabundance limit as a percent of generation in 2014
was an expected 7% and 30%, separately. In China, the car business additionally saw abundance
limit at 45% of creation in 2014, as makers contended to benefit from China's future business
sector potential. As indicated by generation limit information anticipated by IHS Automotive,
worldwide abundance limit conditions could proceed for quite a long while at a normal of around
32 million units for every year amid the period from 2015 to 2019.
Estimating Pressure
Overabundance limit, combined with an expansion of new items being presented in key
sections, will keep the weight on makers' capacity to expand costs. In North America, the
industry rebuilding of a previous couple of years has permitted makers to better match creation
with interest, albeit Japanese and Korean makers additionally have limit situated outside of the
area coordinated to North America. Later on, Chinese and Indian makers are relied upon to enter
U.S. what's more, European markets, further escalating rivalry. Over the long haul, extreme
rivalry and overabundance limit will keep on putting descending weight on swelling balanced
costs for likewise placated vehicles in the United States and add to a testing valuing atmosphere
for the car business. In Europe, the abundance limit circumstance was exacerbated by
debilitating interest and the absence of diminishments in existing limit, such that negative
evaluating weight is relied upon to proceed for a long time to come.
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Product and Energy Price Changes

The cost of oil fell pointedly in the second 50% of 2014, to beneath $50 per barrel, as
interest was weaker than foreseen and worldwide supply stayed solid. Other ware costs
additionally have declined as of late, yet over the more extended term costs are liable to incline
higher given desires for worldwide interest development.
Vehicle Profitability
Our money related results rely on upon the gainfulness of the vehicles we offer, which
may fluctuate essentially by vehicle line. All in all, bigger vehicles tend to order higher costs and
be more beneficial than littler vehicles, both crosswise over and inside vehicle sections. For
instance, in North America, our bigger, more beneficial vehicles had a normal commitment edge
that was around 140% of our aggregate normal commitment edge over all vehicles, while our
littler vehicles had altogether brought down commitment edges. Government directions went for
decreasing discharges and expanding fuel effectiveness may build the expense of vehicles by
more than the apparent advantage to the purchaser. Given the scenery of overabundance limit,
these controls could hose commitment edges. As we execute our One Ford arrangement, we are
attempting to make best-in-class vehicles on worldwide stages that contribute higher edges, and
offering a more adjusted arrangement of vehicles with which we expect to be among the pioneers
in fuel proficiency in each section in which we contend.
Expanding Sales of Smaller Vehicles
Like different producers, we are expanding our interest in recently created and
developing markets, for example, Brazil, Russia, India, and China, in which vehicle deals are
relied upon to increment at a speedier rate than in most develop markets. The biggest fragments
in these business sectors are little vehicles (i.e., Sub-B, B, and C portions). To expand our
cooperation in these quickly developing markets, we are altogether expanding our creation limit,
specifically or through joint endeavors. In spite of the fact that we expect positive commitment
edges from higher little vehicle deals, one consequence of expanded creation of little vehicles
might be that, after some time, our normal per unit edge diminishes on the grounds that little
vehicles have a tendency to have lower edges than medium and substantial vehicles.
Exchange Policy
To the degree governments in different districts erect or escalate boundaries to imports, or
execute coin strategy that points of interest neighborhood exporters offering into the worldwide
commercial center, there can be a critical negative effect on makers situated in business sectors
that advance organized commerce. While we trust the lengthy haul pattern is toward the
development of organized commerce, we have noted with company late improvements in various
locales. In Asia Pacific Africa, for instance, the late sensational devaluation of the yen
fundamentally decreases the expense of fares into the United States, Europe, and other
worldwide markets by Japanese makers. Over a timeframe, the rising shortcoming of the yen can
add to different nations seeking after feeble coin strategies by mediating in the conversion scale
markets. This is especially likely in other Asian nations, for example, South Korea. As another
illustration, administration activities in South America to incentivize nearby creation and parity
exchange are driving exchange erosions between South American nations furthermore with
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Mexico, bringing about corporate atmosphere insecurity and new exchange obstructions. We will
proceed to screen and address creating problems around exchange strategy.
Other Economic Factors.
Amid 2014, experienced business sector administration security yields and swelling were
lesser than anticipated, and there is a growing danger of diligent disinflation and, in a few
markets, even by and large emptying. The lower levels of swelling and loan fees were sudden
somewhat in light of the fact that they have happened against a scenery of free financial
approach and abnormal amounts of full grown business sector deficiencies and obligation. The
consequent ramifications of higher government deficiencies and obligation, with possibly higher
long haul loan fees, may even now drive a greater expense of capital over our arranging period.
Greater financing costs and/or charges to address the greater shortages likewise may obstruct
genuine development in total national output and, consequently, vehicle deals over our arranging
period.
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References
Ford Motors. (2015). Annual Report 2014-15, USA.
Hyundai Corporation. (2015). Annual Report 2014-15, Korea.