Financial Statement Analysis

Introduction:
Financial viability and independence of the company relies on income generated, costs of
service, debt repayments, and an increasing appreciation of equity for the good of interested
shareholders so to that end, businesses must review their present financial results in order to
meet all existing financial requirements in order to maintain complete financial and
operational effectiveness. In addition to a short reference to the firm and its activities, this
text contains the financial report of the motor company.
In the 1850s, the definition and implementation of the study of financial statements became
more and more common with the financial industry among other operating industries and the
main unseen hand affecting the economy of the nations (Horrigan, 1968). This financial ratio
are mostly used to assess the success of an undertaking by adding these measures to relative
financial reports for interested parties from the annual financial statements. The proportion
research consists of two categories that either enable companies to analyze the percentages
used in a "cross-sectional analysis" of their competitors' successes at once or to compare
operations of companies for a long span of "time sequence" analysis (Zutter & Smart, n.d.).
Moreover, two methods for the study of financial results are horizontal: a comparison of the
historical results of a company with present levels of output & a vertical review (Belyh,
2015).

Ford Motor Co
Ford Motor Co. is an international car manufacturer established in 1903 by Henry Ford and
which produces transport and "aircraft, telephone, coolers, mail, and weather satellites" Ford
Motor Co. (Corporate, n.d.-b; Corporate, n.d.-a). In 1908, Ford launched the world Model T
car, which was marketed 15 m till 1927. (Corporate, n.d.-b). In 1956, they opened their shares
officially (Corporate, n.d.-b). The stock market price for Ford Motors was $5.12 and it was
closed at $5,56 as reported on access '18 May 2020,' (Insider, 2020). Furthermore, in 1959,
Ford LLC was set up to offer financial resources such as loans and car leasing (Corporate,
n.d.-b). In 2007 Ford published a vehicle model fitted with Micrsoft's SYCN to meet
developments on the world's market as technology was developing rapidly in the 2000s. By
the middle of the 2010, the smart mobility LLC with SYNC3 mounted in their cars had been
introduced (Corporate, n.d.-b).
Unilever
According to Unilever of 2013, "Unilever is a production business that has four major
divisions: food, refreshment (drinks and ice creams), home care and personal care."
Unilever's portfolio is as varied as its global customer base – ranges from long-standing
names like Lifebuoy and Sunlight and Pond's to modern technologies like the Pureit cost-
effective water purifier. Unilever has over 400 labels, fourteen of them delivering over €1
billion annually in revenue. Many of these products have long and heavy social tasks like the
pursuit of sanitation by Lifebuoy and Dove's campaign for natural Beauty by hand-washing
soap. According to Unilever 2014, Unilever is one of the world's largest fast-moving
consumer products firms with products available in over 190 countries and over 2 billion
people globally use a Unilever product every day. For businesses around the globe, financial
management is extremely relevant, as is Unilever, so the customer will continue to invest in
the firm on the basis of financial statements.

Ratio Equation

Current Ratio Current Assets / Current Liabilities

Quick Ratio (Current Assets – inventory) / Current

Liabilities

Cash Ratio Cash / Current Liabilities

Inventory Turnover COGS / Inventory

Receivable Turnover Sales / Receivables

Total Assets Turnover Sales / Total Assets

Debt Ratio Total Liabilities / Total Assets

Times Interest Earned Ratio EBIT / Interest

Return on Equity Net Income / Equity

Return on Assets Net Income / Total Assets

Profit Margin Net Income / Sales

Results and Discussion

The present ratio compares the potential to fund short-term obligations with the short-right
assets accessible to them, starting with measured availability for three years, and in 2018 it
covered all its current debts with its existing assets by 1.20 times, 1.16 times in 2019, and
1.20 times in 2020. The existing ratio for Unilever is less than the Ford engine ratio as seen in
the table below. The latest ratio of Unilever is 0.785, 0.783 in 2019 and 0.783 in 2020. The
Unilever ratio is stable in 2018 and 2019 but improved in 2020, it is evident from the graph.
In the time between 2018 and 2019, the new Ford ratio dropped and rose by 0.04 in 2020.
The recent rise in the ratio could mean that either current liabilities have been raised in
comparison with existing assets or short-term liabilities have decreased. However, since the
appropriate range approached one, and the new four-year percentages of FORD were more
than once ("How are the existing proportion and the swift ration difference?", 2019), they are
nevertheless willing to pay all their responsibility obligations.

Rapid ratios are just like the present ones, but they remove the inventory from the current
assets, implying that they may not continue to sell their inventories to fund a company's
short-term debt from the operating assets. Ford's quick ratio is showing an increases of 1.08
times, 1.05 times, in 2010 and 0.61 times in 2020, for the first two years of the other two,
where the ratio of existing debt from total assets was declining below the inventory in 2018.
Just 0.74 times in 2018, 0.74 time by 2020 and 0.72 times by 2020 was a rapid ratio for
Unilever. Both firms exhibit lower patterns but remain optimistic signs of liquidity over the
last three years, so they have rapid ratios over anything that is permissible. But the average
quick ratio is higher than Unilever. Unilever. Finally, the cash ratio tests the liquidity of a
business to pay off short-term obligations using only the maximum types of cash & cash
reserves, at least equivalent to one in order to meet profitable, short-term debt paying
capability (Kenton, 2019). Unfortunately for Ford engines and UNILEVER, all cash ratios
across three years are within a reasonable range, besides the increase in 2020 ratio as shown
in the graph, which shows that they cannot meet any existing cash-dependency requirements
alone, with a ratio of 0.36 for 2018 and a ratio of 0.35 for 2017 of 0.514 for 2020. The new
ratio for Unilever was 0.265, 0.309 in 2019 and 0.393 in 2020. All in all, Ford's engines and
Unilever will not only be cash-based from 2018 to 2020, and will be able to include their debt
cover inventory while they increase their odds of higher indebtedness. The chart indicates the
pattern between both firms in the liquidity ratio.
Table 2: Liquidity Ratios of Ford Motor and Unilever
Ratio/Year Ford Motors Unilever
2020 2019 2018 2020 2019 2018
Current Ratio 1.20 1.16 1.20 0.785 0.783 0.783
Quick Ratio 0.61 1.05 1.08 0.7221 0.74 0.714
Cash Ratio 0.51 0.35 0.36 0.393 0.309 0.265
4

Figure 1: Current Ratio of Ford Motor and Unilever

Figure 2: Quick Ratio of Ford Motor and Unilever

Figure 3: Cash Ratio of Ford Motor and Unilever

Ratios of operation
Turning to calculations of activity, the revenue ratio of the stock of stocks by a business
reflects the expense of the post-sales substitution products (the "How to quantify the
inventory sales ratio?" 2019). Inventory sales ratio The typical suggested inventory sales ratio
is between 4 and 6, however because there are three years' ratios of Ford and Unilever
between 12 and 10 suggesting a strong sales and easy after-sales inventory transactions to
easily please consumers without delays (Nguyen, 2018). As shown in Table Ford's high point
of departure in 2020 was 12.15 then falling, hitting a ratio in 2020 of 10.43, 2019, 12.49, and
2018 of 12.15. The decrease in product turnover levels in Ford either means higher inventory
or purchase rates; nevertheless, the decrease suggests that sales are either improved or
inventory stocked (Nguyen, 2018). The inventory sales ratio is not measured for Unilever
since the sales cost is zero.
The receivable turnover decides how often a business earns its customers' due income
(Murphy, 2020). The higher the profit rate is, Ford engines have produced an average
turnover of 2,45 in 2018, namely 2.48 times in 2019 and 12.72 times in 2020. This proportion
shows a strong turnover, indicating that Ford will most often recover its receivables every
year, which enables it to cover its mortgages, bills or cost of acquisitions (Murphy, 2020).
The 2018 receivables ratio, on the opposite, was 7328 for Unilever, 7 029 for 2019 and 9 55
for 2020, reflecting a gradual upward trend. Ford and Unilever also show increased
accounting patterns, but the Ford engines have a greater ratio by 2020.
Finally, net asset transactions demonstrate how a business sells its total assets annually
(Hayes, 2020). In the span of three years Ford's inventory turnover rates are about 0.6 which
is high, provided that automotive companies do not use their properties as much as others to
produce revenue. In the table of asset sales for 2018 being 0.63 times, 0.63 times in 2019 and
0.47 times in 2020, Ford has already undergone an annual tilt and fall. The overall asset
turnover ratio of Unilever in 2020 is 0.747, 2019 is 0.802 and 2018 is 0.857. Both businesses
are seeing declining rates, but ford shows a greater pace of decline than unilever. The
reduction in ratio indicates an ineffective usage of assets against a tilt ratio suggesting higher
revenue by using the total assets accessible (Hayes, 2020).
Table 3: Activity Ratios of Ford Motor and Unilever
Ratio/Year Ford motors Unilever
2020 2019 2018 2020 2019 2018
Inventory Turnover 10.43 12.49 12.15 - - -
Receivable 12.72 9.55 7.329 7.328
2.48 2.45
Turnover
Total Asset 0.47 .747 0.802 0.857
0.60 0.63
Turnover

Figure 4: Inventory Turnover of Ford Motor and Unilever

Figure 5: Receivables Turnover of Ford Motor and Unilever

Figure 6: Total Asset Turnover of Ford Motor and Unilever

The debt ratio reports the financial condition of the company as it switches to the debt
measurements. It shows whether an organization finances its activities from its overall assets
or liabilities (Ross, 2019). The debt level cannot be measured for Unilever, since the long-
term debt is negligible for the last 3 years. Ford's 2018 average debt level was 86%, while its
2019 ratio was 87%, in 2020 it stood at 78%. Basic to this ratio is market risk, with a large
leverage ratio of at least 50% indicating a high risk association as well as financed mostly by
liabilities rather than assets that suggest high returns (Debitoor, n.d.). A low debt ratio of up
to 50% is advised, showing a low risk and assets leveraged that displays low profits and is
supported mostly by its overall assets (Debitoor, n.d.). As seen in figure, over the three years,
Ford ratios are higher than the prescribed ratio which indicates that they fund much of their
company by total liabilities, and that a slope and decrease of the ratio have occurred over the
years that either have financed more through their liabilities when the slope occurred and
have decreased. All in all, the proposed leverage ratio depends on the cash resources
accessible to the company in a particular market, i.e. each industry has its own cash flow
constraints; thus, the desired ratio cannot, but must be calculated in accordance with the
business doing the financial review (Hayes, 2019). The interest-time ratio tests the capability
of a firm to cover its interest and/or other liabilities, taking into account its profits before tax
and income costs (EBIT), as well as the risk of the company being checked (Chen, 2019;
Corporate Finance Institute, n.d.-a). However, note that a large ratio indicates low credit risk
and vice versa (MyAccountingCourse, n.d.). Any ratio above one indicates a favorable
interest and/or other debt ability, whereas a ratio below one indicates insolvency and
bankruptcy (AccountingTools, 2019).
Over the course of three years, Ford's interest ratios are significantly high, indicating that
investors and other stakeholders have a strong positive debt/interest payment position, with
their 2018 EBIT ratio 19.60 times higher than their bonds; 20.22 times higher in 2019; 2.98
times higher in 2020. In addition, the Ford Motor ratios are growing over the next three years,
as seen in figure 8. This may be attributed to a drop in the bond's costs or a rise in EBIT but it
may be due to an increase in bonds or a reduction in EBIT. In conclusion, Ford's debt
calculations show that they are financially strong and competitive from the point of view of
buyers. Unilever's financial situation is good as its debt is zero. It even has an interest rate of
zero.
Table 4: Debt Ratios of Ford Motor and Unilever
Ratio/Year Unilever
2020 2019 2018 2020 2019 2018
Debt Ratio 78% 87% 86% - - -
Times Interest 20.98 - - -
20.22 19.60
Earned Ratio

Figure 7: Debt Ratio of Ford Motor and Unilever

Figure 8: Times Interest Earned Ratio of Ford Motor and Unilever

Finally, we are debating the findings of the profitability calculation. The Equity Return (ER)
measures the capacity of a business to pay residual revenue to owners following payment for
all its other costs, and also outlines the company's ability to generate earnings from good
equity use (Corporate FinanceI nstitute, n.d.-b). The ROE ratio is appropriate depending on
the market, investors and rivals of the company; usually the ratio is 10% higher than
(Hargrave, 2020b). The average Ford ROE is between 2.18 and 2020 and 10% in 2018,
0.25% in 2019, 0.45% by 2020. In general, with the exception of 2019, Ford's ROE ratio was
outside the appropriate range from 2018 to 2020. In the other side, as seen in the graph,
Unilever shows higher equity returns. The ROE is 79,79 for 2018, 43,39 for 2019 and 34,39
for 2020. The higher the ratio between Ford and Unilever, the more performance and the
greater the management of the business (Hargrave, 2020a). In addition to a significant
decrease over 2018-2019, Ford Motor ROA for 2018-2020 is averaged 2 percent, as seen in
Figure 10, with a ROA ratio of 1 percent in 2018, 0.03 percent in 2019 and a ROA ratio of
2.86 percent by 2020. As seen in Figure 10 of 2018 to 2020, the ROA for Unilever has
decreased significantly from 16.49% in 2018 to 9.29% in 2019 and 8.97% in 2020.

Ford's margins were estimated for the 2018-20200 operating margin, in particular, for 2018 a
margin of $1 or 2% and $0.0005, for 2019 a margin of $1 or 0.05% and 2020 a margin of
3.88 percent. As seen in Figure 11, because of the decreases from 2018 and beyond, for
example, high expenses, a reduction in revenue percentage, poor annual revenues etc. and
because of growing prices, declining expenditures, higher earnings, successful resourcing,
etc., they encountered an inclination in 2020. In the other hand, as seen in Table 5, the
profitability margin for Unilever is much higher than for Ford Motors.

Table 5: Profitability Ratios of Ford Motor Company

Ratio/Year Ford Motor Unilever

2020 2019 2018 2020 2019 2018
Return on 8.45 34.39 43.39 79.79
Equity 0.25 10
Return on 2.86 8.97 9.29 16.49
Assets 0.03 1
Profit Margin 3.88 0.05 2 11.0 10.82 18.41

Figure 9: Return on Equity of Ford Motor and Unilever

Figure 10: Return on Total Assets of Ford Motor and Unilever

Figure 11: Profit Margin of Ford Motor and Unilever

Conclusion
Financially or otherwise, the survival of every business would depend on certain variables
based on the financial success of the company. Analysis of the financial records of a business
and the contrast with the previous yearly statement or the statements of the same sector of
another organization was used by internally and externally, such as internally, externally or
internationally. Ford is an engineering manufacturer in the US, known today to draw buyers
around the globe with its luxury and advanced technology embedded vehicles. Hygiene
services for the personal and families, cooking, tea and tea drinking are both part of
Unillever, which is a multinational consortium from UK and Netherlands. Unilever is well-
known in the industrial fields and in the fields of FMCG products, and is famous for their fast
moving consumer goods. It was observed that Ford's 2020 operation has on average been
financially profitable compared to the previous three years. Firstly, as compared with
unilever, Ford is showing a clear indication of liquidity, because its usable cash would not
meet its liabilities by integrating various assets into debt & cost payments without depending
on cash. Second of all, Unilever is strong in its degree of operation in terms of inventory,
loans and net assets since it is willing to rotate its inventory, claims and total assets more
regularly per year. Thirdly, Ford can be seen as a high risk investment from the investors'
point of view, as contrasted with Unilever, since it accounts for 87 per cent of its operation.
But they show promising signs, especially in 2019, when they were 20.22 period, in their
willingness to pay their interest / debt. Lastly, Ford Motor Co. showed that the high rates of
profitability in 2018 was not an average 11 percent decline in the profitability rate owing to
some improvement in the operational markets and convergence issues. In the year 2020 it has
not been a good year for the automotive industry. Unilever, with a more stable position as a
Ford Motors, is preferred to be invested. The business will also benefit from asset
management techniques to allow it to raise its annual overall asset turnover. It is advised that
current asset balances, including cash & stocks be held higher than their existing liabilities
account in 2020 to increase their liquidity compared to 2019 results. In all, change is mostly
dependent on external factors in the industry/business that have a direct effect on their
operations, but risk control policies must be set into place to minimize the detrimental
impacts of the market at least.
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