Financial Accounting - Financial Statement Analysis Project Instructions: For this project, you will use the provided financial statements for Ford Motor Company and GM Motors. Take 2019 information...

Financial Accounting
Financial Statement Analysis Project
Instructions
For this project, you will use the provided financial statements for Ford Motor Company and GM Motors. Take 2019 information given and perform the required financial ratios listed below. Compare the ratios of 2019 to each of the two auto companies. In comparing the ratios you will need to discuss which company has a better ratio, justify your rationale, and explain your findings in detail in your analysis. Write at least one paragraph discussing your results for each ratio.
Part 1:
1) What is the ratio used for, what is its’ purpose?
2) Write out formula
3) Fill out formula using the two years financial statement information for both companies
4) Your interpretation of ratio in at least one paragraph
Part 2: For each of the four categories of ratios, identify what the four categories are, and in your own words, explain the following
1) Who are the main stakeholders?
2) What are they assessing?
3) Why are they assessing it?
Part 1
Ford Motors                General Motors
Profitability
Earnings Per Share = It is used for calculating gain which is generated by company per share.
Formula,
= (Net Income/ Number of Equity Share) (Net Income/ Number of Equity Share)
1) Year 2019    = 47/(4011+71)    = 6581/(1400+24)
    = 0.01     = 4.62
2) Year 2018    = 3677/(4011+71)    = 8014/(1400+24)
    = 0.93     = 5.66
Interpretation: the figures 0.01 & 4.62 per share indicates that if you hold 1 share of Ford and General motor you will get an income of $ 0.01 & $ 4.62 respectively.
· Return on Total Assets = It is used for estimating the assets used for generating returns.
Formula,
(Net Income / Total Assets) (Net Income / Total Assets)
1) Year 2019    = 47/258537    = 6581/228037
    = 0.0001     = 0.0288
2) Year 2018    = 3677/256540    = 8014/227339
    = 0.0143     = 0.0353
Interpretation: the figures 0.0001 & 0.0288 indicates that on the total assets the company holds in the balance sheet $ 0.0001 & $ 0.0288 income is earned for Ford & General Motors respectively.
· Return on Equity = it is used for calculating the return earned on investment made through equity capital
Formula,
(Net Income / Equity Capital) (Net Income / Equity Capital)
1) Year 2019    = 47/41    = 6581/14
    = 1.14     = 470.07
2) Year 2019    = 3677/41    = 8014/14
    = 89.68     = 572.42
Interpretation: the figures 1.14 & 470.07 indicates that income earned if invested in the company through equity means for Ford & General Motors respectively.
· Profit Margin Ratio = It is used for calculating percentage of profit made through sales or annual turnover.
Formula,
(Net Income / Revenue or Turnover) (Net Income / Revenue or Turnover)
1) Year 2019    = 47/143599    = 6581/122697
    = 0.0003     = 0.5363
2) Year 2018    = 3677/148294    = 8014/113045
    = 0.0247     = 0.070
Interpretation: the figures 0.0003 & 0.5363 indicates that income or profit earned by the company on the sales made by them deducting all expenses for Ford & General Motors respectively.
· Gross Margin Ratio = It is used for evaluates how much gross profit is generated from sales. Gross profit is equal to net sales.
Formula,
(Gross Income/ Revenue or Turnover) (Gross Income/ Revenue or Turnover)
1) Year 2019    = 574/143599    = 5481/122697
    = 0.0039     = 0.0446
2) Year 2018    = 3203/148294    = 4445/113045
    = 0.0215     = 0.0393
Interpretation: the figures 0.0039 & 0.0446 indicates that gross income or profit earned by the company on the sales made by them before deducting indirect expenses for Ford & General Motors respectively.
Solvency/Leverage
· Debt Ratio = Measures the portion of company assets that is financed by debt (obligations to third parties).
Formula,
(Total Liabilities / Total Assets) (Total Liabilities / Total Assets)
1) Year 2019    = 13703/258537    = 14386/228037
    = 0.0530     = 0.0630
2) Year 2018    = 11833/256540    = 13963/227339
    = 0.0461     = 0.0614
Interpretation: the figures 0.0530 & 0.0630 indicates that assets financed by the company or the obligation to third company here we can see assets has covered the liabilities of company better in General Motors than Ford.
· Equity Ratio = It is used for determines the portion of total assets provided by equity (i.e. owners' contributions and the company's accumulated profits).
Formula,
(Total Equity Fund / Total Assets) (Total Equity Fund / Total Assets)
1) Year 2019    = 20361/258537    = 26874/228037
    = 0.0787     ...