Ford Motor Company Analysis Research Paper Example | Topics and Well Written Essays - 2000 words

Ford Motor Company Analysis - Research Paper Example The liquidity ratios calculated for the year 2010 and 2011 are shown in the table above. The calculations are on the excel spreadsheet attached. Liquidity ratios show the firm’s ability to settle short term liabilities out of the liquid cash. The type of liquidity ratios calculated include; current ratio and acid test ratio. The liquidity ratios must equal to 1 or more than 1. If it is 1.00 then it implies the short-term debts are fully settled with the liquid cash. If they are less than 1.00 then it shows that the available cash cannot settle the arising short term liabilities. From the calculations Ford Motor Company has a current ratio of 0.86 in 2010 which improved to 0.96 in 2011. Though there was an improvement in the current ratio, it is still less than one which shows the company’s dilemma in dealing with its short term debts. The available cash is not enough to settle the short term liabilities (Zane, Kane & Marcus, 2004). The acid test ratio as depicted from t he calculations is also worth of discussion. In both years the acid test ratio was less than 1 which might be detrimental to the Ford Motor Firm. Though an improvement was noted from 0.47 to 0.59, the ratio was still below the threshold.Activity ratios depict the degree of effectiveness of a company in using the resources available in a manner that can promote the growth of the company. The activity ratios derived above are total asset turnover. This is an indication that the assets of the company were not utilized.