n reality a 'family' of automotive brands including Ford, Lincoln, Mercury, Mazda, Jaguar, Land Rover, Aston Martin, and Volvo. Ford is a global company with two core businesses: the automotive business and the financial services business. The automotive sector consists of the design, development, manufacture, sale and service of cars and trucks. The financial services sector primarily includes two segments: Ford Motor Credit Company, a wholly owned subsidiary of Ford, and The Hertz Corporation, an indirect, wholly owned subsidiary of Ford. Ford Motor Credit provides vehicle-related financing, leasing and insurance. Hertz rents cars and light trucks, as well as industrial and construction equipment.
Introduction to financial analysis: The last three years have been difficult at Ford. Lackluster financial performance and failure to meet sales and profit goals, according to Eric Mayne, has led to the departure of several key executives. Ford has put these changes in the best possible light, suggesting that recent changes in leadership represent an opportunity for enrichment and improved operational effectiveness and profitability, rather than a disruption in the chain of command (Mayne, 2003). Ford's profitability is affected by many factors, including:
The mix of vehicles and options sold
The margin of profit on each vehicle sold
The types and level of "incentives" Ford offers dealers or buyers
The costs of customer warranty claims
The costs to enhance vehicle safety standards, emission controls, and fuel economy
Ford's ability to effectively manage or control costs
Ford's ability or lack of ability to recover cost increases through higher prices
An analysis of Ford's fiscal year end income statements for the last five years provides some useful insights. For example, total revenue has remained relatively stable, but cost of goods sold [COGS] in absolute dollars and as a percent of sales have increased r...