How to Ace a Competency Based Interview

GM’s profitability ratios for 2020 are depicted below. 

GM's profitability metrics such as the net profit margin, operating income margin, ROA, and ROE are positive, highlighting the profitable nature of the firm's operations in 2020. The ROA and ROE show that the automotive entity was able to generate profits from both its assets and shareholders' investments. The relatively high ROE of around thirteen percent shows that GM's management was effective at using the shareholders’ finances to grow the entity. The entity had a low P/E ratio in 2020, meaning that there is an opportunity for it to boost its financial performance in the future (Gibson, 2012). The low dividend yield means that GM’s shareholders were lowly compensated for their investments. GM can increase the dividends paid to its shareholders to guarantee an increase in the dividend yield. In 2020, General Motors’ economic value-added amount was negative, meaning that the entity did not generate value from the shareholders' investments in the entity. 

GM’s liquidity benchmarks are indicated below. 

GM's current ratio is above one, meaning that its short-term assets slightly exceed its current obligations. In this respect, when the current obligations fall due, GM is more than capable of settling them. The automotive company does not need to dispose its fixed, revenue-generating assets to pay off its short-term obligations. The entity's quick ratio in 2020 was almost equal to one meaning that the entity's quick assets were almost equal to its short-term obligations. The metric shows that GM has a high level of liquidity due to the high amount of quick assets. The entity had a negative net liquid balance in 2020, meaning that its cash, cash equivalents, and short-term investments are not sufficient to meet the current maturing debts when they fall due. 

GM’s activity ratios are illustrated below. 

GM takes around 24 days to collect cash from its debtors. The relatively low average collection period allows the automotive company to maintain a high liquidity level ( Bragg, 2012). GM has a high turn of almost ten times, meaning that the automotive entity can efficiently control its inventory. Additionally, the entity can effectively sell the merchandise it purchases. GM's low asset turnover ratio means that the entity is not utilizing its assets efficiently to generate net sales (Gibson, 2012). In this respect, the entity should liquidate unused assets and focus on leasing assets rather than buying them to boost its asset turnover ratio. 

GM’s debt and equity ratios are indicated below. 

The leverage ratio is below one, meaning that GM has a low level of financial risk and, in this respect, could settle its obligations by disposing its assets if it needed to. The entity has a high debt-to-equity metric, meaning that it lacks financial stability. GM should reduce its debt level and focus on raising cash from shareholders. In this case, the entity's financial stability will improve, and its chances of collapsing will reduce substantially. 

References 

Bragg, S. M. (2012).  Business ratios and formulas: A comprehensive guide, third edition . John Wiley and Sons. 

Gibson, C. H. (2012).  Financial reporting and analysis . Cengage Learning.