The profitability measure focuses on Ford Motor’s capabilities of generating favorable profits from sales of its assets and inventory. The focus is on the ratios of the company in terms of the operating profit margin, gross profit margin as well as the net profit margin. Notably, the profitability assessment also evaluates the Return on Equity as well as the Return on Assets. It is evident that the calculation of the profitability is done using financial data from the company’s financial statements over the years 2016-2018; the ratios mainly represent the Ford Motor’s ability to calculate the overall effectiveness of the methods used to report profitability to shareholders (Dybek, 2019). The profitability ratios will give an analysis of the company’s strength in generating income that is relative to its revenue.
The gross profit margin presents the difference between the sales made and the cost of goods divided by the collected revenue. It represents the percentage for the revenue after all the accounting costs of productions of the goods sold. The company is also highly dependent on the US and European market for its sales and promotions, as well as its reliance on trucks for sales (Dybek, 2019). The Return on Equity measures the investment placed on the company. The ROE improved from the year 2016 to 2017; these could be attributed to the strengths of the company such as a strong brand image and a strong market position.
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Reference
Dybek, M. (2019, February 22). Ford Motor Co. (F) | Profitability. Retrieved from https://www.stock-analysis-on.net/NYSE/Company/Ford-Motor-Co/Ratios/Profitability
Ford – New Cars, Trucks, SUVs, Crossovers & Hybrids | Vehicles Built Just for You. (n.d.). Retrieved from https://www.ford.com/
Appendix
Margins Rations
Gross Profit Margin (2018)= Gross Profit/ Net Sales
100 × 12,025 ÷ 148,294
= 8.11%
Operating Profit Margin= EBIT/Net Sales
100 × 3,203 ÷ 148,294
= 2.16%
Net Profit Margin= Net income/ Net sales
100 × 3,677 ÷ 148,294
= 2.48%
Returns Ratio
Returns on assets ratio= Net Income/ Total Assets
100 × 3,677 ÷ 256,540
= 1.43%
Return on Equity= Net Income/ Stockholder’s Equity
100 × 3,677 ÷ 35,932
= 10.23%
