Description I have alrady written some of this thesis, including part 1 and part 2 , Now I need to revise 3.1 based on the comments by the teacher.and write the 3.2 part 2500 words and conclusion 500 words. I choose the Ford Motor as the business and the general motor as the comparision .The writing format must be the same as mine . thank you/ 2 attachmentsSlide 1 of 2attachment_1attachment_1attachment_2attachment_2.slider-slide > img { width: 100%; display: block; } .slider-slide > img:focus { margin: auto; } Unformatted Attachment Preview FORD MOTOR COMPANY AND SUBSIDIARIES CONSOLIDATED INCOME STATEMENT (in millions, except per share amounts) Revenues Automotive Ford Credit Mobility Total revenues Costs and expenses Cost of sales Selling, administrative, and other expenses Ford Credit interest, operating, and other expenses Total costs and expenses Operating income Interest expense on Automotive debt Interest expense on Other debt Other income/(loss), net Equity in net income of affiliated companies Income/(Loss) before income taxes Provision for/(Benefit from) income taxes Net income Less: Income attributable to noncontrolling interests Net income attributable to Ford Motor Company Earning per share attributable to common and class B stock Basic income Diluted income Weighted-average shares used in computation of earnings per share Basic shares Diluted shares CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (in millions) Net income Other comprehensive income/(loss), net of tax Foreign currency translation Marketable securities Derivative instruments Pension and other postretirement benefits Total other comprehensive income/(loss), net of tax Comprehensive income/(loss) Less: Comprehensive income/(loss) attributable to noncontrolling interests Comprehensive income/(loss) attributable to Ford Motor Company For the years ended December 31, 2019 2018 2017 143.599 12.260 41 155.900 148.294 12.018 26 160.338 145.653 11.113 10 156.776 134.693 11.161 9.472 155.326 574 963 57 (226) 32 (640) (724) 84 37 47 136.269 11.403 9.463 157.135 3.203 1.171 57 2.247 123 4.345 650 3.695 18 3.677 131.321 11.527 9.047 151.895 4.881 1.133 57 3.267 1.201 8.159 402 7.757 26 7.731 0,01 0,01 0,93 0,92 1,94 1,93 3.972 4.004 3.974 3.998 3.975 3.998 For the years ended December 31, 2019 2018 84 3.695 2017 7.757 174 130 (689) 23 (362) (278) 37 314 (34) (265) 37 52 7.809 24 (523) (11) 183 (56) (407) 3.288 18 (315) 3.270 7.785 FORD MOTOR COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (in millions) December 31, 2019 ASSETS Cash and cash equivalents (Note 9) Marketable securities (Note 9) Ford Credit finance receivables, net (Note 10) Trade and other receivables, less allowances of $94 and $63 Inventories (Note 12) Assets held for sale (Note 10 and Note 24) Other assets Total current assets 17.504 17.147 53.651 9.237 10.786 2.383 3.339 114.047 Ford Credit finance receivables, net (Note 10) Net investment in operating leases (Note 13) Net property (Note 14) Equity in net assets of affiliated companies (Note 15) Deferred income taxes (Note 7) Other assets Total assets 53.703 29.230 36.469 2.519 11.863 10.706 258.537 LIABILITIES Payables Other liabilities and deferred revenue (Note 17) Automotive debt payable within one year (Note 20) Ford Credit debt payable within one year (Note 20) Other debt payable within one year (Note 20) Liabilities held for sale (Note 24) Total current liabilities 20.673 22.987 1.445 52.371 130 526 98.132 Other liabilities and deferred revenue (Note 17) Automotive long-term debt (Note 20) Ford Credit long-term debt (Note 20) Other long-term debt (Note 20) Deferred income taxes (Note 7) Total liabilities Redeemable noncontrolling interest (Note 23) EQUITY Common Stock, par value $.01 per share (4,011 million shares issued of 6 Class B Stock, par value $.01 per share (71 million shares issued of 530 Capital in excess of par value of stock Retained earnings Accumulated other comprehensive income/(loss) (Note 25) Treasury stock Total equity attributable to Ford Motor Company Equity attributable to noncontrolling interests Total equity 25.324 13.233 87.658 470 490 225.307 – 40 1 22.165 20.320 (7.728) (1.613) 33.185 45 33.230 Total liabilities and equity 258.537 December 31, 2018 2017 16.718 17.233 54.353 11.195 11.220 18.492 20.435 52.210 10.599 11.176 3.930 114.649 3.889 116.801 55.544 29.119 36.178 2.709 10.412 7.929 256.540 56.182 28.235 35.327 3.085 10.762 8.104 258.496 21.520 20.556 2.314 51.179 23.282 19.697 3.356 48.265 95.569 94.600 23.588 11.233 88.887 600 597 220.474 24.711 12.575 89.492 599 815 222.792 100 98 40 1 22.006 22.668 (7.366) (1.417) 35.932 34 35.966 40 1 21.843 21.906 (6.959) (1.253) 35.578 28 35.606 256.540 258.496 GENERAL MOTORS COMPANY AND SUBSIDIARIES CONSOLIDATED INCOME STATEMENTS (In millions, except per share amounts) Years Ended 2019 Net sales and revenue Automotive GM Financial Total net sales and revenue Costs and expenses Automotive and other cost of sales GM Financial interest, operating and other expenses Automotive and other selling, general and administrative expense Total costs and expenses Operating income Automotive interest expense Interest income and other non-operating income, net Equity income Income before income taxes Income tax expense Income from continuing operations Loss from discontinued operations, net of tax Net income (loss) Net loss attributable to noncontrolling interests Net income (loss) attributable to stockholders 122.697 14.540 137.237 110.651 12.614 8.491 131.756 5.481 782 1.469 1.268 7.436 769 6.667 6.667 65 6.732 Net income (loss) attributable to common stockholders 6.581 Earnings per share (Note 21) Basic earnings per common share – continuing operations Basic loss per common share – discontinued operations Basic earnings (loss) per common share Weighted-average common shares outstanding – basic 5 5 1.424 Diluted earnings per common share – continuing operations Diluted loss per common share – discontinued operations Diluted earnings (loss) per common share Weighted-average common shares outstanding – diluted 5 5 1.439 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In millions) Years Ended Net income (loss) Other comprehensive income (loss), net of tax 2019 6.667 Foreign currency translation adjustments and other Defined benefit plans Other comprehensive income (loss), net of tax Comprehensive income (loss) Comprehensive loss attributable to noncontrolling interests Comprehensive income (loss) attributable to stockholders (6) (2.122) (2.128) 4.539 76 4.615 Years Ended December 31, 2018 1.461 2017 133.045 14.004 147.049 133.449 12.139 145.588 120.656 12.298 9.650 142.604 4.445 655 2.596 2.163 8.549 474 8.075 70 8.005 9 8.014 116.229 11.128 9.570 136.927 8.661 575 1.645 2.132 11.863 11.533 330 4.212 (3.882) 18 (3.864) 7.916 (3.880) 6 0 6 1.411 0 3 (3) 1.465 6 0 6 1.431 0 3 (3) 1.492 Years Ended December 31, 2018 8.005 2017 (3.882) (715) (221) (936) 7.069 15 7.084 747 570 1.317 (2.565) 20 (2.545) GENERAL MOTORS COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In millions, except per share amounts) ASSETS Current Assets Cash and cash equivalents Marketable debt securities (Note 4) Accounts and notes receivable (net of allowance of $201 and $211) GM Financial receivables, net (Note 5; Note 11 at VIEs) Inventories (Note 6) Other current assets (Note 4; Note 11 at VIEs) Total current assets Non-current Assets GM Financial receivables, net (Note 5; Note 11 at VIEs) Equity in net assets of nonconsolidated affiliates (Note 8) Property, net (Note 9) Goodwill and intangible assets, net (Note 10) Equipment on operating leases, net (Note 7; Note 11 at VIEs) Deferred income taxes (Note 17) Other assets (Note 4; Note 11 at VIEs) Total non-current assets Total Assets LIABILITIES AND EQUITY Current Liabilities Accounts payable (principally trade) Short-term debt and current portion of long-term debt (Note 13) Automotive GM Financial (Note 11 at VIEs) Accrued liabilities (Note 12) Total current liabilities Non-current Liabilities Long-term debt (Note 13) Automotive GM Financial (Note 11 at VIEs) Postretirement benefits other than pensions (Note 15) Pensions (Note 15) Other liabilities (Note 12) Total non-current liabilities Total Liabilities Commitments and contingencies (Note 16) Equity (Note 20) Common stock, $0.01 par value Additional paid-in capital Retained earnings Accumulated other comprehensive loss Total stockholders’ equity Noncontrolling interests Total Equity Total Liabilities and Equity 2019 Years Ended December 31, 2018 2017 19.069 4.174 6.797 26.601 10.398 7.953 74.992 20.844 5.966 6.549 26.850 9.816 5.268 75.293 15.512 8.313 8.164 20.521 10.663 5.571 68.744 26.355 8.562 38.750 5.337 42.055 24.640 7.346 153.045 228.037 25.083 9.215 38.758 5.579 43.559 24.082 5.770 152.046 227.339 21.208 9.073 36.253 5.849 42.882 23.544 4.929 143.738 212.482 21.018 22.297 23.929 1.897 35.503 26.487 84.905 935 30.956 28.049 82.237 2.515 24.450 25.996 76.890 12.489 53.435 5.935 12.170 13.146 97.175 182.080 13.028 60.032 5.370 11.538 12.357 102.325 184.562 10.987 56.267 5.998 13.746 12.394 99.392 176.282 14 26.074 26.860 (11.156) 14 25.563 22.322 (9.039) 14 25.371 17.627 (8.011) 41.792 4.165 45.957 228.037 38.860 3.917 42.777 227.339 35.001 1.199 36.200 212.482 FORD MOTOR COMPANY AND SUBSIDIARIES 2019 2018 Profitability Ratios Revenue growth rate -2,77% 2,27% Operating profit margin (Return on Sales) Operating profit x 100% Revenue 0,37% 2,00% Net profit margin Net profit Revenue 0,05% 2,30% Return on capital employed (ROCE) Operating profit x 100% Capital employed 0,36% 1,99% Return on equity (ROE) Operating profit Equity 1,73% 8,91% 1,16 1,20 Acid Test (Quick Ratio) Current Asset – Inventory Current Liability 1,05 1,08 Cash Ratio Cash and cash equivalents Current Liability 0,18 0,17 0,60 0,63 29,23 30,05 0,87 0,86 6,78 6,13 x 100% x 100% Liquidity Ratios Current Ratio Current Assets Current Liability Efficiency Ratios Asset turnover Revenue Total assets Inventory Turnover Days Inventory COS Leverage Ratios Debt to Assets Ratio Total debt Total assets Debt to Equity Ratio Total debt Equity x 365 Debt to Capital Ratio Total debt Total debt + Equity 0,87 0,86 Asset to Equity Ratio Total assets Equity 7,78 7,13 Interest Cover Operating profit Finance costs 0,56 2,61 OMPANY AND SUBSIDIARIES 2017 GENERAL MOTORS COMPANY AND SUBSIDIARIES 2019 2018 2017 -6,67% 1,00% 3,11% 3,99% 3,02% 5,95% 4,95% 4,86% 5,44% -2,67% 2,98% 3,83% 3,06% 6,39% 13,71% 11,93% 10,39% 23,93% 1,23 0,88 0,92 0,89 1,12 0,76 0,80 0,76 0,20 0,22 0,25 0,20 0,61 0,60 0,65 0,69 31,06 34,30 29,69 33,49 0,86 0,80 0,81 0,83 6,26 3,96 4,31 4,87 0,86 0,80 0,81 0,83 7,26 4,96 5,31 5,87 4,10 2,43 1,37 3,90 Oxford Brookes University Research and Analysis Report An analysis and evaluation of the business and financial performance of Ford Motor Company, between 1 Jan 2017 and 31 Dec 2019. Table of Contents Part 1: INTRODUCTION ………………………………………………………………………………………………………….. 3 1.1. Reasons for choosing the topic ………………………………………………………………………………….. 3 1.2. Reasons for choosing the industry ……………………………………………………………………………… 3 1.3. Reasons for choosing Ford Motor Company ……………………………………………………………….. 3 1.4. Ford Motor Company’s background …………………………………………………………………………… 4 1.5. Research objective …………………………………………………………………………………………………… 4 1.6. Research question……………………………………………………………………………………………………. 5 1.7. Overall Research Approach ……………………………………………………………………………………….. 5 PART 2: INFORMATION GATHERING AND ACCOUNTING / BUSINESS MODELS ……………………………. 6 2.1. The sources of information ……………………………………………………………………………………….. 6 2.2. Methods used to collect information and their limitations……………………………………………. 6 2.2.1. Company Annual Report and its limitations …………………………………………………………. 6 2.2.2. Internet and its limitations…………………………………………………………………………………. 7 2.2.3. Book and its limitations……………………………………………………………………………………… 7 2.3. Ethical issue and how to resolve them ……………………………………………………………………….. 7 2.3.1. Ethical issue ……………………………………………………………………………………………………… 7 2.3.2. How to resolve the ethical issue …………………………………………………………………………. 7 2.4. Financial and Business Models used …………………………………………………………………………… 8 2.4.1. Ratios analysis and limitations ……………………………………………………………………………. 8 2.4.2. SWOT analysis and limitations ……………………………………………………………………………. 9 2.4.3. Porter’s Five Forces and limitations …………………………………………………………………….. 9 PART 3: RESULTS AND ANALYSIS FOR BUSINESS AND FINANCIAL PERFORMANCE ……………………… 11 3.1. Business Performance…………………………………………………………………………………………….. 11 3.1.1. SWOT Analysis………………………………………………………………………………………………… 11 3.1.2. Porter’s Five Forces Analysis …………………………………………………………………………….. 12 3.2. Financial Performance ……………………………………………………………………………………………. 14 3.2.1. Profitability…………………………………………………………………………………………………….. 14 3.2.2. Liquidity …………………………………………………………………. Error! Bookmark not defined. 3.2.3. Efficiency ……………………………………………………………….. Error! Bookmark not defined. 3.2.4. Leverage ………………………………………………………………… Error! Bookmark not defined. 3.2.5. Market value ………………………………………………………….. Error! Bookmark not defined. Part 1: INTRODUCTION 1.1. Reasons for choosing the topic I choose the topic eight for my research report which is “An analysis and evaluation of the business and financial performance of an organisation over three-year’s period”. Financial analysis use the historical numbers and give us an insight into how well the company has been performing and trends in that performance. It is an essential skill in a variety of occupations, including investment management, corporate finance, commercial lending and the extension of credit (Fridson & Alvarez, 2011). Business analysis is the application of knowledge, skill, tools, and techniques to determine problems and identify business needs, recommend viable solutions, meet business and project objectives and facilities the successful implementation of the business or project (Project Management Institute, 2015). Using the financial and business analysis through different accounting tools and approaches, helping us to get a deep understanding of the organisation’s profitability and risk, defining business needs and determining solutions to business problems. During my past few years ACCA study and corporate finance job, I learnt various financial and business techniques and knowledge which I can apply to this topic eight research report easily. It is always a challenging task to analyse an organisation’s financial and business performance. 1.2. Reasons for choosing the industry and its basic information For the last century, the automobile culture has spread over the entire globe (Mohr, et al., 2013). The automobile industry and its value chain have shaped not only the global economy but how billions of peoples live and jobs. It can allow us move in an easier and faster way, cover more distance and access to resources that once were inaccessible. People’s relationship and communication become closer and better because of the invention of automobile. I cannot even conceive of a world without cars and I want to know more about this industry. According to Deloitte, the global automobile industry is in the midst of a major transformation and challenge. The technology, joint collaboration, efficiency improvements and set up strategic partnerships with IT giants will be the potential futures for automobile industry (Helbig & Sandau, 2017). The global automobile industry is intensely competitive and volatile, with manufacturing capacity far exceeding current demand (Ford Motor Company, 2020), it will cause the volatile financial and business performance. The global new vehicles sales are falling by about 4.3 million in 2019, a bigger drop than 2008 (International Organization of Motor Vehicle Manufacturers, 2020). Additionally, the effect of the coronavirus (COVID-19) on the automobile industry is unprecedented and most vehicle manufacturers have had to shut down during this period. Therefore the automobile industry face unprecedented challenge and enormous difficulties. 1.3. Reasons for choosing Ford Motor Company In the 14th series of Top Gear, British motoring factual television series, the show asked people to vote “The car company that has made the largest number of great cars in the history of the world chart”. The number one brand is not a supercar manufacturer, nor a local British brand, not even a luxury brand. At the top of the list is Ford Motor Company. I’m interested why Ford is so popular? Why it can stand out from many famous car brands? So, I choose Ford Motor Company as my target organisation and General Motors Company as a competitor for the comparative analysis. The two biggest automakers in the United States and are also big players on the world stage. 1.4. Ford Motor Company’s background Ford Motor Company is a leading automobile company based in USA. Company is incorporated in Year 1903 and based in Dearborn, Michigan (Ford Motor Company, 2020). It adapted the moving assembly line process for the manufacture of automobiles, which allowed it manufacture, market and sell the Model T at a significantly lower price than his competition, enabling the creation of a new and rapidly growing market (Vlaskovits, 2011). The company designs, manufactures, markets and services a full line of Ford cars, trucks, SUVs, electrified vehicles and Lincoln luxury vehicles and is pursuing leadership positions in electrification; mobility solutions, including self-driving services; and connected services. It employs approximately 188,000 people worldwide. Throughout its 117-year history, Ford Motor Company is focus on the freedom of movement and making contribution in times of need. In 2019, Ford’s U.S. market share was around 41.1 percent, trailing only General Motors (GM) (Wagner, 2020). 1.5. Research objective Different stakeholders have their different own interest in tracking the financial and business performance. The objective of this research report is to critically assess the financial and business performance of Ford Motor Company over a three-year between 2017 and 2019 in different aspects. Through using the numbers being produced in Ford Motor Company’s financial statements over the past three years, to calculate the different type of financial ratios and highlight the relationship between the different ratios and analysis the trends of the different ratios in order to measure the overall financial health. To analyse Ford Motor Company’s internal and external environment to identify the company’s strength and weakness, as well as opportunity and threat which could affect its business operations. Focusing on the key factors and understanding where the company has competitive advantages and what issues should be addressing. Determining the automobile industry’s weakness and strengths and the competition level within the industry using Porter’s Five Forces model. Through analysing the automobile industry to identify Ford Motor Company’s competitive position in this industry. And comparing with the competitor General Motors Company to have a better understanding of Ford Motor Company’s internal and external financial and business performance, its position in this automobile industry, and the overall strategy. 1.6. Research question I have set the following questions so that the report meets the research objectives; these are: 1. What has been the financial performance of Ford Motor Company over the last three years, and compare it with General Motors Company? 2. What is biggest weakness and threat for Ford Motor Company in the future? 3. How can Ford Motor Company maintain its competitive position? 1.7. Overall Research Approach A deductive approach will be used in this research report, including using quantitative and qualitative approaches to analyse the financial and business performance. Quantitative approach involves collecting and converting financial data into numerical form whereas qualitative approach includes incorporate subjective analysis. First of all, I will analyse Ford Motor Company and its competitor General Motors Company last three years financial statement data using their profitability ratios, liquidity ratios, leverage ratios, efficiency ratios and market ratios. After that, I will analyse the management messages, press releases and investor’s presentation from the company, using the SWOT model to examine the business environment and performance internally and externally. Lastly, I will analyse some research and articles in the automobile industry and conduct the Porter’s Five Forces model to examine the industry’s competitive intensity and attractiveness, and identify the Ford Motor Company’s position in this automobile industry. PART 2: INFORMATION GATHERING AND ACCOUNTING / BUSINESS MODELS 2.1. The sources of information When people are processing research or drafting an article, there are variety of sources to gather information and evidence to support the assertions. Most research use both primary sources and secondary sources together to build a completed and strong analysis. The primary sources are material that eyewitness accounts or as close to the original sources as possible (Ho, 2019). Including face to face interview, survey, questionnaire and speeches, and they are the raw material and provide a first-hand account of the events. But I will not use the primary sources to do my research and analysis repot as they are not relevant here. I will focus on the secondary sources of information. The secondary sources are interpretation, analysis, explanation or description based on primary sources. The secondary sources are easily available on the internet and books (Burchsted & Bell, 2020). Some types of secondary sources including textbooks, company annual reports, global bodies and etc. Secondary sources can provide a lot context and meaning that can be used to argue a point or a particular opinion. 2.2. Methods used to collect information and their limitations Secondary sources of information has been collected, interpreted and concluded previously and I can gain their information second hand. It can either be quantitative or quantitative. There is a lot of freely and reliable secondary source of information and it is better to collect information from different types of resources rather than focus on a single source of information. I will try my best to get the various, relevant and reliable sources of information but unavoidably there are some limitations for different type of resources. 2.2.1. Company Annual Report and its limitations The listed companies’ annual reports are the documents that used to disclose corporate information to all their shareholders (US securities and exchange commission, 2014). Including Management message, detailed financial data, result of operation, future plan and etc. Annual report is prepared by the internal and external financial experts. The external financial experts are consider as neutrality and authority. But the annual report is a general report aimed at a general public and cannot focus on any particular audience (Beal, 1966). The annual report do some window dressing processes to make the annual reports look better for investors, which will mislead the research and performance analysis. Moreover, the annual report is focus on quantitative information rather than qualitative information such as the employee efficiency, organisation integrity and etc. Those qualitative abilities are important factors for business performance analysis. 2.2.2. Internet and its limitations Nowadays there are vast of information can be found on the internet. The research report is benefited greatly from the online information as it is easy to be assessed and time saving for researchers. Information from business periodicals, specific trade associations and professional business consultancies all can be found on the internet. But there is a need to evaluate the quality and reliable of the web searching information as the extensive of information on the internet. 2.2.3. Book and its limitations Textbooks is written by professionals and have the detail and reliable knowledge of the subject. Ratio formula is detail showed and analysis in the textbook, and different concepts and theories is well explained. But some textbooks are old and outdated and information shared may be not current and relevant. 2.3. Ethical issue and how to resolve them 2.3.1. Ethical issue It is our duty and responsibility to conduct an ethical manner in any research report from planning to publication (Ng, 2006). Accountant are trained to maintain the high level of professional ethic when do the data collection and analysing. I will also conduct the same professional ethic to research and analysis this report. As all the information is public available from secondary sources of information, and no primary sources such as survey or interview is conducted during the information collection, so the plagiarism ethical issue risk will be arose. Plagiarism is the practice of taking someone else’s words or ideas without acknowledging the original source of information and passing them off as one’s own (Jacobs, 2020). It can be either published or unpublished source of information, and intentional and unintentional both are consider as dishonesty and cheat (university of stirling, 2017). Here are some examples of plagiarism: • Purchasing the research report on-line. • Turning in someone else’s work as your own. • Copying words or ideas without citation. • Changing some words but copying the sentence structure without citation. 2.3.2. How to resolve the ethical issue A professional accountant has a continuing duty to maintain professional knowledge, skill and ethics (IESBA, 2020). On my past accountant study and training, I have incorporate the highest levels of professional ethics while collecting and analysing the information. I have been very careful in citing all the information and ideas that used in my research and quoting the words or phrases that from other sources. I have been reading throughout the sources of information and getting the full view of the authors’ opinion instead of one or two sentences before analysing and evaluating the different sources of information. 2.4. Financial and Business Models used 2.4.1. Ratios analysis and limitations Financial ratios are important tools for interpreting financial statements. They are used to perform quantitative analysis and to gain the meaningful information about the company using the profitability ratios, liquidity ratios, leverage ratios, efficiency ratios and market value ratios (Corporate Finance institute, 2020). The financial ratios are calculated using the data in the company’s audited financial statements which is easy to extract. And they can track the changes within one company for a period of time and make a comparison with other companies • Profitability ratios are one of the most important ratios to measure a company’s success and evaluate the ability to generate income. However, individual figures shown in the financial statement means very little by themselves (Pyke, 2007). But when these figures are expressed as gross profit percentage, net profit percentage and return on capital employed (ROCE), they are more useful. • Liquidity ratios are used to determine a company’s ability to pay its short-term liability obligations. Current ratio, quick ratio and cash ratio are commonly used. • Efficiency ratios are used to analyse the company’s ability to effectively employ the resources to produce income. Including inventory turnover ratio, accounts receivable turnover ratio, accounts payable turnover ratio and etc. • Leverage ratios can tell us how the company’s assets and business operations are financed, using debt or equity. • And market value ratios are used to evaluate the current share price and can help the current and potential investors to determine whether it is over-priced or underprices. But we should also bear in mind the following limitations when interpreting financial ratios: • Historical information: all the financial ratios are based on the data stated in the financial statements which are all historical data. The historical information may already out of date and is not necessarily the best indicator of future performance. • Inflationary effects: annual financial statements are released yearly and there are time difference between each release. The real data will not be reflected in the financial statements thus the data in different financial statements are not comparable. • Manipulation of data: the financial ratios is based on the information that is reported by the company. Thus, the information may be manipulated by the company’s management to report a better result. That will result the financial ratios cannot reflect the actual performance and misleading the researchers. 2.4.2. SWOT analysis and limitations SWOT is an acronym for Strengths, Weaknesses, Opportunities and Threats. It is a strategy analysis and can identify and understand the key issues affecting the business internally and externally (Kaplan Publishing UK, 2019). Strengths and weaknesses are considered as internal factors and opportunities and threats are considered as external factors (Business Queensland, 2017). The company need to build and maintain its strengths, minimise and improve the weaknesses, seize and take advantage of the opportunity and identify and counteract the threats. The company should try their best to convert their weaknesses or threats to strengths or opportunities, and match strengths with their opportunities. The SWOT analysis also can help the company to understand its external environment and internal capacities so that can improve the company’s business performance. SWOT analysis is not free from its limitations (Juneja, n.d.). 1. SWOT analysis generate four individual parts and no weighting factors involved, it doesn’t priorities issues and doesn’t help the company choose the best solution. Therefore, the four different parts can produce a lot of information, but not all of them are useful (Juneja, n.d.). 2. SWOT analysis categorizes one factor as a strength, weakness, opportunity or threat, but one factor might be both a strength and a weakness or both an opportunity and a threat (Juneja, n.d.). 3. SWOT analysis is a subjective process and might be include the bias of the individuals who collect and analysis the data. That will result the analysis is not reliable and relevant for decision making (Juneja, n.d.). 2.4.3. Porter’s Five Forces and limitations Porter’s Five Forces of Competitive Position Analysis were developed in 1979 by Michael E Porter to assess and evaluate the competitive strength and position of a company (Chartered Global Management Accountant, 2013). The five forces that determine the competitive position and attractiveness of a market as follow (Johnso
Description
I have alrady written some of this thesis, including part 1 and part 2 , Now I need to revise 3.1 based on the comments by the teacher.and write the 3.2 part 2500 words and conclusion 500 words. I choose the Ford Motor as the business and the general motor as the comparision .The writing format must be the same as mine . thank you/
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FORD MOTOR COMPANY AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENT
(in millions, except per share amounts)
Revenues
Automotive
Ford Credit
Mobility
Total revenues
Costs and expenses
Cost of sales
Selling, administrative, and other expenses
Ford Credit interest, operating, and other expenses
Total costs and expenses
Operating income
Interest expense on Automotive debt
Interest expense on Other debt
Other income/(loss), net
Equity in net income of affiliated companies
Income/(Loss) before income taxes
Provision for/(Benefit from) income taxes
Net income
Less: Income attributable to noncontrolling interests
Net income attributable to Ford Motor Company
Earning per share attributable to common and class B stock
Basic income
Diluted income
Weighted-average shares used in computation of earnings per share
Basic shares
Diluted shares
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(in millions)
Net income
Other comprehensive income/(loss), net of tax
Foreign currency translation
Marketable securities
Derivative instruments
Pension and other postretirement benefits
Total other comprehensive income/(loss), net of tax
Comprehensive income/(loss)
Less: Comprehensive income/(loss) attributable to noncontrolling interests
Comprehensive income/(loss) attributable to Ford Motor Company
For the years ended December 31,
2019
2018
2017
143.599
12.260
41
155.900
148.294
12.018
26
160.338
145.653
11.113
10
156.776
134.693
11.161
9.472
155.326
574
963
57
(226)
32
(640)
(724)
84
37
47
136.269
11.403
9.463
157.135
3.203
1.171
57
2.247
123
4.345
650
3.695
18
3.677
131.321
11.527
9.047
151.895
4.881
1.133
57
3.267
1.201
8.159
402
7.757
26
7.731
0,01
0,01
0,93
0,92
1,94
1,93
3.972
4.004
3.974
3.998
3.975
3.998
For the years ended December 31,
2019
2018
84
3.695
2017
7.757
174
130
(689)
23
(362)
(278)
37
314
(34)
(265)
37
52
7.809
24
(523)
(11)
183
(56)
(407)
3.288
18
(315)
3.270
7.785
FORD MOTOR COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in millions)
December 31,
2019
ASSETS
Cash and cash equivalents (Note 9)
Marketable securities (Note 9)
Ford Credit finance receivables, net (Note 10)
Trade and other receivables, less allowances of $94 and $63
Inventories (Note 12)
Assets held for sale (Note 10 and Note 24)
Other assets
Total current assets
17.504
17.147
53.651
9.237
10.786
2.383
3.339
114.047
Ford Credit finance receivables, net (Note 10)
Net investment in operating leases (Note 13)
Net property (Note 14)
Equity in net assets of affiliated companies (Note 15)
Deferred income taxes (Note 7)
Other assets
Total assets
53.703
29.230
36.469
2.519
11.863
10.706
258.537
LIABILITIES
Payables
Other liabilities and deferred revenue (Note 17)
Automotive debt payable within one year (Note 20)
Ford Credit debt payable within one year (Note 20)
Other debt payable within one year (Note 20)
Liabilities held for sale (Note 24)
Total current liabilities
20.673
22.987
1.445
52.371
130
526
98.132
Other liabilities and deferred revenue (Note 17)
Automotive long-term debt (Note 20)
Ford Credit long-term debt (Note 20)
Other long-term debt (Note 20)
Deferred income taxes (Note 7)
Total liabilities
Redeemable noncontrolling interest (Note 23)
EQUITY
Common Stock, par value $.01 per share (4,011 million shares issued of 6
Class B Stock, par value $.01 per share (71 million shares issued of 530
Capital in excess of par value of stock
Retained earnings
Accumulated other comprehensive income/(loss) (Note 25)
Treasury stock
Total equity attributable to Ford Motor Company
Equity attributable to noncontrolling interests
Total equity
25.324
13.233
87.658
470
490
225.307
–
40
1
22.165
20.320
(7.728)
(1.613)
33.185
45
33.230
Total liabilities and equity
258.537
December 31,
2018
2017
16.718
17.233
54.353
11.195
11.220
18.492
20.435
52.210
10.599
11.176
3.930
114.649
3.889
116.801
55.544
29.119
36.178
2.709
10.412
7.929
256.540
56.182
28.235
35.327
3.085
10.762
8.104
258.496
21.520
20.556
2.314
51.179
23.282
19.697
3.356
48.265
95.569
94.600
23.588
11.233
88.887
600
597
220.474
24.711
12.575
89.492
599
815
222.792
100
98
40
1
22.006
22.668
(7.366)
(1.417)
35.932
34
35.966
40
1
21.843
21.906
(6.959)
(1.253)
35.578
28
35.606
256.540
258.496
GENERAL MOTORS COMPANY AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(In millions, except per share amounts)
Years Ended
2019
Net sales and revenue
Automotive
GM Financial
Total net sales and revenue
Costs and expenses
Automotive and other cost of sales
GM Financial interest, operating and other expenses
Automotive and other selling, general and administrative expense
Total costs and expenses
Operating income
Automotive interest expense
Interest income and other non-operating income, net
Equity income
Income before income taxes
Income tax expense
Income from continuing operations
Loss from discontinued operations, net of tax
Net income (loss)
Net loss attributable to noncontrolling interests
Net income (loss) attributable to stockholders
122.697
14.540
137.237
110.651
12.614
8.491
131.756
5.481
782
1.469
1.268
7.436
769
6.667
6.667
65
6.732
Net income (loss) attributable to common stockholders
6.581
Earnings per share (Note 21)
Basic earnings per common share – continuing operations
Basic loss per common share – discontinued operations
Basic earnings (loss) per common share
Weighted-average common shares outstanding – basic
5
5
1.424
Diluted earnings per common share – continuing operations
Diluted loss per common share – discontinued operations
Diluted earnings (loss) per common share
Weighted-average common shares outstanding – diluted
5
5
1.439
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
Years Ended
Net income (loss)
Other comprehensive income (loss), net of tax
2019
6.667
Foreign currency translation adjustments and other
Defined benefit plans
Other comprehensive income (loss), net of tax
Comprehensive income (loss)
Comprehensive loss attributable to noncontrolling interests
Comprehensive income (loss) attributable to stockholders
(6)
(2.122)
(2.128)
4.539
76
4.615
Years Ended December 31,
2018
1.461
2017
133.045
14.004
147.049
133.449
12.139
145.588
120.656
12.298
9.650
142.604
4.445
655
2.596
2.163
8.549
474
8.075
70
8.005
9
8.014
116.229
11.128
9.570
136.927
8.661
575
1.645
2.132
11.863
11.533
330
4.212
(3.882)
18
(3.864)
7.916
(3.880)
6
0
6
1.411
0
3
(3)
1.465
6
0
6
1.431
0
3
(3)
1.492
Years Ended December 31,
2018
8.005
2017
(3.882)
(715)
(221)
(936)
7.069
15
7.084
747
570
1.317
(2.565)
20
(2.545)
GENERAL MOTORS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions, except per share amounts)
ASSETS
Current Assets
Cash and cash equivalents
Marketable debt securities (Note 4)
Accounts and notes receivable (net of allowance of $201 and $211)
GM Financial receivables, net (Note 5; Note 11 at VIEs)
Inventories (Note 6)
Other current assets (Note 4; Note 11 at VIEs)
Total current assets
Non-current Assets
GM Financial receivables, net (Note 5; Note 11 at VIEs)
Equity in net assets of nonconsolidated affiliates (Note 8)
Property, net (Note 9)
Goodwill and intangible assets, net (Note 10)
Equipment on operating leases, net (Note 7; Note 11 at VIEs)
Deferred income taxes (Note 17)
Other assets (Note 4; Note 11 at VIEs)
Total non-current assets
Total Assets
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable (principally trade)
Short-term debt and current portion of long-term debt (Note 13)
Automotive
GM Financial (Note 11 at VIEs)
Accrued liabilities (Note 12)
Total current liabilities
Non-current Liabilities
Long-term debt (Note 13)
Automotive
GM Financial (Note 11 at VIEs)
Postretirement benefits other than pensions (Note 15)
Pensions (Note 15)
Other liabilities (Note 12)
Total non-current liabilities
Total Liabilities
Commitments and contingencies (Note 16)
Equity (Note 20)
Common stock, $0.01 par value
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Total stockholders’ equity
Noncontrolling interests
Total Equity
Total Liabilities and Equity
2019
Years Ended December 31,
2018
2017
19.069
4.174
6.797
26.601
10.398
7.953
74.992
20.844
5.966
6.549
26.850
9.816
5.268
75.293
15.512
8.313
8.164
20.521
10.663
5.571
68.744
26.355
8.562
38.750
5.337
42.055
24.640
7.346
153.045
228.037
25.083
9.215
38.758
5.579
43.559
24.082
5.770
152.046
227.339
21.208
9.073
36.253
5.849
42.882
23.544
4.929
143.738
212.482
21.018
22.297
23.929
1.897
35.503
26.487
84.905
935
30.956
28.049
82.237
2.515
24.450
25.996
76.890
12.489
53.435
5.935
12.170
13.146
97.175
182.080
13.028
60.032
5.370
11.538
12.357
102.325
184.562
10.987
56.267
5.998
13.746
12.394
99.392
176.282
14
26.074
26.860
(11.156)
14
25.563
22.322
(9.039)
14
25.371
17.627
(8.011)
41.792
4.165
45.957
228.037
38.860
3.917
42.777
227.339
35.001
1.199
36.200
212.482
FORD MOTOR COMPANY AND SUBSIDIARIES
2019
2018
Profitability Ratios
Revenue growth rate
-2,77%
2,27%
Operating profit margin (Return on Sales)
Operating profit
x 100%
Revenue
0,37%
2,00%
Net profit margin
Net profit
Revenue
0,05%
2,30%
Return on capital employed (ROCE)
Operating profit
x 100%
Capital employed
0,36%
1,99%
Return on equity (ROE)
Operating profit
Equity
1,73%
8,91%
1,16
1,20
Acid Test (Quick Ratio)
Current Asset – Inventory
Current Liability
1,05
1,08
Cash Ratio
Cash and cash equivalents
Current Liability
0,18
0,17
0,60
0,63
29,23
30,05
0,87
0,86
6,78
6,13
x 100%
x 100%
Liquidity Ratios
Current Ratio
Current Assets
Current Liability
Efficiency Ratios
Asset turnover
Revenue
Total assets
Inventory Turnover Days
Inventory
COS
Leverage Ratios
Debt to Assets Ratio
Total debt
Total assets
Debt to Equity Ratio
Total debt
Equity
x 365
Debt to Capital Ratio
Total debt
Total debt + Equity
0,87
0,86
Asset to Equity Ratio
Total assets
Equity
7,78
7,13
Interest Cover
Operating profit
Finance costs
0,56
2,61
OMPANY AND SUBSIDIARIES
2017
GENERAL MOTORS COMPANY AND SUBSIDIARIES
2019
2018
2017
-6,67%
1,00%
3,11%
3,99%
3,02%
5,95%
4,95%
4,86%
5,44%
-2,67%
2,98%
3,83%
3,06%
6,39%
13,71%
11,93%
10,39%
23,93%
1,23
0,88
0,92
0,89
1,12
0,76
0,80
0,76
0,20
0,22
0,25
0,20
0,61
0,60
0,65
0,69
31,06
34,30
29,69
33,49
0,86
0,80
0,81
0,83
6,26
3,96
4,31
4,87
0,86
0,80
0,81
0,83
7,26
4,96
5,31
5,87
4,10
2,43
1,37
3,90
Oxford Brookes University
Research and Analysis Report
An analysis and evaluation of the business and financial performance of
Ford Motor Company, between 1 Jan 2017 and 31 Dec 2019.
Table of Contents
Part 1: INTRODUCTION ………………………………………………………………………………………………………….. 3
1.1.
Reasons for choosing the topic ………………………………………………………………………………….. 3
1.2.
Reasons for choosing the industry ……………………………………………………………………………… 3
1.3.
Reasons for choosing Ford Motor Company ……………………………………………………………….. 3
1.4.
Ford Motor Company’s background …………………………………………………………………………… 4
1.5.
Research objective …………………………………………………………………………………………………… 4
1.6.
Research question……………………………………………………………………………………………………. 5
1.7.
Overall Research Approach ……………………………………………………………………………………….. 5
PART 2: INFORMATION GATHERING AND ACCOUNTING / BUSINESS MODELS ……………………………. 6
2.1.
The sources of information ……………………………………………………………………………………….. 6
2.2.
Methods used to collect information and their limitations……………………………………………. 6
2.2.1.
Company Annual Report and its limitations …………………………………………………………. 6
2.2.2.
Internet and its limitations…………………………………………………………………………………. 7
2.2.3.
Book and its limitations……………………………………………………………………………………… 7
2.3.
Ethical issue and how to resolve them ……………………………………………………………………….. 7
2.3.1.
Ethical issue ……………………………………………………………………………………………………… 7
2.3.2.
How to resolve the ethical issue …………………………………………………………………………. 7
2.4.
Financial and Business Models used …………………………………………………………………………… 8
2.4.1.
Ratios analysis and limitations ……………………………………………………………………………. 8
2.4.2.
SWOT analysis and limitations ……………………………………………………………………………. 9
2.4.3.
Porter’s Five Forces and limitations …………………………………………………………………….. 9
PART 3: RESULTS AND ANALYSIS FOR BUSINESS AND FINANCIAL PERFORMANCE ……………………… 11
3.1.
Business Performance…………………………………………………………………………………………….. 11
3.1.1.
SWOT Analysis………………………………………………………………………………………………… 11
3.1.2.
Porter’s Five Forces Analysis …………………………………………………………………………….. 12
3.2.
Financial Performance ……………………………………………………………………………………………. 14
3.2.1.
Profitability…………………………………………………………………………………………………….. 14
3.2.2.
Liquidity …………………………………………………………………. Error! Bookmark not defined.
3.2.3.
Efficiency ……………………………………………………………….. Error! Bookmark not defined.
3.2.4.
Leverage ………………………………………………………………… Error! Bookmark not defined.
3.2.5.
Market value ………………………………………………………….. Error! Bookmark not defined.
Part 1: INTRODUCTION
1.1.
Reasons for choosing the topic
I choose the topic eight for my research report which is “An analysis and evaluation of the
business and financial performance of an organisation over three-year’s period”. Financial
analysis use the historical numbers and give us an insight into how well the company has
been performing and trends in that performance. It is an essential skill in a variety of
occupations, including investment management, corporate finance, commercial lending and
the extension of credit (Fridson & Alvarez, 2011). Business analysis is the application of
knowledge, skill, tools, and techniques to determine problems and identify business needs,
recommend viable solutions, meet business and project objectives and facilities the
successful implementation of the business or project (Project Management Institute, 2015).
Using the financial and business analysis through different accounting tools and approaches,
helping us to get a deep understanding of the organisation’s profitability and risk, defining
business needs and determining solutions to business problems. During my past few years
ACCA study and corporate finance job, I learnt various financial and business techniques and
knowledge which I can apply to this topic eight research report easily. It is always a
challenging task to analyse an organisation’s financial and business performance.
1.2.
Reasons for choosing the industry and its basic information
For the last century, the automobile culture has spread over the entire globe (Mohr, et al.,
2013). The automobile industry and its value chain have shaped not only the global economy
but how billions of peoples live and jobs. It can allow us move in an easier and faster way,
cover more distance and access to resources that once were inaccessible. People’s
relationship and communication become closer and better because of the invention of
automobile. I cannot even conceive of a world without cars and I want to know more about
this industry.
According to Deloitte, the global automobile industry is in the midst of a major
transformation and challenge. The technology, joint collaboration, efficiency improvements
and set up strategic partnerships with IT giants will be the potential futures for automobile
industry (Helbig & Sandau, 2017).
The global automobile industry is intensely competitive and volatile, with manufacturing
capacity far exceeding current demand (Ford Motor Company, 2020), it will cause the
volatile financial and business performance. The global new vehicles sales are falling by
about 4.3 million in 2019, a bigger drop than 2008 (International Organization of Motor
Vehicle Manufacturers, 2020). Additionally, the effect of the coronavirus (COVID-19) on the
automobile industry is unprecedented and most vehicle manufacturers have had to shut
down during this period. Therefore the automobile industry face unprecedented challenge
and enormous difficulties.
1.3.
Reasons for choosing Ford Motor Company
In the 14th series of Top Gear, British motoring factual television series, the show asked
people to vote “The car company that has made the largest number of great cars in the
history of the world chart”. The number one brand is not a supercar manufacturer, nor a
local British brand, not even a luxury brand. At the top of the list is Ford Motor Company. I’m
interested why Ford is so popular? Why it can stand out from many famous car brands? So, I
choose Ford Motor Company as my target organisation and General Motors Company as a
competitor for the comparative analysis. The two biggest automakers in the United States
and are also big players on the world stage.
1.4.
Ford Motor Company’s background
Ford Motor Company is a leading automobile company based in USA. Company is
incorporated in Year 1903 and based in Dearborn, Michigan (Ford Motor Company, 2020). It
adapted the moving assembly line process for the manufacture of automobiles, which
allowed it manufacture, market and sell the Model T at a significantly lower price than his
competition, enabling the creation of a new and rapidly growing market (Vlaskovits, 2011).
The company designs, manufactures, markets and services a full line of Ford cars, trucks,
SUVs, electrified vehicles and Lincoln luxury vehicles and is pursuing leadership positions in
electrification; mobility solutions, including self-driving services; and connected services. It
employs approximately 188,000 people worldwide. Throughout its 117-year history, Ford
Motor Company is focus on the freedom of movement and making contribution in times of
need. In 2019, Ford’s U.S. market share was around 41.1 percent, trailing only General
Motors (GM) (Wagner, 2020).
1.5.
Research objective
Different stakeholders have their different own interest in tracking the financial and
business performance. The objective of this research report is to critically assess the
financial and business performance of Ford Motor Company over a three-year between
2017 and 2019 in different aspects.
Through using the numbers being produced in Ford Motor Company’s financial statements
over the past three years, to calculate the different type of financial ratios and highlight the
relationship between the different ratios and analysis the trends of the different ratios in
order to measure the overall financial health.
To analyse Ford Motor Company’s internal and external environment to identify the
company’s strength and weakness, as well as opportunity and threat which could affect its
business operations. Focusing on the key factors and understanding where the company has
competitive advantages and what issues should be addressing.
Determining the automobile industry’s weakness and strengths and the competition level
within the industry using Porter’s Five Forces model. Through analysing the automobile
industry to identify Ford Motor Company’s competitive position in this industry.
And comparing with the competitor General Motors Company to have a better
understanding of Ford Motor Company’s internal and external financial and business
performance, its position in this automobile industry, and the overall strategy.
1.6.
Research question
I have set the following questions so that the report meets the research objectives; these
are:
1. What has been the financial performance of Ford Motor Company over the last
three years, and compare it with General Motors Company?
2. What is biggest weakness and threat for Ford Motor Company in the future?
3. How can Ford Motor Company maintain its competitive position?
1.7.
Overall Research Approach
A deductive approach will be used in this research report, including using quantitative and
qualitative approaches to analyse the financial and business performance. Quantitative
approach involves collecting and converting financial data into numerical form whereas
qualitative approach includes incorporate subjective analysis.
First of all, I will analyse Ford Motor Company and its competitor General Motors Company
last three years financial statement data using their profitability ratios, liquidity ratios,
leverage ratios, efficiency ratios and market ratios. After that, I will analyse the management
messages, press releases and investor’s presentation from the company, using the SWOT
model to examine the business environment and performance internally and externally.
Lastly, I will analyse some research and articles in the automobile industry and conduct the
Porter’s Five Forces model to examine the industry’s competitive intensity and
attractiveness, and identify the Ford Motor Company’s position in this automobile industry.
PART 2: INFORMATION GATHERING AND ACCOUNTING / BUSINESS
MODELS
2.1.
The sources of information
When people are processing research or drafting an article, there are variety of sources to
gather information and evidence to support the assertions. Most research use both primary
sources and secondary sources together to build a completed and strong analysis.
The primary sources are material that eyewitness accounts or as close to the original sources
as possible (Ho, 2019). Including face to face interview, survey, questionnaire and speeches,
and they are the raw material and provide a first-hand account of the events. But I will not
use the primary sources to do my research and analysis repot as they are not relevant here.
I will focus on the secondary sources of information. The secondary sources are
interpretation, analysis, explanation or description based on primary sources. The secondary
sources are easily available on the internet and books (Burchsted & Bell, 2020). Some types
of secondary sources including textbooks, company annual reports, global bodies and etc.
Secondary sources can provide a lot context and meaning that can be used to argue a point
or a particular opinion.
2.2.
Methods used to collect information and their limitations
Secondary sources of information has been collected, interpreted and concluded previously
and I can gain their information second hand. It can either be quantitative or quantitative.
There is a lot of freely and reliable secondary source of information and it is better to collect
information from different types of resources rather than focus on a single source of
information. I will try my best to get the various, relevant and reliable sources of information
but unavoidably there are some limitations for different type of resources.
2.2.1. Company Annual Report and its limitations
The listed companies’ annual reports are the documents that used to disclose corporate
information to all their shareholders (US securities and exchange commission, 2014).
Including Management message, detailed financial data, result of operation, future plan and
etc. Annual report is prepared by the internal and external financial experts. The external
financial experts are consider as neutrality and authority.
But the annual report is a general report aimed at a general public and cannot focus on any
particular audience (Beal, 1966). The annual report do some window dressing processes to
make the annual reports look better for investors, which will mislead the research and
performance analysis. Moreover, the annual report is focus on quantitative information
rather than qualitative information such as the employee efficiency, organisation integrity
and etc. Those qualitative abilities are important factors for business performance analysis.
2.2.2. Internet and its limitations
Nowadays there are vast of information can be found on the internet. The research report is
benefited greatly from the online information as it is easy to be assessed and time saving for
researchers. Information from business periodicals, specific trade associations and
professional business consultancies all can be found on the internet.
But there is a need to evaluate the quality and reliable of the web searching information as
the extensive of information on the internet.
2.2.3. Book and its limitations
Textbooks is written by professionals and have the detail and reliable knowledge of the
subject. Ratio formula is detail showed and analysis in the textbook, and different concepts
and theories is well explained.
But some textbooks are old and outdated and information shared may be not current and
relevant.
2.3.
Ethical issue and how to resolve them
2.3.1. Ethical issue
It is our duty and responsibility to conduct an ethical manner in any research report from
planning to publication (Ng, 2006). Accountant are trained to maintain the high level of
professional ethic when do the data collection and analysing. I will also conduct the same
professional ethic to research and analysis this report.
As all the information is public available from secondary sources of information, and no
primary sources such as survey or interview is conducted during the information collection,
so the plagiarism ethical issue risk will be arose.
Plagiarism is the practice of taking someone else’s words or ideas without acknowledging
the original source of information and passing them off as one’s own (Jacobs, 2020). It can
be either published or unpublished source of information, and intentional and unintentional
both are consider as dishonesty and cheat (university of stirling, 2017).
Here are some examples of plagiarism:
• Purchasing the research report on-line.
• Turning in someone else’s work as your own.
• Copying words or ideas without citation.
• Changing some words but copying the sentence structure without citation.
2.3.2. How to resolve the ethical issue
A professional accountant has a continuing duty to maintain professional knowledge, skill
and ethics (IESBA, 2020). On my past accountant study and training, I have incorporate the
highest levels of professional ethics while collecting and analysing the information. I have
been very careful in citing all the information and ideas that used in my research and
quoting the words or phrases that from other sources. I have been reading throughout the
sources of information and getting the full view of the authors’ opinion instead of one or
two sentences before analysing and evaluating the different sources of information.
2.4.
Financial and Business Models used
2.4.1. Ratios analysis and limitations
Financial ratios are important tools for interpreting financial statements. They are used to
perform quantitative analysis and to gain the meaningful information about the company
using the profitability ratios, liquidity ratios, leverage ratios, efficiency ratios and market
value ratios (Corporate Finance institute, 2020). The financial ratios are calculated using the
data in the company’s audited financial statements which is easy to extract. And they can
track the changes within one company for a period of time and make a comparison with
other companies
• Profitability ratios are one of the most important ratios to measure a company’s
success and evaluate the ability to generate income. However, individual figures
shown in the financial statement means very little by themselves (Pyke, 2007). But
when these figures are expressed as gross profit percentage, net profit percentage
and return on capital employed (ROCE), they are more useful.
• Liquidity ratios are used to determine a company’s ability to pay its short-term
liability obligations. Current ratio, quick ratio and cash ratio are commonly used.
• Efficiency ratios are used to analyse the company’s ability to effectively employ the
resources to produce income. Including inventory turnover ratio, accounts
receivable turnover ratio, accounts payable turnover ratio and etc.
• Leverage ratios can tell us how the company’s assets and business operations are
financed, using debt or equity.
• And market value ratios are used to evaluate the current share price and can help
the current and potential investors to determine whether it is over-priced or underprices.
But we should also bear in mind the following limitations when interpreting financial ratios:
• Historical information: all the financial ratios are based on the data stated in the
financial statements which are all historical data. The historical information may
already out of date and is not necessarily the best indicator of future performance.
• Inflationary effects: annual financial statements are released yearly and there are
time difference between each release. The real data will not be reflected in the
financial statements thus the data in different financial statements are not
comparable.
• Manipulation of data: the financial ratios is based on the information that is
reported by the company. Thus, the information may be manipulated by the
company’s management to report a better result. That will result the financial ratios
cannot reflect the actual performance and misleading the researchers.
2.4.2. SWOT analysis and limitations
SWOT is an acronym for Strengths, Weaknesses, Opportunities and Threats. It is a strategy
analysis and can identify and understand the key issues affecting the business internally and
externally (Kaplan Publishing UK, 2019). Strengths and weaknesses are considered as
internal factors and opportunities and threats are considered as external factors (Business
Queensland, 2017).
The company need to build and maintain its strengths, minimise and improve the
weaknesses, seize and take advantage of the opportunity and identify and counteract the
threats. The company should try their best to convert their weaknesses or threats to
strengths or opportunities, and match strengths with their opportunities. The SWOT analysis
also can help the company to understand its external environment and internal capacities so
that can improve the company’s business performance.
SWOT analysis is not free from its limitations (Juneja, n.d.).
1. SWOT analysis generate four individual parts and no weighting factors involved, it
doesn’t priorities issues and doesn’t help the company choose the best solution.
Therefore, the four different parts can produce a lot of information, but not all of
them are useful (Juneja, n.d.).
2. SWOT analysis categorizes one factor as a strength, weakness, opportunity or threat,
but one factor might be both a strength and a weakness or both an opportunity and
a threat (Juneja, n.d.).
3. SWOT analysis is a subjective process and might be include the bias of the
individuals who collect and analysis the data. That will result the analysis is not
reliable and relevant for decision making (Juneja, n.d.).
2.4.3. Porter’s Five Forces and limitations
Porter’s Five Forces of Competitive Position Analysis were developed in 1979 by Michael E
Porter to assess and evaluate the competitive strength and position of a company
(Chartered Global Management Accountant, 2013).
The five forces that determine the competitive position and attractiveness of a market as
follow (Johnso
