Chapter 5 - Cash Flow Statement

http://www.theglobeandmail.com/globe-investor/ford-rides-new-models-to-26-billion-profit/article1998866/

Summary:

In summary of the above article, Ford Motor Co. posted its best first-quarter period in 13 years because of their new arrival small cars, Ford Explorer and Fiesta. Their profit jumped 22 per cent, their best first-quarter performance since 1998; their eighth straight quarterly profit from their near-bankruptcy 5 years ago. Also, their revenues went up 18 per cent which was way higher than what the analysts were projecting. The company saw an especially strong growth in Asia. The redesigned Explorer SUV got more miles per gallon which more than doubled in US sales. The rising gas prices has been pushing buyers to small, more fuel efficient cars which can affect Ford’s sales later on but Ford has been able to command for higher prices for cars because consumers have been adding expensive options like the Sync entertainment system. Ford still has trouble spots like higher prices for commodities and could increase by the end of the year. They lost some market share in US, Europe and South America in first quarter because it didn’t match incentive spending as General Motors Co. did but Ford is two fewer brands shorter. They are trying to be disciplined and won’t produce more than they can sell. That cycle leads to big discounts with Ford which helps them pay off debt. It has led them to a more cash than debt ratio. Investors are still keeping an eye out for trouble though.

Connection:

The cash flow statement is the main point of the article and the chapter in the textbook. It is Ford’s best first-quarter period in 13 years, which means that there is more income coming in than there was 13 years ago. This is because Ford put an effort and focused towards more research and development and came up with two new arrival cars Ford Explorer and Fiesta. These cars have been doing well in the market as it features new expensive options that help them drive up the costs of the vehicle. Also the redesigned Explorer SUV used more miles per gallon which doubled in US sales which benefited greatly because gas prices have been rising. Overall, the Ford company is generating more cash to debt ratio than they did before because of their “won’t produce more than they can sell” rule that has recently taken place.

Reflection:

In my opinion, I think Ford has really been stepping up their game in the market overall. It seems as if they have effectively reassessed their sales strategies and it has been working to their great benefit. Although there are some trouble spots still unresolved, it is good that their investors are keeping a close eye on them. It ensures their consistency with keeping up with their company goals and expectations of others involved with their business. It also gives Ford a confidence boost to keep innovative and on top of their game among their major competitors.