Topic
General Motors Financial Ratios Analysis
Instructions
The purpose of this assignment is to help students gain a better understanding of the financial statements used for corporate financial reporting and the key ratios used to make business decisions.
Assignment Steps
Select a Fortune 500 Company from one of the following industries:
- Pharmaceutical
- Energy
- Retail
- Automotive
- Computer Hardware
Review the balance sheet and income statement in the company’s 2015 Annual Report.
Calculate the following ratios using Microsoft® Excel®:
- Current Ratio
- Quick Ratio
- Debt Equity Ratio
- Inventory Turnover Ratio
- Receivables Turnover Ratio
- Total Assets Turnover Ratio
- Profit Margin (Net Margin) Ratio
- Return on Assets Ratio
Analyze in 1,050 words why each ratio is important for financial decision making.
Minimum required references include your textbook and your chosen firm’s webpage for their 2015 Annual Report.
Answer preview
Quick ratio shows an organization’s short-term liquidity. It also measures the organization’s ability to meet its short-term obligations using its most liquid assets. Quick ratio excludes the company inventories from its current assets. From our computations as can be observed from Table 1 above, the General motors quick Ratio is 55:1, which is greater than 1. This is a significantly high quick ratio. The higher the quick Ratio, the better for the organization. A liquidity ratio of 55:1 implies that General motors is in very good liquidity position. The General Motors are an indication that the company has lots of reserves which not being placed to other investments. The ratio also indicates a high level of receivables for general Motors which was $$26billion in 2015 and even higher in 2014 at $35billion. High accounts receivables as in the case of General motors is a pointer that the company is not in a position to effectively collecting on its account receivables.
Word count: 1052