working capital management report ford motor company

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Working Capital Management

Report: Ford Motor Company Lecturer: PhD Tran Phi Long Class: Advanced Finance 62A

Group 4: 1 Nguyén Ngoc Hai — 11205149

2 Phạm Minh Tuấn — 11207358

3 Nguyễn Nữ Minh Nguyệt - 11206408

4 Nguyễn Phương Thảo — 11203671

5 Nguyễn Nam Anh - 11204401

6 Pham Linh Chi - 11200620

7 Nguyén Dinh Long - 11205950

Table of contents:

Question I

1 Background EOord - -o «co c0 on 9n nọ on Hi Ko nó Hi BI lo Bi 5

2 General enVironIm€nf .- «so - co c 0n 0 0n nó ni Hi nọ in neuen ene a seereneers 5

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1 Balance Sheef co 0n ĐH HH HH 0 04 00010014609 6000 009 6:0Á-0096-004-800 6-96 8

2 Leverage nh nổ hố cố eeeeee ố ố 12

3 Cash Ílow sfafeTmenf - on 0n 0 HH HH HH HH GB Ki I0 6.000 08-0190 06-89 6/9988 12

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4, ConcÏusion c «c0 0n ni n0 0 0 BI Bi 0800 8-89'08 16

Question 3

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Question 1: Background of the company and the economy during 2019 — 2022

1 Background Ford

¢ Ford Motor Company (commonly known as Ford) is an American multinational

automobile manufacturer headquartered in Dearborn, Michigan, United States It

was founded by Henry Ford and incorporated on June 16, 1903

« Ford manufactures a large selection of automobiles, including cars, trucks, SUVs,

and commercial vehicles under the brands Ford, Lincoln, and Troller The Ford

Mustang, F-150 pickup truck, and Explorer SUV are some of its most well -known models

¢ Ford has also dabbled with various sectors over the years, including

telecommunications, financial services, and aviation Nonetheless, it has mostly

concentrated on the development and manufacturing of automobiles

¢ Currently, Ford employs about 186,000 people worldwide and has business in over 100 nations Their goal is to produce automobiles that are of the highest quality, are safe, and are environmentally responsible

® The drop is because of the continuation of higher warranty costs during the

second half of 2019, lower vehicle sales volumes, reduced results from Ford

Credit, and higher investment in the development of the next generation of self- driving and electric vehicles

The company's revenue for the year was $155,9 billion, which was down from $160.3

billion in the previous year Net income was also down to $ 84 million, compared to $3.7 billion in the previous year

In 2020:

¢ Fell 15.6% last year due to the coronavirus pandemic, a decline

* Commercial fleet sales and tight inventories of its F-150 pickup trucks

¢ Ford's revenue for 2020 was $127.1 billion, down from $155,9 billion in 2019

The company also reported a net loss of $ 1,276 billion for the year, compared to

a net income of $84 million in the previous year

¢ Sales of the popular full-size pickup tumbled by about 33% in the fourth quarter

from the same time last year

¢ Ford’s truck sales slid 11.3% in 2020, while SUVs were off by 9.7% year over

year

¢ The company launched the all-electric Mustang Mach-E SUV in 2020 and announced plans to invest $11.5 billion in electric vehicle development over the

next several years

¢ Sales of passenger cars, which Ford is discontinuing, aside from key models such

as the Mustang, plummeted 44.7% compared with 2019

Overall, while 2020 was a difficult year for Ford, the company demonstrated resilience

and an ability to adapt to challenging circumstances

In 2021:

¢ The company reported revenue of $136,341 billion for the year, up from $127.1

billion in the previous year Net income also improved significantly, with the company reporting a profit of $17,910 billion in 2021, compared to a loss of

$1,276 billion in 2020

Ford has also benefited from its focus on electric and autonomous vehicle technology The company launched its all-electric Mustang Mach-E SUV in 2021, which has been well - received by consumers and has helped to drive sales

In addition, Ford has been implementing a restructuring plan to streamline its operations and reduce costs This plan includes a significant investment in electric

vehicles, as well as a focus on core businesses and markets

Overall, while Ford faced significant challenges in 2020, the company has shown resilience and has taken steps to position itself for success in the years ahead

In 2022:

The Ford Motor Company reported revenue streams of just over 158 billion U.S dollars in 2022 This figure represents a growth in revenue of nearly 16 percent

year-on-year Vehicle wholesales grew from almost 3.9 million units in 2021 to

around 4.2 million units in 2022

Ford Motor annual net income for 2022 was $-1.981B, a 111.04% decline from

2021

Ford Motor said that it lost $2.2 billion in 2022 as it wrote down the value of two big investments and struggled with high costs and supply chain problems Ford has long struggled to reduce defects and recalls in its cars and trucks Recalls can be expensive and time consuming, and company executives said that they were working to improve the reliability of their vehicles

2.2 Sociocultural:

Ford employs about 57,000 hourly workers in the U.S., more than any other automaker.* Overall, we employ about 88,000 in the United States

Ford supports American suppliers: In 2020, Ford purchased more than $47 billion

in goods and services from more than 5,300 U.S based suppliers, supporting businesses in 47 states

Ford dealerships are in every state: Ford has more than 3,000 dealerships that

employ more than 170,000 men and women across the United States

2.3 Global:

* One of the ways that Ford affected the global automotive industry in 2021 was

through its focus on electric vehicles The company launched its all-electric

Mustang Mach-E SUV, which was well received by consumers and helped to

drive interest in electric vehicles Ford also announced plans to invest $22 billion

in electric vehicle development through 2025, which is expected to have a significant impact on the global electric vehicle market

¢ The company has partnerships with companies such as Argo AI and Volkswagen

to develop autonomous driving systems, and it is testing autonomous vehicles in select markets

¢ The company has announced plans to exit some markets, such as Brazil, and to focus on more profitable segments of the market

¢ Overall, Ford's investments in electric and autonomous vehicle technology, as well as its restructuring plan, are expected to have a significant impact on the

global automotive industry in the years ahead

2.4 Technology:

¢ Ford Motor Company is a major player in the automotive industry, and

technology is a key area of focus for the company Some of the key technology areas that Ford is working on include electric and hybrid vehicles, autonomous driving Technology in manufacturing is also improved, such as advanced robotics and automation This technology helps Ford to produce vehicles more efficiently and with greater precision Ford is committed to sustainability and is investing in technology to reduce the environmental impact of its vehicles and manufacturing processes This includes the use of recycled materials and advanced energy management systems Overall, technology is a key focus for Ford Motor Company, and the company is investing heavily in a variety of technology areas to improve its products, manufacturing processes, and

sustainability

Question 2: How does the company manage its cash?

1 Balance Sheet

ASSETS

urrent assets

count rec current asset urrent aurrent assets

current assets

asset current accounts + 3

current taxes assets

non current assets 14212

LIABILITIES AND EQUITY

Interest urrent urrent

Current revenue

current aurrent

current

taxes revenuc

non current non current net

AL LIABILITIES NET MINORITY INTEREST

10 GROSS MINORITY INTEREST 4316 48622

Ley ratio 54309°% 53,7259

Overall, the company's assets decreased slightly while its liabilities and equity decreased more

significantly The company has significant long-term debt and its leverage ratio decreased in

2021

11

The company's total assets increased from 258,537 in 2020 to 267,261 in 2021, representing a 3.38% increase The company's current assets decreased from 116,744 in 2020 to 108,996 in

2021, representing a 6.65% decrease The company's total liabilities and equity decreased from

267,261 in 2020 to 257,035 in 2021, representing a 3.83% decrease The company's leverage

ratio decreased from 60.5% in 2020 to an unknown value in 2021 The company's net income and cash flows statements are not provided, so we cannot analyze profitability or cash flow The company has significant long-term debt, which increased from 101,361 in 2020 to 88,400 in

2021 This represents a 13% decrease in long-term debt The company's accounts payable,

interest payable and current deferred revenue increased in 2021, while current debt and other current liabilities decreased

Looking at the provided data, the leverage ratio of the company was 60.07% in 2019, which

means that 60.07% of its assets were financed by debt In 2020, the leverage ratio increased

slightly to 60.5% However, in 2021, the ratio decreased significantly to 53.725%, indicating that the company had less debt relative to its assets In 2022, the ratio increased slightly to 54.309%

It is important to note that the optimal leverage ratio can vary depending on the industry and the specific circumstances of the company A high leverage ratio can indicate that a company is taking on too much debt and may be at risk of defaulting on its loans On the other hand, a low leverage ratio may indicate that a company is not taking advantage of the benefits of debt financing, such as tax deductions and increased leverage

3 Cash flow statement: 3 periods (2019-2020, 2020-2021, 2021-2022)

3.1 Operating activities:

12

Ford Motor annual/quarterly cash flow from operating activities history and growth rate from

2010 to 2022 Cash flow from operating activities can be defined as a company's cash flows from operations

Ford Motor cash flow from operating activities for the quarter ending December 31, 2022

was $6.853B, a 56.59% decline year-over-year

Ford Motor cash flow from operating activities for the twelve months ending December

31, 2022 was $13.307B, a 64.78% decline year-over-year

Ford Motor annual cash flow from operating activities for 2022 was $6.853B, a 56.59% decline from 2021

Ford Motor annual cash flow from operating activities for 2021 was $15.787B, a 34.95% decline from 2020

Ford Motor annual cash flow from operating activities for 2020 was $24.269B, a 37.59%

increase from 2019

3.2 Investing activities:

Ford Motor annual/quarterly investing activities - other history and growth rate from 2010 to

2022 Investing activities - other can be defined as the net amount of items a company reports that are too small to report separately Additionally, this field holds the sum of items a company reports that cannot be assigned to any other standardized field in the investing activities section

of the Cash Flows Statement

Ford Motor investing activities - other for the quarter ending December 31, 2022

was $0.411B, an 86.69% decline year-over-year

Ford Motor investing activities - other for the twelve months ending December 31, 2022

was $9,217B, a 13.35% decline year-over-year

Ford Motor annual investing activities - other for 2022 was $0.411B, an 86.69% decline from 2021

Ford Motor annual investing activities - other for 2021 was $3.089B, a 144.23% decline from 2020

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¢ Ford Motor annual investing activities - other for 2020 was $-6.984B, a 25.93%

It seems like you have provided a table of Capital Expenditures and Revenue for a company over

the course of several years Here is what I can understand from the data you have given: The

Company’s Capital Expenditures (or CapEx) have varied greatly over the years, ranging from

33.138T in 2019 to 169.631T in 2022 The company's Revenue has also fluctuated, but to a lesser extent than its CapEx, with a high of 39.022M in 2021 and a low of 34.478M in 2020 The

% Revenue, which appears to be the percentage of revenue that the company is investing in CapEx, has also varied, with a high of 0.4% in 2022 and a low of 0.1% in 2019 Without additional context, it is difficult to draw any definitive conclusions about the company's financial performance or strategy However, it is worth noting that investing heavily in CapEx can be a sign of a company's commitment to long-term growth and innovation On the other hand, if a company is consistently spending more on CapEx than it is generating in revenue, it may be an indication that the company is not generating enough cash flow to support its growth plans

3.3, Financing activities

Ford Motor annual/quarterly financial activities - other history and growth rate from 2010 to

2022 Financial activities - other can be defined as the net amount of items a company reports that are too small to report separately Additionally, this field holds the sum of items a company reports that cannot be assigned to any other standardized field in the financing activities section

of the Cash Flows Statement

® Ford Motor financial activities - other for the quarter ending December 31, 2022 was $-

0.271B, a 158.1% increase year-over-year

® Ford Motor financial activities - other for the twelve months ending December 31, 2022

was $-0.870B, an 89.13% increase year-over-year

¢ Ford Motor annual financial activities - other for 2022 was $-0.271B, a 158.1% increase from 2021

¢ Ford Motor annual financial activities - other for 2021 was $-0.105B, a 42.93% decline from 2020

¢ Ford Motor annual financial activities - other for 2020 was $-0.184B, an 18.58% decline from 2019

4 Conclusion

Drawing from the case study analysis, Ford is the second largest American based automaker in the world In addition, the company operates in a very competitive and saturated market As a result, the company faces high level of competition from major players such as BMW, GM,

Toyota, Honda, Chrysler, and Mercedes Benz among others

When grouped, Ford lie at the lowest group, which produces broadest range of cars, which affordable prices The company is a strong brand, which is globally known Its financial capacity

15

and presence has increased its market share The major weakness of the company is that it highly depends on the U.S market Financial crisis in Europe and U.S have threatened its performance

and market share

Financially, Ford is stable and in a better position The company has increased in sales and revenues as well as pre-tax operating profits in a consecutive period of three years It has been recommended that the company ought to increase its presence in emerging markets and produce diversified products

Question 3: How does the company manage its inventory?

1 Ford Inventory Management System

LJ Background

Ford Motor, which is considered the market leader of the vehicles production market in the U.S,

is one of the biggest automakers in the world beside Toyota of Japan or Mercedes Benz of Europe One of many reasons leading them to success is a strategic plan in inventory

management Managing inventories is definitely a significant task in order to develop the company A strategic management assures an enough number of products in the stores, which guarantee that the company can operate normally without any excess of products Since the great number of inventories can result in a lower percentage of liquidity in the assets of Ford Moreover, the corporation can receive a loss since it cannot meet the demand due to the large

number of inventories On the other hand, the lack of inventories will lead to the limited choices

in products in the store; therefore, Ford can face the problem that less cars sold resulting in less revenue In order to managing inventories successfully, Ford Motor has used a wide variety of

useful tools

12 Problems

In 9/2022, Ford ended the month with between 40,000 and 45,000 large pickups and SUVs that it could not finish because it did not have all the parts Automakers have been struggling with various supply chain issues, specifically a shortage of computer chips, which has choked off vehicle production for much of the last two years

16

This is not the first time that Ford has built vehicles with most but not all of their computer chips

as it awaited In March, the company announced it would ship some SUVs without all of their less crucial chips and then added them later after they were sold to customers At times it has been forced to temporarily closed, some plants altogether due to chip shortages The company ended the quarter with inventory of about 18,000 vehicles waiting for parts, down from 53,000 at the start of the April-June period The parts shortages have curtailed automotive production and resulted in a new-vehicle inventory crunch

1.3 Types and Roles of Inventory at Amazon

Raw materials, work-in-process, and supplies: This is generally called unfinished goods This type of inventory includes raw materials, work-in-process and supplies Moreover, awaiting products, which are nearly final products but lack some small parts are counted

as unfinished goods This type of awaiting products is a problem that negatively influences the quarter revenue of Ford due to its delay

Available inventory: This type of inventory is maimly the final product, which cannot match the demand of customers Therefore, the number of sold ones is quite low, leading

to a high number of inventories To tackle this situation, these products should be sold with a discounted price that can lessen down the number of inventories

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Ford Motor Co., inventory

2 Ford’s Inventory Strategies:

2.1 Ford’s Lean manufacturing

Lean manufacturing boosts the productivity of the chain by avoiding keeping inventory; Lean’s principles make the production process of Ford as effective as possible It focuses on improving

18

product quality and lowering the cost resulting from removing waste products from the production process and the value chain Lean Resource Center (LRC) provides new educational

materials on lean management and periodic magazines; CD-ROOMs, movies and electronic

resources of Lean, and Ford's global supply chain research service LRC also provides a network

of university professors, mentors and experts, who have a wide knowledge about lean management The LRC has also established an alliance with the Ford Supplier Network-network

of external suppliers On the website of this network, suppliers can see the LRC logo and can click on the LRC content This is exactly what icons on the web used to widen the popularity of their brand image LRC has noticed a significant growth in the number of searches of their company in the Internet after expanding brands to internal and extranet websites This means that their adaptation of LRC is working well Ford not only applies Lean manufacturing to itself, but also shares with other automakers Ford Motor tried its best to help other suppliers understand and apply Lean manufacturing to their production system in order to reduce wastes during production Ford suitably adapt the Lean manufacturing to its manufacturing system, therefore, this plays an integral role in reducing the number of inventories

raw materials, as well as those related to stocking

The earliest usage of JIT at Ford was practiced by Henry Ford, as an effort towards managing production materials during the period between 1903 and 1920 The model entails areas like eliminating unnecessary production stages, correcting defective working techniques, and reducing the idling time of company machines and plants The JIT strategy of Ford entails the elimination of product defects, eliminating overproduction and ensuring that the company does

not incur unnecessary transportation

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3 Ford Measures of Inventory Performance

3.1 Inventory size

10,778.00 11,033.00 | 134,693.00 10,808.00 10,797.00 | 112,752.00 12,065.00 11,436.50 | 114,651.00 14,080.00 13,072.50 | 134,397.00 11,932.75 11,584.75 | 124,123.25

The level of inventory as we can see from the table is increasing from 2019 with 10,799 dollars

up to now The reason behind this is that there has been a global shortage of semiconductor chips, which has caused delays in the production of finished goods in the automotive industry, in

recent years The shortage has been caused by various factors, including the COVID-19

pandemic and geopolitical tensions The COVID-19 pandemic caused disruptions to the global supply chain, leading to a reduction in the production of semiconductor chips Many factories had to shut down temporarily to contain the spread of the virus, which resulted in delays and backlogs in the production of chips At the same time, there has been an increased demand for semiconductor chips due to the growing use of technology in various industries This has led to

an increase in the demand for chips from the consumer electronics industry, which has put pressure on the supply of chips for other industries

The shortage of semiconductor chips is expected to continue to affect the automotive industry in the short term, but the situation is expected to improve as chip production ramps up to meet demand However, the timeline for the recovery of the chip supply chain is uncertain and depends on various factors, including the global vaccination rates, the impact of new virus variants, and geopolitical tensions As a result, many automotive companies have reported higher inventory levels than usual, which is a significant concern for the industry High inventory levels can lead to increased storage costs and a reduction in profitability for the company Additionally, high inventory levels may result in the need for discounting to clear the inventory, which can affect the company's bottom line

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4 Ford Measures of Inventory Performance

4.1 Inventory size

10,778.00 11,033.00 | 134,693.00 10,808.00 10,797.00 | 112,752.00 12,065.00 11,436.50 | 114,651.00 14,080.00 13,072.50 | 134,397.00 11,932.75 11,584.75 | 124,123.25

The level of inventory as we can see from the table is increasing from 2019 with 10,799 dollars

up to now The reason behind this is that there has been a global shortage of semiconductor chips, which has caused delays in the production of finished goods in the automotive industry, in

recent years The shortage has been caused by various factors, including the COVID-19

pandemic and geopolitical tensions The COVID-19 pandemic caused disruptions to the global supply chain, leading to a reduction in the production of semiconductor chips Many factories had to shut down temporarily to contain the spread of the virus, which resulted in delays and backlogs in the production of chips At the same time, there has been an increased demand for semiconductor chips due to the growing use of technology in various industries This has led to

an increase in the demand for chips from the consumer electronics industry, which has put pressure on the supply of chips for other industries

The shortage of semiconductor chips is expected to continue to affect the automotive industry in the short term, but the situation is expected to improve as chip production ramps up to meet demand However, the timeline for the recovery of the chip supply chain is uncertain and depends on various factors, including the global vaccination rates, the impact of new virus variants, and geopolitical tensions As a result, many automotive companies have reported higher inventory levels than usual, which is a significant concern for the industry High inventory levels can lead to increased storage costs and a reduction in profitability for the company Additionally, high inventory levels may result in the need for discounting to clear the inventory, which can affect the company's bottom line

21

4.2 Analysis of inventory management using ratios

Table 7: Inventory Ratios of Ford Motor, General Motors (major competitor) and Industry for a

4-year period (2019-2022)

11,220.00 9,816.00 | 11,198.00] 10,239.50} 136,269.00] 132,954.00 29.99 28.11 12.17 12.98 7.03 10,778.00 | 10,398.00] 11,033.00 | 10,107.00] 134,693.00} 123,265.00 29.90 29.93 12.21 12.20 7.23 10,808.00 | 10,235.00] 10,797.00] 10,316.50] 112,752.00} 108,813.00 34.95 34.61 10.44 10.55 7.67 12,065.00 | 12,988.00} 11,436.50] 11,611.50] 114,651.00} 109,126.00 36.41 38.84 10.03 9.40 6.39 14,080.00 | 15,366.00] 13,072.50| 14,177.00] 134,397.00} 135,754.00 35.50 38.12 10.28 9.58 6.39

$11,790.20 | $11,760.60 | $11,507.40 | $11,290.30 | $126,552.40 | $121,982.40} $ 33.11 33.36|5 11.03}$ 10.94 6.94

Inventory turnover is a measure of how quickly a company sells its inventory over a given

period A high inventory turnover ratio indicates that a company is selling its inventory quickly,

which can be a good sign as it implies efficient use of working capital and reduces the risk of

inventory obsolescence or spoilage However, an extremely high inventory turnover ratio could

also suggest that a company is experiencing stock outs or not stocking enough inventory to meet

customer demand, which could result in lost sales and dissatisfied customers On the other hand,

a low inventory turnover ratio could indicate that a company is not selling its inventory quickly

enough, which could suggest issues with demand or pricing However, a low inventory turnover

ratio could also be a deliberate strategy for certain businesses, such as luxury retailers that

intentionally limit their inventory to create exclusivity Therefore, what is considered a "good"

inventory turnover ratio depends on the industry, business model, and competitive environment

of a company It is important to compare a company's inventory turnover ratio with industry

benchmarks and trends to determine whether it is performing well or not

For most industries, an inventory turnover ratio of 5 to 10 is regarded as ideal In the case of

Ford Company, the inventory turnover ratio for 2022 was 10.28, decreased from 12.21 in 2019

This decrease perhaps indicates that Ford is managing its inventory less effectively In addition,

its average inventory turnover from 2019 to 2022 being around 11.03 times per year is

significantly higher than its average industry group, which is around 6.94 times This implies a

positive point that Ford Motor can maintain lower on-hand inventory than its average industry It

signals a less risky prospect since the company replenishes cash quickly and is not stuck with

unsold goods

22

Ford Motor inventory turnover decreased gradually during the period of four years as shown in table 7 When compared to its competitors-General Motor, Ford's inventory management strategy focuses on reducing the level of inventory held in its supply chain The company uses a just-in- time (JIT) system that allows it to order parts and materials only as needed, which helps to minimize inventory-carrying costs Ford also uses advanced analytics and predictive modeling to optimize inventory levels and improve supply chain efficiency General Motors, on the other hand, has traditionally held larger inventories of parts and finished goods in its supply chain However, the company has been moving towards a more JIT system in recent years, with a goal

of reducing inventory and improving efficiency General Motors has also invested in advanced inventory management systems and analytics to optimize its supply chain and reduce costs This improvement of General Motors in managing their inventory can be seen through the inventory

turnover ratios of both companies, they are nearly the same in 2018 and 2019 but from 2020, General Motor is managing their inventory more effectively by having lower inventory turnover

compared with Ford

Question 4: How does Amazon manage its accounts receivable/accounts payable from 2019 -

2022?

1, Accounts receivable

Data of Ford (millions)

Table 4.1 Account Receivables

0 Receivable Turnover Ratio 15.26 13.22 12.76 11.66 Days in Sales Outstanding 23.92 27.61 28.6 31.30

23

Equation: Receivable Turnover RÑafie ————————— Average Accounts Receivable

365 Receivable Turnover Ratio

Days in Sales Outstanding (DSO) =

Receivables Turnover Ratio and Days in Sales Outstanding (Ford Motor)

% Re evabie Turnover Ratio —e=— Days in Sales Outstanding

Total net receivables at December 31, 2022 were $4 billion higher than a year ago, primarily reflecting higher non-consumer financing, offset partially by fewer operating leases, lower

consumer financing, and currency exchange rates Ford Credit’s loss metrics reflected healthy

and stable consumer credit conditions and strong auction values Ford Credit’s U.S 36-month auction values for off-lease vehicles were up 8% from a year ago, reflecting strong demand for used vehicles, including the impact of lower new vehicle production due to the semiconductor shortage

In a 4-year period, Ford’s accounts receivable has a significant rise from $9,237 millions to

$15,729 millions While Ford’s accounts receivables, turnover ratio has gradually declined from

2019 to 2022 These results show that Ford was managing its accounts receivable ineffectively and its product was not sold easily Furthermore, during the examined period, days in sales outstanding followed a rise from 23.92 days in 2019 to 31.3 days in 2022 Therefore, the collection period of Ford was longer, so that the company could not use its cash more quickly In conclusion, it could be indicated that credit and collection policies of the company were

unfavorable

24

LI Credit Policy of Ford - Ford Credit Segment

Establishing an official credit policy is essential for a company to have higher accounts receivable since the credit policy can affect the company’s volume of sales Receivables represent an extended line of credit from a company to the client that requires payments due in a relatively short time, ranging from a few days to a fiscal year The credit period or payment terms delineate the length of time the client must pay his invoice Sales and accounts receivable increase when the payment terms are increased Shortening the credit period has the opposite effect

Ford Credit earns its revenue primarily from payments made under retail installment sale and

finance lease (retail financing); operating lease contracts that it originates and purchases; interest rate supplements and other support payments from affiliates; and payments made under dealer financing programs As a result, Ford Credit has a large portfolio of finance receivables and

«

operating leases which it classifies into two portfolios consumer” and “non-consumer” Finance receivables and operating leases in the consumer portfolio include products offered to individuals and businesses that finance the acquisition of our vehicles from dealers for personal and commercial use Finance receivables in the non-consumer portfolio include products offered

Ford’s Red Flex Buy Gold Ford Standard

Carpet Lease financing Certified Options Purchase

financing Term 24- to 48- | 66- or 75- 36-month 36- or 48- 12-to 84-

month month repayment | month month

repayment repayment repayment Terms terms

Discount Not disclosed 15% or 18% | Not Not Not

in first 36 disclosed disclosed disclosed months

Mileage 10,000, 12,000 | Unlimited Not Not Unlimited

25

Amount - $395 disposal | Not disclosed | Not $475 Not

fee, waived if disclosed disposal fee | disclosed you renew

- $645

acquisition fee

Minimum | Notdisclosed | Not disclosed | 172 point Not Not

credit score disclosed disclosed

APR 0% 0% 3.49% 0% 0%

Ford's Red Carpet Lease: Ford’s lease offers to include lots of flexibility in terms of mileage limits and lessees receive complimentary GAP insurance, but leasing fees add up

fast Here’s an overview:

24- to 48-month repayment terms

$395 disposal fee, waived if you renew

$645 acquisition fee

Complimentary GAP coverage for up to 96 months

Mileage limits of 10,000, 12,000 or 15,000 miles per year (or pre-purchase more) College students and recent graduates can get $500 bonus cash

Flex Buy financing: Ford offers special Flex Buy financing, exclusively for new car purchases Terms include:

66- or 75-month repayment

Payments made during the first 36 months are discounted by 15% or 18%

Monthly payments increase after 36 months

Not available in Maine, Michigan, New Hampshire, North Carolina, Ohio, Pennsylvania, Virginia and Washington, D.C

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Gold Certified vehicles are Ford’s version of certified pre-owned vehicles (CPOs) Here’s

an overview:

Must pass 172-point inspection

Starting APR is 3.49% (available with 36-month financing)

Includes 12-month/12,000-mile comprehensive warranty

Includes seven-year/100,000-mile powertrain coverage

Ford Options financing: If the customers are looking for a new Mustang Mach-E or F-

150 Lightning, they might qualify for Ford Options financing They will have to make a

balloon payment at the end of the loan, or choose to trade in the vehicle for another Ford or

refinance the remaining amount A few other Ford Options loan terms to know about:

36- or 48-month repayment

$475 disposal fee

Not available in Nevada, New Hampshire, North Carolina or Washington, D.C 1.2 Comparison: Ford vs General Motors vs Industry

Data of General Motors (millions)

Table 4.3: Account Receivables (General Motors)

Average Accounts Receivable $33,399 | $33,821 | $34,144 | $40,500

Data of Industry: Automotive

Table 4.7: Receivable Turnover Ratio (Industry)

2019 2020 2021 2022 Receivable Turnover Ratio 6.53 6.61 97 11.06 Days in Sales Outstanding 55.89 55.21 37.63 33.00

1.2.1 Comparison of Accounts Receivable Turnover Ratios

Table 4.8: Comparison of Accounts Receivable Turnover Ratios

Accounts Receivable Turnover Ratios (Ford Motor

vs General Motor vs Automotive Industry)

From the chart, we can see Ford’s line was higher than that of both General Motors and the Industry despite its figure showing a downward trend The competitor’ ratio was relatively stable

but always stays at a low ratio (below five times) The Industry’s figure kept to an upward trend

that was higher than the trend of General Motors When compared with the Industry in this period, it can be indicated that Ford managed its accounts receivable quite efficiently However,

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it is noticeable that the receivable turnover ratio of Ford and the Industry in 2022 are nearly equal Therefore, Ford should improve its receivable collection in the next period

1.2.2 Comparison of Days in Sales Outstanding

Table 4.9: Comparison of Days in Sales Outstanding

Days in Sales Outstanding (Ford Motor vs General Motor vs

Automotive Industry)

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According to the data, the industry average for days in sales outstanding took a period of more

than 50 days in 2019 to 2020, then decreased considerably to more than 30 days, whereas

General Motor's numbers over this time significantly exceeded (around 90 - 100 days) In contrast, Ford’s line was far lower than those of General Motors and the industry, and it

consistently remained above 20 days Compared to the other two, Ford Motors, which has a low

day in sales outstanding, indicates that the company is getting its payments quickly, therefore is

able to convert to cash from credit sales

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