# General motors financial statement ratios.

b’Subject: Finance’
b’Topic: General motors financial statement ratios.’
b”Write a 3-6 page report evaluating trends in all of the above ratios. Discuss whether your company’s profitability, efficiency, liquidity, and solvency are improving or deteriorating. Suggest ways the company can improve the ratios that show problems. The report should be well written with cover page, introduction, the body of the paper (with appropriate subheadings), conclusion, and reference page. Referencnyzes must be appropriately cited.”

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Based on formulas in your textbook, compute the following ratios for two years. You may use Excel to compute your ratios.

 2019 2018 Evaluation Debt ratio (Total Debt/Total Assets) 52,145,000/167,489,000 = 0.31 41,265,000/159,422,000 = 0.30 Strong debt ratios, less than 0.5 meaning most of companies assets are financed through equity. Less risk Gross profit margin (Gross Profit/Total Assets) 41,531,000/167,489,000 = 24.8% 42,399,000/159,422,000 = 26.6% Strong gross profit margins, 10% is average and anything over 20% is high. Free cash flow (Operating Cash Flow – Capital Expenditures 12,588,000-2,594,000  = 9,994,000 15,827,000-2,196,000  = 13,631,000 Strong free cash flow, it is considerably positive Times interest earned (EBIT/Interest Expenses) 19,256,000/1,574,000 = 12.23 13,201,000/1,316,000 = 10.03 Strong times interest earned, 2.5 is typically considered acceptable risk for investors Accounts receivable turnover (Total Turnover/Average Receivables) 51,921,590/8,724,000  = 5.95 54,203,480/8,025,000 = 6.75 Weak turnover ratio but improving from year to year, higher risk Inventory turnover (Cost of Goods Sold/Average Inventory) 10,219,000/8,283,000 = 1.23 11,248,000/7,508,000 = 1.5 Weak inventory turnover ratio, indicates overstocked products that are selling slowly, higher risk

Prepare a DuPont Analysis of ROE for two years, including computations of

 2019 2018 Evaluation Return on Sales 5,481/ 131,756 = 4.1% 4,445/ 142,604 =3.1% Stronger Quicker More Liquid Less Risk Asset Turnover 122,697/ 228,037 = 0.54 133,045/ 227,339 =0.59 Weaker Slower More Liquid Return on Assets 6,732/ 228,037 =2.95% 8,014/ 227,339 =3.53% Weaker Slower Less Liquid More Risk Financial Leverage 228,037/ 41,792 =5.46 227,339/ 38,860 =5.85 Weaker Slower Less Liquid More Risk Return on Equity 6,732/ 41,792 =16.11% 8,014/ 38,860 =20.62% Weaker Slower Less Liquid More Risk

Briefly evaluate the ratio trends. Indicate on your worksheet whether each ratio is:

stronger / weaker

quicker /slower

more / less liquid

more / less risk

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