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


= 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


= 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




More Liquid

Less Risk

Asset Turnover 122,697/ 228,037

= 0.54

133,045/ 227,339




More Liquid


Return on Assets 6,732/ 228,037


8,014/ 227,339




Less Liquid

More Risk

Financial Leverage 228,037/ 41,792


227,339/ 38,860




Less Liquid

More Risk

Return on Equity 6,732/ 41,792


8,014/ 38,860




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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