Question

Given the financial data in the popup​ window, General Motor /Ford Motor Company

Sales $155,305 /$146,808

EBIT $7,626/ $7,817

Interest Expense $345/ $714

Net Income $5,208/ $7,101

Current Assets $81,478/ $131,491

Total Assets $166,365 / $202,094

Current Liabilities $62,491/ $19,545

Equity $42,527/ $26,399

Values are expressed in millions of dollars.

​,

for General Motors​ (GM) and Ford Motor Company​ (F), compare these two companies using the following financial​ ratios: times interest earned​ ratio, current​ ratio, total asset​ turnover, financial​ leverage, profit​ margin, and return on equity. Which company would you invest​ in, either as a bondholder or as a​ stockholder?

The times interest earned ratio for General Motors is nothing. ​(Round to four decimal​ places.)

Answer 1

in $mn	General Motor	Ford Motor		S
Sales	$         155,305.00	$146,808.00
EBIT	$            7,626.00	$    7,817.00
Interest Expense	$               345.00	$      714.00
Net Income	$            5,208.00	$    7,101.00
Current Assets	$           81,478.00	$131,491.00
Total Assets	$         166,365.00	$202,094.00
Current Liabilities	$           62,491.00	$ 19,545.00
Equity	$           42,527.00	$ 26,399.00
Debt	$           61,347.00	$156,150.00	Debt = Total Assets - Current Liabilities - Equity
			Formula
Time Interest Earned	22.10	10.95	EBIT / Interest Expense
Current Ratio	1.30	6.73	Current Assets / Current Liabilities
Total asset​ turnover	0.93	0.73	Sales / Total Assets
Financial ​Leverage	1.44	5.91	Total Debt / Shareholder’s Equity
Profit​ Margin	3.4%	4.8%	Net Income / Sales
Return on Equity	12.2%	26.9%	Net Income / Equity
As a bond holders we would like to invest in General Motor as its Times Interest earned is almost twice as that of
General Motor and its current financial leverage is significantly less compared to Ford
However as stockholder, we would like to invest in Ford, as it has higher Return on Equity and profit margin thereby
generating greater return for stock holders