Week 1 FA Case

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Apr 3, 2024

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1 Week 1 FA Case Caleb Cofer Dr. Patrick AC 740: Accounting Theory August 24, 2023
2 Ford Motor Company Part A 1. The conformed name of Ford Motor Company is Ford Motor Co. 2. The SIC code of Ford Motor Company is SIC 3711. 3. Ford Motor Company’s state of incorporation is Delaware. 4. Ford Motor Company’s fiscal year-end is December 31, with the most recent year-end obviously being December 31, 2022. 5. Ford Motor Company’s business address is One American Road, Dearborn, Michigan 48126. 6. Ford Motor Company’s telephone number is 313-322-3000. 7. Ford Motor Company’s stock is listed on the New York Stock Exchange (NYSE). 8. The former Ford Motor Company was acquired and incorporated by the current Ford Motor Company in Delaware in 1919. Ford commits to building a better world where transportation is more accessible by developing trucks, cars, SUVs, vans, and luxury vehicles, both gas-powered and electric. They claim to invent breakthrough electric vehicles for all customers, and professional vehicles tailored to the needs of businesses to help them grow and thrive. On January 1, 2023, Ford implemented a new operating model and reporting structure which will analyze their results in the following segments: Ford Blue, Ford Model e, Ford Pro (these three are combined to replace the Automotive segment), Ford Next, and Ford Credit. 9. Ford’s 10-K report does not list a single competitor, but rather states that the worldwide automotive industry has a wide variety of producers with none being dominant. They continue to state that certain manufacturers do account for a major percentage of total
3 sales within particular countries. In the United States, I would say the major competitors of Ford are companies such as General Motors, Toyota, Tesla, and Honda. 10. 10-Ks for both Tesla and General Motors have been printed. Part B In Ford’s 2022 Annual Report, on the last page of the section titled ‘Summary of Significant Accounting Policies’, the preparer of the statement outlines both new accounting standards that have recently been adopted, and new accounting standards that have been issued but not yet adopted. One small change that was recently adopted is the standard which requires entities to disclose certain information in their annual financial statements for transactions with governments that are accounted for by applying a contribution accounting model or grant. Another accounting standard that has been issued but not yet adopted has to do with credit losses, debt restructurings, and vintage disclosures. This standard requires an entity to apply the loan restructuring and refinancing guidance in ASC 310 to all loans and other receivable modifications. It also enhances the requirements of disclosure for certain refinances and restructurings when by lenders when the borrower is facing financial difficulty. Ford claims that these policies will not have a large impact on their financial statements in the future. Part C I was surprised to find that Ford was in the negative in terms of profit last fiscal year. According to Fortune.com, Ford’s key financials showed a $1,981 Million or 111% loss last year. I suppose this isn’t too hard to believe since we are not too far removed from Covid, but I did not
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4 anticipate them recording a loss for 2022. Their profit ratios as % of revenues, assets, and stockholders’ equity were also negative, coming in at -1.3%, -0.8%, and -4.6%, respectively. As an investor, your total return in 2022 would have been -42.1%, although over 5 years and 10 years it would be 2.5% and 3.1%. This doesn’t seem like an uncommon trend coming out of the pandemic, and I predict Ford will recover in the next 5 years and continue to grow since they are one of the world’s most admired companies. The majority of experts at Marketwatch.com believe that it is best to hold on to Ford right now if you have it, which I would have to agree with. I would also go even further and say that now would be a relatively good time to get in on Ford. Ford themselves said in their 2023 “Delivering Ford+” press release that their main focus going forward with the Ford+ growth plan is to redefine customer value, while simultaneously reducing cyclicality, improving capital efficiency, and generating profitable growth and strong free cash flow. It seems to me that the basis of their plans in the future is to create value by ceasing to try to be all things to all people, but instead further distinguishing their three business segments which are Ford Blue (gas powered and hybrid vehicles), Ford Model e (electric vehicles and breakthrough digital platforms and software), and Ford Pro (Ford’s so-called secret weapon to help commercial customers lower the total cost of vehicle ownership through the avenues of specialized gas and increasing attach rates for productivity services such as prognostics and telematics). All in all, Ford plans to create value through improving product mix, leading in development and delivery of electric vehicles, leveraging existing strengths into a comprehensive commercial business through Ford Pro, and revolutionizing experiences for all types of customers which over time will broaden sources of revenue. CFO John Lawler plans a total
5 company adjusted EBIT (earnings before interest and taxes) margin of 10% in 2026, which will be a waypoint to higher subsequent profitability (2022 Annual Report p. 126).
6 References Inline XBRL Viewer. (n.d.). https://www.sec.gov/ix?doc=%2FArchives%2Fedgar%2Fdata %2F37996%2F000003799623000012%2Ff- 20221231.htm#ie50adb6d899d4f6ebcb5e73f7bd915e7_16 2022 annual report - s1.q4cdn.com. (n.d.-b). https://s1.q4cdn.com/695946674/files/doc_financials/2022/ar/2022_annual_report.pdf Staff, F. (2023, August 1). Ford Motor . https://fortune.com/company/ford-motor/? utm_source=search&utm_medium=suggested_search&utm_campaign=search_link_clicks F: Ford Motor Co.. analyst estimates . MarketWatch. (n.d.). https://www.marketwatch.com/investing/stock/f/analystestimates Ford Motor Company Capital Markets Day (delivering ford+) transcript. (n.d.-c). https://media.openexc.com/wp-content/uploads/2023/05/CMD-05-22-2023-Plenary-and- Breakout-Transcript.pdf
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