FIN_6060_MILESTONE_2 8TH

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Apr 3, 2024

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Milestone 2: GM Pro Forma Statements AKINLDE TEMITOPE DAMILOLA Nexford University FIN 6060: Financial Decision Making Dr. Keith Wade FEBUARY 2024

GM’s Pro forma income statement As at DEC 2017 2017 2018 Total Sales automotive 133,449 146,793.9 Cost of sales for automotive 114,869 126,355.9 Net sales 145,588 160,146.80 operating costs 0 automotive, general, and administrative expense 9,575 10532.5 GM financial interest operating and other expenses 11,128 12240.8 Total operating expense 135,572 149129.2 operating Income 10,016 11017.6 income before tax 11,863 13,049.3 Income tax expense 11,533 11,533 Income from continuing operations 330 363 Net income (3882) 1846.30 GM'S Ero forma balance sheet current assets cash and cash equivalent 15512 17063.2 Marketable securities 8313 9144.3 Accounts and notes receivable (net of allowance of $278 and $212) 8164 8980.4 GM Financial receivables, net 20521 22573.1 Inventories 10663 11729.3 Other current assets 4465 4911.5 Total current assets 68744 75618.4 Noncurrent assets GM Financial receivables, net 21208 23328.8 Equity in net assets of nonconsolidated affiliates 9073 9980.3 Property, net 36253 39878.3 Goodwill and intangible assets, net 5849 6433.9 Equipment on operating leases, net 42882 47170.2

Deferred income taxes 23544 Other assets 4929 5421.9 Total non-current assets 143738 158111.8 Total Assets 212482 233730.2 LIABILITIES AND EQUITY Current liabilities Accounts payable (principally trade) 23929 26321.9 Short-term debt and the current portion of long-term debt Automotive 2515 2766.5 GM Financial 24450 26895 Accrued liabilities 25996 28595.6 Total current liabilities 76890 84579 Non-current Liabilities Long-term debt Automotive 10987 12085.7 GM Financial 56267 61893.7 Postretirement benefits other than pensions 5998 6597.8 Pensions 13746 15120.6 Other liabilities 12394 13633.4 Total non-current liabilities 99392 109331.2 Total Liabilities 176282 193910.2 EQUITY Common stock, $0.01 par value 14 15.4 Additional paid-in capital 25371 27908.1 Retained earnings 17627 19389.7 Accumulated other comprehensive loss -8011 -8812.1 Total stockholders’ equity 35001 38501.1 Noncontrolling interests 1199 Total Equity 36200 39820 Total Liabilities and Equity 212482 233730.2 GM'S PRO FORMA STATEMENT OF CASHFLOW Catego Cash flows from operating activities Income from continuing operations 330 363 Depreciation, amortization, and impairment charges 12261 13487.1 Foreign currency remeasurement and transaction losses 52 57.2 Undistributed earnings of nonconsolidated affiliates, net -132 -145.2 Pension contributions and OPEB payments -1636 -1799.6 Provision (benefit) for deferred taxes 10880 10880

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Change in other operating assets and liabilities -3015 Other operating activities -468 Net cash provided by operating activities — continuing operations 17338 Net cash used in operating activities — discontinued operations -10 Net cash provided by operating activities 17328 Cash flows from investing activities Expenditures for property -8453 Available-for-sale marketable securities, acquisitions -5503 Available-for-sale marketable securities, liquidations 9007 Acquisition of companies/investments, net of cash acquired -41 Purchases of finance receivables, net -19325 Principal collections and recoveries on finance receivables 12578 Purchases of leased vehicles, net -19180 Proceeds from termination of leased vehicles 6667 of leased vehicles 6,667 2,554 1,095 Other investing activities 178 Net cash used in investing activities — continuing operations -24072 Net cash used in investing activities — discontinued operations -3500 Net cash used in investing activities -27572 Cash flows from financing activities Net decrease in short-term debt -140 Proceeds from issuance of debt (original maturities greater than three months) 52187 Payments on debt (original maturities greater than three months) -33592 Payments to purchase common stock -4492 Proceeds from the issuance of GM Financial preferred stock 985 Dividends paid -2233 Other financing activities -305 Net cash provided by financing activities — continuing operations 12410 Net cash provided by financing activities — discontinued operations 174 Net cash provided by financing activities 12584 Effect of exchange rate changes on cash, cash equivalents and restricted cash 348 Net increase (decrease) in cash, cash equivalents and restricted cash 2688 Cash, cash equivalents and restricted cash at beginning of period 15160 Cash, cash equivalents and restricted cash at end of period 17848 Ratio Analysis The utilization of quantitative metrics for the purpose of evaluating the financial performance of a particular organization is what is known as ratio analysis. Through the utilization of this methodology, it is possible to acquire substantial insights into the profitability, operational efficiency, solvency, and liquidity of the company, as demonstrated by its financial statements. According to Vaidya (2019), the profitability ratio is a method that examines a company's potential to generate profits in relation to its balance sheet assets, revenues, operating expenses, or equity, using the most recent information available. According to Hayes (2023), the utilization of liquidity measures is necessary in order to -3316.5 -514.8 19071.8 -11 19060.8 0 -9298.3 -6053.3 9907.7 -45.1 -21257.5 13835.8 -21098 7333.7 195.8 -26479.2 -3850 -30329.2 0 -154 57405.7 -36951.2 -4941.2 1083.5 -2456.3 -335.5 13651 191.4 13842.4 382.8 2956.8 16676 19632.8

evaluate a debtor's capability of meeting current debt commitments without relying on money from outside sources. The ratios evaluate a company from the perspective of its capacity to repay its debts as well as the level of security that they offer. Calculating indicators such as the current ratio, quick ratio, and operating cash flow ratio is the method that is utilized to accomplish this.(Hayes, 2023) Net profit Ratio Net profit/Net sales -3% 1.2% Current Ratio Current assets/Current liability 1 1 Gross profit ratio Gross profit/Net sales 7% 7% Return on assets ratio Net profit/Total assets -2% 0.8% Net income/shareholder Return on equity equity -11% 4.8% Inventory turnover ratio cost of sales/inventories 12.71425 12.71425 Additional funds Needed (AFN) = expected increase in assets — automatic increase in liabilities — expected increase in retained earnings Increase in Assets = current year’s assets X sales growth rate = $212,482 billion x 10% =$ 21,248.2 billion Increase in liabilities = Current years liabilities x sales growth rate = 176,282 billion x 10% = $ 17,682 billion

Expected increase in retained earnings = $ 17,627 x 10% = $ 1,762.7 AFN =$21,248.2-%$17,682-%1,762.7 = $1,803.5 AFN = $1,803.5 billion Recommendation It is of the utmost importance to investigate the effects of the considerable tax burden that General Motors imposes on its high income, which calls for reform. The only reliance on return on equity (ROE) and return on assets (ROA) is insufficient to ensure the long-term viability of the firm. Therefore, it is essential to implement a new strategic and business model in order to guarantee the company's prosperity. Additionally, General Motors does not completely optimize the exploitation of its assets, despite the fact that it has enough liquidity. In order to determine how successfully a firm makes use of its assets and liabilities in order to generate sales and profits, efficiency ratios are utilized. The computation requires determining how effectively inventories are being utilized, how effectively machinery is being utilized, how effectively liabilities are being converted, and how effectively equity is being utilized. Because they have the ability to increase a company's income and earnings, improvements to efficiency ratios are extremely important. Year 2022, Team CFI The findings of the study that was presented earlier make it abundantly evident that General Motors is not making efficient use of its assets. The fact that its ROA ratio is only 0.8%, which is insufficient for a company of its scale, lends credence to this assertion. Due to the fact that this expansion will result in a bad net profit ratio of only 1.2%, it is suggested that General Motors refrain from the pursuit of this growth. Taking into account the fact that the corporation requires 1,803.5 billion dollars in order to carry out the growth, this ratio is regarded as being insufficient.

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