Gm Financial Report Analysis

Introduction General Motors Corp. (NYSE: GM), the world’s largest automaker, has been the global industry sales leader for 76 years. General Motors was founded 1908, in Flint, Michigan and currently employs approximately 284,000 people around the world. GM’s global headquarters is the Renaissance Center located in Detroit, Michigan, USA, They currently manufacture their cars and trucks in 35 different countries. Its European headquarters are based in Zurich, Switzerland, and its Holden headquarters are located in Melbourne, Victoria, Australia.

In 2007, 9. 37 million GM cars and trucks were produced globally under the following 12 brands: Buick, Cadillac, Chevrolet, GM Daewoo, GMC, Holden, Hummer, Opel, Pontiac, Saab, Saturn and Vauxhall. GM is also the majority shareholder in GM Daewoo Auto & Technology Co. of South Korea and has had much collaboration with the world’s various automakers. This includes product, power train and purchasing collaborations with Suzuki Motor Corp. and Isuzu Motors Ltd.

of Japan, advanced technology collaborations with Toyota Corporation and DaimlerChrysler AG and BMW AG of Germany and vehicle manufacturing ventures with several of the world’s automakers including Toyota, Suzuki, Shanghai Automotive Industry Corp. of China, AvtoVAZ of Russia, Renault SA of France, and most recently, UzAvtosanoa of Uzbekistan. GM also had collaborations with Fiat S. P. A (see GM/Fiat Premium platform) and Ford Motor Company. To this day, GM retains various stakes in many different automakers.

GM parts and accessories are sold under GM Performance Parts, GM Good wrench and ACDelco brands through GM Service and Parts Operations which supplies GM dealerships and distributors worldwide. GM engines and transmissions are marketed through GM Power train. GM’s largest national market is the United States, followed by China, Canada, the United Kingdom, and Germany. GM owns nearly-half (49%) of the finance company GMAC Financial Services, which offers automotive, residential and commercial financing and insurance. GM’s On Star subsidiary is a vehicle safety, security and information service provider.

There have only been a limited number of models bearing the General Motors brand. The GM EV1 was an electric vehicle that was offered for lease only in the 1990s, before being unceremoniously scrapped. The Holden Statesman (1971 – 1985) was originally marketed as the General Motors statesman. Alfred Sloan was picked to take charge of the corporation and led it to its post war global dominance. This unprecedented growth of GM would last through the late 70’s and into the early 80’s. The General Motors Aftermarket Business in the US manages four brands; Good wrench, ACDelco, GM Performance Parts and GM Accessories.

GM After sales operates globally. ?Individual Analysis GM Liquidity Ratios Liquidity is an important factor in financial statement analysis since an entity that can not meet its short term obligations may be forced into liquidation. The focus of this aspect of analysis is on working capital, or some computer of working capital. Liquidity Ratios20072006200520042003 Current Ratio0. 860. 970. 720. 740. 81 Quick Ratio0. 941. 572. 622. 962. 63 Current Ratio is the measure of short-term liquidity. It indicates that the ability of an entity to meet its short-term debts from its current assets.

Quick Ratio is a more rigorous measure of short-term liquidity. It indicates the ability of the entity to meet unexpected demands form liquid current assets. Leverage Leverage20072006200520042003 gearing0. 190. 110. 170. 250. 23 Profitability Ratios Profitability Ratios20072006200520042003 Return on total assets0. 0160. 00780. 00720. 0190. 021 Return on ordinary equity0. 1540. 0750. 2260. 2130. 383 Return on total assets measures rate of return earned through operating total assets provided by both creditors and owners. Return on ordinary equity measures rate of return earned on assets provided by owners.

Financial stability Ratios Financial stability Ratios20072006200520042003 Debt Ratio1. 23831. 02280. 96680. 94130. 9429 Equity Ratio0. 10450. 07710. 03070. 05700. 0562 Asset turnover Ratio1. 08070. 62080. 40380. 41490. 4490 Debt ratio measures percentage of assets provided by creditors and extent of using gearing. Equity Ratio measures percentage of assets provided by shareholders and the extent of using gearing. Asset turnover Ratio measures the effectiveness of an entity in using its assets during the period. Cash Sufficiency Ratios Cash Sufficiency Ratios20072006200520042003 Cash Flow Adequacy1. 236. 870. 290.

320. 13 Debt coverage2. 794656. 13958. 9493 Cash Flow Adequacy measures the entity’s ability to cover its main cash requirements. Debt coverage measures the payback period for coverage of ling-term debt. Cash Flow Efficiency Ratios Cash Flow Efficiency Ratios20072006200520042003 Cash Flow to Revenues0. 18840. 01020. 05390. 01450. 0155 Operations Index2. 21191. 12962. 88310. 62590. 6363 Cash Flow Return on Assets0. 46920. 10510. 10020. 01840. 0205 Cash Flow to Revenues measures ability to convert revenue into cash flows. Operations Index is an index measuring the relationship between profits and operating cash flows.

Cash Flow Return on Assets measures the operating cash flow return on assets before interest and tax. Analysis of Cash Flow Statement ?Summarize: General Motors Corp as one of the world’s largest automaker had been done extremely successful in the last decade. However, from 2003, the predomination of GM in the automaker market has gone. Basic on the above analysis, the financial report from 2003 to 2007 indicates that the entire of development of GM is decreasing between 2003 and 2005, particular on the aspect of the declining of the return on total asset and the lowest Current Ratio and Quick Ratio in 2005.

The recession of GM was caused by the entity targeted the wrong market; the inefficient utilized the asset and positioned their new products in the wrong market segmentation. Even in the end of 2006, the rumor was about GM was applied the bankruptcy protection. Indeed, there were the considerable reasons for GM was getting depression. Firstly, GM targeted the wrong products into the wrong market.

Before 2000, GM mainly product the huge size vehicles engine which brings the majority of revenue for GM, however, with the price of crude oil raise and the more stricter requirement of environmental conservation, the demand of the huge size vehicles engine of GM decreasing and it brings a big lost within the organization, combined with the development of the automakers industry of Japan. Form the above financial report analysis, we can see that the net profit of GM decreasing by maintain its sale was occurred in 2005. At the time, Toyota was selling 809 millions vehicles; GM was selling 920 millions vehicles.

However, the equity ratio of Toyota was 9% and the equity ratio of GM only was 3% respectively. At the beginning of the year, the announcement declared that Toyota enhanced its selling to 906 million vehicles in global market end of 2006. The compare was replaced GM and became the largest automakers in the auto market which kept the profit margin by 8. 8% reverse the GM was losing 1. 7 billion in that fiscal year. From the data calculated by the table, it indicates that however the revenuer and total assets was declining but the asset turnover ratio was getting better after 2006. The reason is because of GM was selling FIAT for 1.

99 billions on Feb, 2005 in order to get rid of the heavy debt of financial crisis by selling and shutting down the enter presses running under deficit firms owned by GM. on October, 2005, GM was selling the 20% shock share of its FHI (Fuji Heavy Industries) that gained 0. 8 billions cash in hand. Meantime, GM was also selling the 20. 2% shock share of SUZUKI and the holding shock holder of GMAC. However, due to the economic of USA was recessionary, and the American sub-prime debit crisis also the global over-heating of economic and inflation of developed countries incurred GM can not sustain in the rough economical environmental.

GM now is getting into a heavy debt crisis which cannot take of by the company which had resplendence history ever before. Reference Hoggett, J. , Edwards, L. , Medlin, J. (2008). Accounting, 6th Edition. John Wiley & Sons Australia Limited. Wikipedia, the free encyclopedia, (2003). General Motors. From Wikipedia, the free encyclopedia Retrieved May 10, 2008 from the Web: History, Corporate Information, Retrieved May 10, 2008, from the World Wide Web: < http://www. gm. com/corporate/about/history/>