Principles of Finance
General Motors Company vs Ford Motor Company
GENERAL MOTORS CORPORATION (COMPANY)
General Motors Corporation (General Motors or GM) was incorporated on August 11, 2009. Also known as GM, the company designs, builds and sells cars, trucks and automobiles parts globally and headquartered in Detroit, Michigan. The company also provides automotive financing services through General Motors Financial Company, Inc. (GM Financial).
The company designs, manufactures and markets vehicles under the brands of Buick, Cadillac, Chevrolet and GMC. Along with our strategic partners, we produce cars and trucks, and sell and service our vehicles, through the following brands: Chevrolet, …show more content…
For the three years reviewed, GM hasn’t had a steady profit margin. In 2012, it jumped almost a whole percent and the following year is dropped half a percent. On the other hand, Ford Motor Company had a very high profit margin and then it heavily dropped in the years 2012 and 2013. Ford Motor Company has a better advantage in the profit margin as it is keeping now similar to the industry average of 4.5% and ending their 2013 year with 4.87% unlike GM which was as 2.57% at the end of 2013; almost half lower than the industry average. In this case, Ford Motor Company shows higher potential in profits for the year 2014 if they continue to keep it at 4%; however GM will need to raise their profit margin by another 2% to keep with the rest of the industry.
RETURN ON ASSETS
As we seen on the last comparison of the profit margin we were shown that Ford holds a better profit margin compared to GM. Looking at the return on assets, this will show us the rate at which the company sells their products and how much is earned on the sales of each dollar. So even though GM has a lower profit margin, their return on assets is higher. This is a good thing to look at if wanting to invest in these companies. With GM having a much higher return on assets would intrigue investors with them rather than the competitors like Ford where their ROA is less than their profit margin.
RETURN ON EQUITY Return on equity (also