1.

Key financial ratios calculation

GENERAL MOTORS FINANCIAL RATIO 2017 2018
Current Assets
PAYING ABILITY RATIOS

Current Ratio = 0.89 0.91

Current Liabilities
SHORT-TERM DEBT-

Current Assets (Cash & Obligation)

Cash Ratio = 0.20 0.25
Current Liabilities

Current Assets (Cash, Obligation and A/R)

Acid-test Ratio = 0.83 0.92
Current Liabilities

Net Working Current Assets - Current Liabilities (Net WC)

= -0.04 -0.03
Capital Ratio Total Assets

Total Liabilities
LONG-TERM DEBT-PAYING

Debt Ratio = 0.83 0.81

Total Assets
ABILITY RATIOS

Debt to Equity Total Debts (Long Term Liabilities)

= 2.60 2.45
Ratio Total Equity

Times Interest EBIT

= 20.63 13.12
Earned Interest Payments

Debt to Total Liabilities

Tangible Net = 5.80 4.96
Total Equity - Intangible Assets
Worth Ratio

Days's Sales in Gross Receivables

= 71.91 82.90
Receivables Net Sales/365

Inventory CoGS
= 11.94 13.55
Turnover Inventory
LIQUIDITY RATIOS

Inventory = Avarage Inventory

Turnover in 38.85 -
CoGS/365
Days

Receivable = Sales Revenue

5.07 4.40
Turnover Inventory

Receivable = Average Inventory

Turnover in 46.90 52.30
CoGS/365
days
 A/C Turnover in days + Inventory turnover in
Operating Cycle = 85.75 -
days

= Sales Revenue
Assets Turnover 0.67 0.69
Total Assets

Net Profit = Net Income

5.38 -2.66
Margin Sales Revenue

= Gross Profit
Gross Margin 12.52 9.58
Sales Revenue
PROFITABILITY RATIOS

Operating = Operating Income

5.95 3.02
Margin Sales Revenue

Return on = Net Profit

0.15 3.55
Assets (ROA) Total Assets

Return on = Net Profit

0.91 18.87
Equity (ROE) Total Equity

Return on = Net Profit

Investment 0.32 6.97
Average (Long-term Debts + Equity)
(ROI)

Operating asset = Net Sales

0.83 0.84
turnover Average operating assets

Return on = Operating income

Operating 0.18 0.21
Average operating assets
Assets

Dupont Return =
Operating Margin x Operating asset turnover 4.93 2.53
on Assets

Sales to fixed = Net Sales

1.22 -
assets Average Net fixed assets
 2. Comment
a) Overall
It is clear that the profitability of the company has been increasing for the
last 2 years, mainly due to the decrease in Income tax expense (Note 17),
improvement in accounts receivable and better management of the company debt..
The company also demonstrates that the profitability can be improved even
further by having better inventory management and productivity maximization on
their fixed assets.

b) Short-term debt-paying ratios

Short-term debt-paying ratios

1
0.8
0.6
0.4
0.2
0
2017 2018
-0.2
Current ratio Quick ratio
Cash ratio Net working capital ratio

General Motors overall Short-term debt-paying ablity in 2018 was improved

when compared to 2017.
The Quick Ratio saw a significant grown from 0.83 in 2017 to 0.92 in 2018.
The difference here is mainly because of the higher amount in inventories that may
indicate an increase in inventory prices or volume.
 c) Long-term debt-paying ratios

Short-term debt-paying ratios

8
6
4
2
0
2017 2018
Debt ratio
D/E ratio
Debt to tangible net worth ratio
Net working capital ratio

The Debt Ratio decreased slightly for the last two years going from 0.83 to
0.81 mainly due to the quite high growth rate of total assets compared to the figure
of total liability, indicated that the level of creditor financing was improved.
The stockholders equity increased dramatically from $36420 millions in
2017 to $42777 millions in 2018 indicated the better management of the
companies equity.

d) Liquidity ratios
 Turnover ratios
16
14
12
10
8
6
4
2
0
2017 2018
Inventory turnover Receivable turnover Asset turnover

2017 2018
Day’s sales in receivables 71.91 82.90
Inventory turnover in days - 38.85

The inventory liquidity declined for the last two years, while the cost of
goods sold increased during the same period. This trend indicated that the
inventory cost or volume was increased.
The accounts receivable turnover was improved when compared to 2017,
where it decreased from 5.07 to 4.4 times.
The inventory turnover increased sharply from 11.94 in 2017 to 13.55 in
2018 and the day’s sales in receivables also grown about 11 days. Which may
indicated a good managerial efficiency.
The Total Asset Turnover improved slightly for the last two years because of
the better management of current assets.

e) Profitability ratios
 Margin
14
12
10
8
6
4
2
0
-2 2017 2018

-4
Net profit margin Gross profit margin Opeating margin

Return ratio
20
18
16
14
12
10
8
6
4
2
0
2017 2018
ROA ROE ROI

The Gross Profit Margin and the Operating profit margin decreased sharply
from 2017 to 2018 as the cost of goods sold did not increase at the same level that
the sales increased. Wheares, The Net Profit Margin ratio was improved
significantly from -2.66 to 5.38 in last 2 years mainly due to the decrease in
Income tax expense (Note 17).
There was a upward trend in return ratio included ROA, ROE and ROI.
Especially ROE from 0.91 in 2017 to 18.87 in 2018.
3. Appendix
a) General Motors Income Statement
b) General Motors Balance Sheet