As a current investor in Ford, which elements of financial performance are most

important?

As a current investor in Ford, Profitability Ratios, mostly Return on Equity (ROE) and Net Profit
Margin are considered to be the most important elements of financial performance. Return on
Equity is a financial performance indicator that illustrates the connection between a company’s
profit and the return to investors. It shows how profitable a company makes using the capital that
its shareholders have invested in it, as well as how well the company’s management team uses
that capital to grow and benefit both the company and its investors. The higher the ROE, the
more efficient the company’s operations are at using those funds. Net Profit Margin is a financial
ratio that is used to determine how much profit a business makes relative to its overall sales. It
shows the yearly profit rate that the business generates, making it a crucial instrument for
creditors and investors.

The company’s industry, investors, and competitors all influence the acceptable ROE ratio,
typically 10% and above. By analyzing Exhibit 4, we can observe that in 2016 Ford Motor’s
Return on Equity Ratio was 15.9% and in 2017 it was 21.8%. From here we can conclude that
Ford Motor’s Return on Equity Ratio was generally higher than what was considered acceptable
because Ford’s ROE Ratio averaged 19% from 2016 to 2017. Ford has had an upward trend in
2017, as Exhibit 4 illustrates, indicating that the business “knows how to reinvest its earnings
wisely”. From 2016 to 2017, Ford Motor’s Profit Margin reached 4%; more precisely, they
generated a margin of 3.1% in 2016 and 4.9% in 2017. As seen in Exhibit 4, Ford had an incline
in 2017 which may have been brought about by higher sales and revenue, lower costs, and
efficient resource use.