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Module 11: Adjusting Accounting Information

Module 11: Adjusting Accounting Information

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Module 11: Adjusting Accounting Information

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  1. Module 11: Adjusting Accounting Information

    The Ford Motor Company By: Paula Casini
  2. Ford Motor Company Automotive Sector – sale of vehicles, service parts and accessories Ford North America Ford South America Ford Europe Ford Asia Pacific Africa Financial Services Sector Ford Motor Credit Company – vehicle related financing, leasing and insurance Other Financial Services – holding companies and real estate
  3. Products and Services Brand Name Vehicles: Ford and Lincoln Retail Sales Fleet Sales Vehicle Financing Automotive Components Market Share = 14.0%
  4. SWOT Analysis Strengths Weaknesses Strong position in US market ECOnetic initiative Sound financial performance ‘One Ford’ approach Significant growth in China Poor environmental record High cost structure Unprofitable Europe operations Opportunities Threats Positive attitude toward ‘green’ vehicles Increasing fuel prices New emission standards Growth through acquisitions Decreasing fuel prices Rising raw material prices Intense competition Fluctuating exchange rates
  5. Inventory Footnote Disclosure
  6. Financial Statement Impact
  7. Effect of LIFO Inventory Method
  8. Lease Commitments Footnote
  9. Determine the Discount Rate Capital Leases very minimal No PV of Minimum Lease Payments Given Ford’s LT Borrowing Rate = 4.7%
  10. PV of Future Operating Lease Payments
  11. Financial Statement Impact
  12. Ratio Effect of Adjustments
  13. Stock Compensation Footnote
  14. Summary of Relevant Data
  15. Stock Price during 2013 12/30/13 Stock Price = $15.43 01/02/13 Stock Price = $13.46
  16. Value of Options Value of options exercisable at beginning of year = 96.5*(13.46-8.67) = 462.24 Value of options exercisable at beginning of year using end of year prices = 96.5*(15.43-8.53) = 665.85 Estimated value of exercised options = 33.1*(14.45-9.76) = 155.07
  17. Value of Options Value of option expired during year = 1.6*(14.45-8.26) = 9.90 Value of option forfeited during year = 0.1*(14.45-12.8) = 0.16 Value of options exercisable at end of year = 67.6*(15.43-8.53) = 466.44
  18. Share Based Compensation
  19. Adjustments Increase beginning NFL by value of options exercisable at beginning of year Increase ending NFL by value of options exercisable at end of year Decrease EPAT by share based compensation Increase FEAT by the expense due to change in market price less the expense due to exercise, forfeiture and expired
  20. Questions?