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Running head: FORD 0

Review: Ford Annual Report

OMM 622 Financial Decision-Making

Instructor: James Hersey

May 15, 2017

REVIEW: FORD ANNUAL REPORT

At the end of each fiscal year, firms that are publicly traded are required to file Form 10-K with the U.S. Securities & Exchange Commission (SEC). Additionally, the SEC requires companies to send an annual report to the firm’s investors. Many companies are choosing to submit Form 10-K in their annual reports to shareholders. The 10-K however can be a challenge to read in its original format however as it contains much more detail and is usually presented in smaller print (Epstein, 2014). The information provided within, contains comprehensive details about the company that are important to stakeholders, investors and shareholders alike; information explaining the company’s finances, direction, current risks, strategies, goals, and operations, (United States Securities & Exchange Commission, 2011). With this information they are able to make informed choices before buying or selling stocks or investing the company’s corporate bonds.

The Ford Motor Company identifies its stakeholders as: employees, customers, dealers, suppliers, investors and communities; and then furthering its definition with values in its “relationship to ‘society’ which includes government agencies, nongovernmental organizations (NGOs) and academia” (Ford Motor Company, 2014). This means the term has a broad variety of interests to satisfy. With this in mind the three items which would provide the most significant information at once would likely be: Item 1A – Risk Factors, Item 8 - Financial Statements and Supplementary Data, and Item 7– Management’s Discussion and Analysis of Financial Condition and Results of Operations (Epstein, 2014). The reason for selecting these three items is simply that they are items that general audiences would seem to care about unanimously in regards to, who the company is, how they are doing, what they are challenged with, and if they have the means to accomplish their goals; assuming of course that stakeholders are already familiarized with the information in item 1, what the business is.

Item 1A – Risk Factor – First, there is not a detailed description or formal entry of the firm’s risk factors in the annual report. It is reasonable to expect that a stakeholder would want to know this information for any variety of reasons including: investment, lending, employment, developing professional relationships, or even temporary partnerships/affiliations. Another aspect to consider would be the product of the company. Since Ford’s products are also typically long-term investments, some stakeholders may have an interest in determining if there are factors that will hinder or prevent the company’s ability to provide support; such as their loss of market share and the company’s failures in achieving growth during a time of volatile fuel pricing.

Item 8 - Financial Statements and Supplementary Data –This is where the company includes their key financial data and relevant information, (Epstein, 2014). This item is important because here stakeholders can track the history of increases and decreases in sales, the company’s net profits, and cash flow. If something in Item 1A seems troubling, or an issue of concern, the results in the firm’s solutions can be found here. The mentioned attributes provided from item 1A in coupling with increased competitive market pricing in Europe and banking institutions seeking to finance their products at better rates, Ford’s net income dropped nearly 75%. Stakeholders in the company would likely be interested in whether or not this may result in any closures of the company’s factories, if there are any interruptions in services, a loss in product availability or quality. or if now is not the right time to invest in the company.

Item 7– Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A)– Items 1A and 8 can lead to a lot of speculation about what has happened or where the company is going. The information in Item 7 can help to answer some questions or maybe close some gaps between the company and its stakeholders. This item is the no-frills explanation of what occurred with the past fiscal year and the company’s plans. Why is there so much lost revenue? This item can provide that information as well as if this is a permanent issue or not. In Ford’s 10-K it was stated that a combination of instances and elements like, shifts in global demand, overproduction of units, volatile fuel costs, volatile exchange rates and financing competition (to name a few) have impacted the revenue and expenses for the year. Item 7 also includes strategies such as, accelerated development of new products, aggressive restructuring to adapt for profitability and leveraging global assets through teamwork.

Overall, stakeholders could glean enough about the company to understand that for the year 2012 Ford Motor Company has some work to do before it can really be considered as sound investment. Those seeking to become or remain employed can use this information for what lays ahead, and those seeking affiliation could actually leverage the company’s weakened status for more favorable arrangements within deals and negotiations. In hindsight, during 2012, while an investment may not have been with low risk, there were many opportunities for long-term benefits for potential affiliate and/or contractor organizations; especially should their situation improve (Tomlin, 2014).

References

Epstein, L. (2014). Financial decision making: An introduction to financial reports. San Diego,

CA: Bridgepoint Education, Inc.

Ford Motor Company (Ed.). (2014). Stakeholder engagement. Retrieved from

http://corporate.ford.com/microsites/sustainability-report-2013-14/blueprint-governance

stakeholder.html

Tomlin, B. (2014). Managing supply-demand risk in global production: Creating cost-effective

flexible networks. Business Horizons, 57(4), 509-519.

United States Securities & Exchange Commission (Ed.). (2011, July 1). How to read a 10-K.

Retrieved from https://www.sec.gov/answers/reada10k.htm