General Motors - Financial Ratio Analysis Essay -- Business Finance Ac

General Motors - Financial Ratio AnalysisI. General Motors History HighlightsIn its early years the automobile industry consisted of hundreds of firms, severallyproducing a few models. William Durant, who bought and reorganized a failingBuick Motors in 1904, determined that if several automobile makers would unite,it would increase the protection for the group. He formed the General Motors phoner in Flint, Michigan, in 1908.Durant had bought 17 companies (including Oldsmobile, Cadillac, and Pontiac) by1910, the year a bankers syndicate forced him to step down. In a 1915 swayswap, he regained control by dint of Chevrolet, a company he had formed with racecar driver Louis Chevrolet. GM created the GM Acceptance Corporation (autofinancing) and acquired a number of businesses, including Fisher Body,Frigidaire (sold in 1979), and a small bearing company, Hyatt Roller Bearing.With the Hyatt acquisition came Alfred Sloan, an administrative genius who wouldbuild GM into a corporate colos sus.Sloan, president from 1923 to 1937, implemented a decentralized circumspectionsystem, now emulated worldwide. The auto maker competed by offering modelsranging from luxury to economy, colors besides black, and yearly stylemodifications. By 1927 it had become the industry leader.GM introduced a line of front-wheel-drive compacts in 1979. Under Roger Smith,CEO from 1981 to 1990, GM laid off thousands of workers as part of a massivecompanywide restructuring and cost cutting program.In 1984 GM formed NUMMI with Toyota as an experiment to see if Toyotasmanufacturing techniques would work in the US. The joint ventures first car wasthe Chevy Nova. GM bought Ross Perots Electronic Data Systems (1984) and HughesAircraft (1986). In 1989 the company bought 50% of Saab Automobile.In 1990 GM launched Saturn, its first new nameplate since 1926, reflecting a newcompanywide emphasis on quality. Two years later it made the largest stockoffering in US history, raising $2.2 billion. Culminating a period of boardroomcoups (relating to the companys lagging effort to reduce costs) in the early1990s, John Smith replaced Robert Stempel as CEO.NBC apologized in 1993 for improprieties in its expose alleging that GM pickupsequipped with sidesaddle gas tanks tended to explode upon side impact. Thegovernment nonetheless asked the ... ...improved.The stock holders equity has increased dramatically indicating thebetter management of the companies equity.The EBIT has improved for the last two year mainly because the level ofinterest paid has decreased due(p) to the reduction of liabilities.ProfitabilityThe receipts Profit brim has increased from 1993 to 1994 as the cost ofgoods sold did not increase at the same level that the sales increased. TheOperating Profit Margin ratio was stable in 1995 when compared to 1994 and theNet Profit Margin has also been improving for the last two years.The Return on Total Assets has increased due the increase in thecompanies profitability, while Re turn on Equity has decreased on the last twoyears as the stockholders equity increased boilers suitIt is clear that the profitability of the company has been increasingfor the last 2 years, mainly due to the decrease in liabilities, improvement inaccounts receivable and better management of the company debt..The company also demonstrates that the profitability can be improvedeven further by having better inventory management and productivity maximizationon their fixed assets.