General Motors Final Evaluation

Historical Ratios

  • Consistent decrease in Current Ratio.
  • Drastic Decrease in Times-Interest Earned
  • Consistent increase in Profitability ratios.
  • Drastic Decrease in Price Earnings Ratio

Industry and Competitor Ratios

  • Current Ratio = Weak compared to the industry; strong compared to competitors.
  • Weak Debt to Equity
  • Weak Times-Interest Earned
  • Average Activity Ratios
  • Strong Profitability ratios.
  • Weak Price Earnings Ratio.

Horizontal Analysis

  • Reveals a sizable increase in GM's Financial Sector.
  • Consistent Increases in GM's expenses, specifically Selling and Interest expense.
  • Cash & Cash Equivalents steadily decreasing.
  • Long-Term Assets increasing faster than Short Term Assets.
  • Liabilities increasing at a rate that is comparable to Assets.
  • Stockholders Equity returning after the recall.

Common Size Analysis

  • Steadily decreasing Cash & Cash Equivalents.
  • Larger portion of Long-Term Assets than Current Assets.
  • Increasing percentage of Financial Receivables.
  • Large bump in Property and Equipment on lease.
  • Increasing portion of Financial Short-Term debt.
  • High Total Equity compared to competitors.

Projected Future

  • Financial Sector projected to increase faster than Automotive.
  • Increasing Interest Expenses.
  • Increasing Cost of Sales.
  • Increasing Administrative Expenses.
  • Steady growth pattern projected through 2019.
  • EPS projected to only increase.

Final Thoughts

GM has a solid customer base, and has acquired the necessary companies in China to expand their reach.

A push for sustainability has encouraged GM to invest in both the renewable energy car sector, and car sharing with Lyft.

Despite the setbacks triggered by the recall, GM shows an immense ability to execute proper damage control and easily bounce back.

A company such as GM shows immense solvency and stability.

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