CAR INDUSTRY

Car Industry

Car Industry

Car industry's borrowing can be explained by its leverage ratios. Car industry's debt ratio has remained relatively steady over the last 5 years. 1998's debt ratio was 82.65%. This shows how they were relying heavily on borrowed funds to finance operations. (David 2006)

This is further evinced by Car industry's debt-to-equity ratio of 4.77 in 2008, which is up from past years. Compared to the 1.97 industry average, Car industry's number appears quite high. Car industry's times-interest-earned for 2008 was 3.68, an increase from previous years. This could be due to the $15,955 million gain Car industry recorded as a result of the spin-off of their interest in The Associates, Inc. The liquidity of Car industry, indicated by its current ratio of .41, shows that they have many current liabilities. This number is much lower than the industry average of 1.8. Car industry's quick ratio has trended upward over the last 4 years, with 1998 finishing at .29. This is, again, below the industry average of .90. With a company as large as Car industry, having as many current liabilities as they do is not necessarily an indication of a problem. Dupont Car industry's efficiency can be determined by examining the asset turnover ratio and the days inventory held ratio. These show how effectively Car industry is using its assets. The asset turnover ratio for Car industry has averaged .71 times over the last 5 years. 1998 turnover was .79 times. The days inventory held ratio for Car industry has fluctuated over the past 5 years.

Car industry's reduction from their 1994-1995 average of 25.79 days to 22.25 in 2006 was a significant improvement. Their further reduction to a 2007-2008 average of 19.07 shows a continued effort by Car industry to reduce inventory costs. Days sales outstanding (average collection period) in 1994-1997 saw a range of 8.23 days to 9.24 days. Car industry improved this number significantly in 1998 to 6.49 days.

Unions play a large role within the Car industry Motor Company, employing vast numbers of its workforce. The United Auto Workers (UAW) union represents these employees. From management's viewpoint, the effects of having the UAW can be both positive and negative.

Employees with representation, who reap the benefits of a strong and organized labor union, are more satisfied, and therefore more efficient, employees. Negative effects occur when labor disputes threaten to cripple a company as a ...