Financial Statements

Financial statements are reports indicating cash flows, financial condition and results in a company. They are important in helping an organization in evaluating their ability to generate cash and how the money is utilized. Additionally, they indicate whether an organization has the ability to pay back its debt. They also give financial ratios showing the position of a firm financially. The paper will discuss financial statements and budgets in Ford Motor Company.

            Ford Motor Company has been using the balance sheet to monitor their stockholders' equity, liabilities and assets. Additionally, they have been using income statement to evaluate their financial activities and operations. In this case, the management gets an overview of gains, revenues and expenditures. Ford also uses the statement of cash flow to find out their money at the reporting period.

Types of Budgets and their Applications

 The master budget shows the sum of sales, purchases, capital investments and future expenses among others. The type of budget can be used by Ford Motor Company in planning for future processes that will be profitable, hence, eliminating the current ones that are not productive.

            Sales budget indicates the expected number of sales and their estimated price in a time given (Peavler, 2016). The budget can be used by Ford Motor Company to estimate profits in their products and planning for the funds. Production budget helps firms to calculate the number of units that should be manufactured. The budget can be used by Ford to estimate the number of automobiles to produce in each period. The direct material budget shows the number of goods that should be purchased at a given time to fulfill production arrangements. The budget can be used by Ford in planning the number of raw materials they will need to produce each automobile. Manufacturing overhead budget shows all cost used in the production of products and labor. Therefore, it can be applied by Ford Motor Company to estimate the cost they will incur in order to produce each automobile. Finally, the administrative budget is a detailed financial plan of a firm in a given period. It is utilized by Ford to estimate the total cost of running their operations and the profit they get in return.

Reference

Peavler, R. (2016). The Sales Budget is Central to Effective Business Planning. Retrieved from

https://www.thebalance.com/the-sales-budget-an-example-393024