Comparing Ford and Ferrari Financial Statement Analysis Paper 1

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Business Finance

Four questions in comparing Ford and Ferrari. Data is provided. No need to search anything, all information is there.

Please please show all work as I would like to follow along and try to understand what was done.

Side notes to help better understand whats done is appreciated!

Question 1 – Valuation and Financial Ratios

Using the data provided, calculate the following valuation measures and financial ratios for both firms and present your results in a table similar to the one below:

Question 2 – Interpretation

A) Based on the market-to-book ratio, which firm arguably resembles a growth firm more closely?

B) Based on the debt management ratios you calculated, which firm operates with a higher leverage?

C) When comparing the return on capital between these two firms, is it more appropriate to compare them based on their ROEs or the ROICs? Explain your answer.

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Question 3 – DuPont Equation

A) For each firm, break down the ROE using the DuPont equation for both firms. Please present your results in a table similar to the one below.

B) Briefly explain why the ROE of Ford differs from the ROE of Ferrari.

Question 4 – Cash from Operations

Suppose the working capital of Ford and Ferrari for 2017 were as follows: