rs to come. Another benefit of debt financing is a higher return on equity ratio. GM has outperformed the industry in the last five years for the ROE because it uses more debt financing and less equity. However, the ROI is very low compared to the ROE because of the increased long-term debt that the firm has used for financing activities. The return on investment ratio is showing that the bond investors are financing more of the assets of the company as compared to the equity investors. GM has just instituted a new corporate policy in 1998 to keep the return on net assets at a minimum of 12.5%. (GM 1999 11) This program will help senior management to measure the returns of the assets that the firm has. It will also allow management to evaluate whether or not to purchase and finance new capital expenditures based upon the expected rate of return.In the transnational framework, GM would be classified as an international company because it manages its international operations as a financial investment. This is an advantage for GM because they are able to gain access to lower cost labor, new market opportunities and access to partnerships and alliances with automakers in many different countries.(Bartlett 11) This positioning will allow GM to reap the benefits of a global scale of economies and possibly lower unit production costs in the future. GM currently has alliances with Subaru, Suzuki, Isuzu, and Saab. The inventory ratios have moved in a positive direction over the past two years. This a great benefit for a firm, which has a very low profit margin because it is showing that management is properly handling both the purchasing and work in progress inventories effectively. Management should continue to monitor the inventory levels of the firm and make any changes to the purchases based upon the demand for new automobiles. Also, a large inventory increases the fixed costs of the firm due to the increased warehouse space, ...
