This will be very helpful for Anna University MBA Examination. I Did M.B.A 2011-2013 at Jei Mathaajee College of Engineering (Affiliated to Anna University).
Analysis of the BMW Group using tools like SWOT analysis, PEST analysis and Porter's Value Chain. There is a slight focus on the Asian market. This short essay was written for an INTERNATIO…Full description
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Table of Contents 1 LIQUIDITY RATIOS
1
1.1 CURRENT RATIO 1.2 QUICK RATIO 1.3 CASH R ATIO ATIO 1.4 WORKING CAPITAL R ATIO ATIO 1.5 DAYS SALES IN INVENTORY ATIO 1.6 INVENTORY TURNOVER R ATIO ECEIVABLES R ATIO ATIO 1.7 DAYS SALES IN R ECEIVABLES 1.8 ACCOUNT R ECEIVABLE ECEIVABLE TURNOVER R ATIO ATIO
1 1 2 2 3 3 4 4
2 LONG TERM DEBT PAYING ABILITY
5
2.1 TIMES INTEREST EARNED 2.2 DEBT R ATIO ATIO 2.3 DEBT /EQUITY R ATIO ATIO ATIO 2.4 DEBT TO TANGIBLE NET WORTH R ATIO
5 5 6 7
3. PROFITABILITY RATIOS
7
3.1 NET PROFIT MARGIN 3.2 TOTAL ASSETS TURNOVER R ATIO ATIO 3.3 R ETURN ETURN ON ASSETS 3.4 OPERATING INCOME MARGIN 3.5 OPERATING ASSET TURNOVER ETURN ON OPERATING ASSETS 3.6 R ETURN ETURN ON OPERATING ASSETS 3.8 DUPONT R ETURN
7 8 8 9 9 10 10
4 INCOME STATEMENT
12
4.1 COMMON SIZE ANALYSIS (HORIZONTAL) 4.2 COMMON SIZE ANALYSIS (VERTICAL)
12 13
ii
Ratio Analysis of BMW 2007 To 2009 1 Liquidity Ratios Ratio analysis provides a quick, easy-to-use measure of liquidity. 1.1 Current ratio
Current ratio= Current Asset Current Liabilities 2009
Current ratio= = 39944 36919 Current ratio= 1.08 times 2008
Current ratio= 38670 39287 Current ratio= 0.98 times 2007 Current ratio= 32378 33784 Current ratio = 0.95 times Analysis:
This ratio tell us to pay 1 liability company has 1.08 current asset. Although in three years the position of the company is better in its short term debt. In 2009 the company increases their current asset and minimizes their current liabilities so the company current rat io is better.
1.2 Quick ratio 2009
Quick ratio = Current Asset- Inventory Current Liabilities Quick ratio = 39944 ± 6555 36919
0.88 times
2008
1
2007
Quick ratio = 38670 ± 7290 39287
0.78 times
Quick ratio = 38670 ± 7290 39287
0.73 times
Analysis:
The Quick ratio shows also the better position than previous years because BMW decreased inventory from 7290 to 6555 and also increase the current asset. 1.3 Cash Ratio
7767 36919 Cash Ratio= 0.21 times 2008 Cash Ratio= 7454 39287 Cash Ratio= 0.19 times 2007
Cash Ratio= 2393 33784 Cash Ratio= 0.07 times Analysis:
Cash ratio is improving, and they increase t heir cash and cash equivalents. And reduce the currently liabilities.
1.4 Working Capital Ratio 2009 Working Capital Ratio = Current Assets - Current Liabilities 39944 ± 36919 = 3025 2008
Working Capital Ratio = Current Assets - Current Liabilities 38670 ± 39287 = -617 2
2007 Working Capital Ratio = Current Assets - Current Liabilities 32378- 33784 = -1406 Analysis
The position of working capital is much better in 2009. BMW increase the current asset and reduce the current liabilities from the previous years. 1.5 Days Sales in Inventory
Days Sales in Inventory = Ending Inventory *365 CGS 2009 Days Sales in Inventory = 6555 45356 Days Sales in Inventory = 52.75 days 2008 Days Sales in Inventory = 7290 47148 Days Sales in Inventory = 56.44 days 2007 Days Sales in Inventory =7349 43832 Days Sales in Inventory = 61.33 days Analysis
This formula tells us the number of days in a year in to cost of good sold. According to the result company is going in better position. 1.6 Inventory Turnover Ratio
Inventory Turnover Ratio =
Cost of Goods Sold Average Inventory
2009 Inventory Turnover Ratio =
45356 6923 Inventory Turnover Ratio = 6.5 times 2008 Inventory Turnover Ratio =
Inventory Turnover Ratio =
47148 7320 6.44 times
2007
3
Inventory Turnover Ratio =
43832 7072 Inventory Turnover Ratio = 6.20 times
Analysis
Inventory turnover ratio indicates the liquidity of inventory. In 2009 company show that Inventory Turnover Ratio is going better.
1.7 Days Sales in Receivables Ratio
Days Sales in Receivables Ratio = Gross Receivables*365 Net Sales 2009 Days Sales in Receivables Ratio =
18973 50681 Days Sales in Receivables Ratio = 136 days 2008 Days Sales in Receivables Ratio = 18176 53197 Days Sales in Receivables Ratio = 124 days 2007 Days Sales in Receivables Ratio = 13996 56018 Days Sales in Receivables Ratio = 91 days Analysis
This formula tells us how many days required converting the sale in receivables. This time company shows weakness that they do not recover their receivable early.
1.8 Account Receivable Turnover Ratio
Account Receivable Turnover Ratio = Net sales Average Gross Receivables 2009 Account Receivable Turnover Ratio =
50681 18575 Account Receivable Turnover Ratio = 2.73 times 2008
4
Account Receivable Turnover Ratio = 53197 16086 Account Receivable Turnover Ratio = 3.31 times 2007 Account Receivable Turnover Ratio = 56018 13200 Account Receivable Turnover Ratio = 4.24 times
Analysis
Account Receivable Turnover Ratio indicates the liquidity of receivables. The receivables ratio tells us that company receives their ratio 2.73 times in a year at after 160 days approximately.
2 Long Term Debt Paying Ability
2.1 Times interest Earned
TIE = Recurring Earnings Excluding Interest Exp, Tax Exp, Equity & minority Earnings Interest Expense, including Capitalize Interest 2009 Times interest Earned =
1180 1014 Times interest Earned = 1.16 times 2008 Times interest Earned = 1632 930 Times interest Earned = 1.75 times 2007 Times interest Earned = 4212 897 Times interest Earned = 4.7 times
Analysis
This ratio tells us that BMW has 1.16 earning to pat their interest expenses in 2009. but in 2008 they have 1.75 and in 2007 they have 4.75, which is better then 2009. in this year company earning is going down. 2.2 Debt Ratio
Debt Ratio =Total Liabilities 5
Total Assets 2009 Debt Ratio =
82038 101953 Debt Ratio = 0.80 times 2008 Debt Ratio = 80813 101086 Debt Ratio = 0.799 times 2007 Debt Ratio =67253 88997 Debt Ratio = 0.756 times
Analysis
This ratio tell us that company total asset is decreasing but in opposite direction total liabilities also increasing. This is the weakness of BMW 2.3 Debt /Equity Ratio
Debt /Equity Ratio = Total Liabilities Stock Holder Equity 2009 Debt /Equity Ratio =
82038 19915 Debt /Equity Ratio = 4.12 t imes 2008 Debt /Equity Ratio = 80813 20273 Debt /Equity Ratio = 3.99 t imes 2007 Debt /Equity Ratio = 67253 19130
Debt /Equity Ratio = 3.52 t imes
Analysis
This ratio determines the company long term debt paying ability. Company debt paying ability in 2009 is weak then the previous years.
6
2.4 Debt to Tangible net worth Ratio
Debt to Tangible net worth Ratio =
Total Liabilities (Stock holder¶s Equity ± Intangible Assets)
2009 Debt to Tangible net worth Ratio =
82038 14536 Debt to Tangible net worth Ratio = 5.6 times
2008 Debt to Tangible net worth Ratio = 80813 14632 Debt to Tangible net worth Ratio = 5.5 times 2007 Debt to Tangible net worth Ratio = 67253 13460 Debt to Tangible net worth Ratio = 5 times
Analysis
This ratio indicates how well creditors are protected in case of the firm¶s insolvency. This ratio is also showing the weak position of the company.
3. Profitability Ratios
3.1 Net profit Margin
Net profit Margin =
Net income*100 Net Sales
2009 Net profit Margin =
21000 50681 Net profit Margin = 0.41%
2008 Net profit Margin = 33000 53197 Net profit Margin = 0.62% 2007 Net profit Margin = 313400 56018 Net profit Margin = 5.5 %
7
Analysis
This ratio gives a measure of net income generated by each dollar of sales. This ratio show the weakness of company their net income is lower then previous years
3.2 Total Assets Turnover Ratio
Total Assets Turnover Ratio =Net Sales Average Total Assets 2009 Total Assets Turnover Ratio = 50681 101520 Total Assets Turnover Ratio = 49%
2008 Total Assets Turnover Ratio = 53197 95042 Total Assets Turnover Ratio = 56% 2007 Total Assets Turnover Ratio =56018 84027 Total Assets Turnover Ratio = 66% Analysis
Total asset turnover measure the activity of the assets and the liability of the firm to generate sales through the use of the assets. In this analysis we find that company toatal asset turnover decreased from 56% to 49%. It is weak for BMW.
3.3 Return on Assets
Return on Assets =Net income Average Total Assets 2009 Return on Assets =
210 101520 Return on Assets = 0.21% 2008 Return on Assets = 330
8
95042 Return on Assets = 0.35 2007 Return on Assets =3134 84027 Return on Assets = 3.7 % Analysis
This ratio measures the firm¶s ability to utilize its assets to create profits by comparing profits with assets that generates profits. This show weak, because co mpany return on asset decreasing.
3.4 Operating Income Margin
Operating Income Margin = Operating Profit*100 Net Sales 2009 Operating Income Margin =
289 50681 Operating Income Margin = 0.57 2008 Operating Income Margin = 921 53197 Operating Income Margin = 1.73 2007 Operating Income Margin = 4212 56018 Operating Income Margin = 7.52
Analysis
The operating income margin is also decreased because of decrease in the operating profit and decrease of net sale. 3.5 Operating Asset Turnover
Operating Asset Turnover =Net Sales Average Operating Assets (Total Assets-Intangibles-Deferred Income Taxes) 2009 Operating Asset Turnover =
This ratio measures the ability of operating assets to generate sale. Operating asset turnover is decreasing in 2009 due to low net sale and high operating assets. 3.6 Return on Operating Assets
Return on Operating Assets =Operating Income Average Operating Assets 2009 Return on Operating Assets = 289 94944 Return on Operating Assets = 0.3% 2008 Return on Operating Assets = 921 88593 Return on Operating Assets = 1.05% 2007 Return on Operating Assets = 4212 77799 Return on Operating Assets = 5.4%
Analysis
Adjusting the non operating items results in the following formula for return on operating assets. There is weak in the operating income of BMW. 3.8 DuPont Return on Operating Assets
DuPont Return on Operating Assets =Operating Income Margin*Operat ing Assets Turnover 2009 DuPont Return on Operating Assets = 0.57*53.38 DuPont Return on Operating Assets = 0.3%
10
2008 DuPont Return on Operating Assets = 1.73*60.05 DuPont Return on Operating Assets = 1.05% 2007 DuPont Return on Operating Assets = 7.52*72 DuPont Return on Operating Assets = 5.4%
Analysis
In this ratio we view the operating income margin with operating assets turnover. And in 2009 DuPont is minimizing due to less operating income margin
11
4
2007
Income Statement
Amounts 2008
2009
Common Size ( % ) 2007 2008 2009
56018
53197
50681
100.00
94.96
90.47
Cost of sales
(43832)
(47148)
(45356)
(100.00)
(107.57)
(103.48)
Gross Profit
12186
6049
5325
100.00
49.64
43.70
Selling & Admin Expense Research & Development Other Operating Income Other Operating Expenses Financial Results
(5254)
(5369)
(5040)
(100.00)
(102.19)
(95.93)
(2920)
----
----
(100.00)
----
----
730
1428
808
100.00
195.62
110.68
(530)
(1187)
(804)
(100.00)
(223.96)
(151.70)
(339)
(570)
124
(100.00)
(168.14)
36.58
Profit Before Tax
3873
351
413
100.00
9.06
10.66
Revenues
4.1 Common Size Analysis (Horizontal)
12
Income Tax
(739)
(21)
(203)
(100.00)
(2.84)
(27.47)
Net Profit
3134
330
210
100.00
10.53
6.70
Analysis
The horizontal analysis shows the decrease in the revenues approximately 10% and 3% increase in CGS due to this GP decreased in 2009. Research & Deve lopment expenses also increase but lower then 2008. But other expenses increase 50% then 2007. And due to this only 6.7 % Net profit.
4.2 Common Size Analysis (Vertical)
2007
Amounts 2008
2009
Common Size ( % ) 2007 2008 2009
56018
53197
50681
100.00
100.00
100.00
Cost of sales
(43832)
(47148)
(45356)
78.25
(88.63)
(89.49)
Gross Profit
12186
6049
5325
21.75
11.37
10.51
Selling & Admin Expense Research & Development Other Operating Income Other Operating Expenses Financial Results
(5254)
(5369)
(5040)
(9.38)
(10.09)
(9.94)
(2920)
----
----
(5.21)
----
----
730
1428
808
1.30
2.68
1.59
(530)
(1187)
(804)
(0.95)
(2.23)
(1.59)
(339)
(570)
124
(0.61)
(1.07)
0.24
Profit Before Tax
3873
351
413
6.91
0.66
0.81
Income Tax
(739)
(21)
(203)
(1.32)
(0.04)
(0.40)
Net Profit
3134
330
210
5.59
0.62
0.41
Revenues
13
Analysis
In the vertical analysis of the income statement shows that the sales are decreased and the cost of goods sold is more than the previous years. This means that BMW have more inventory or they purchases the material cost ly. The other expenses are also comparatively increased. In 2009 then the 2007 the major increase in the cost of sales has caused the d ecrease in the net income.
