'Financial Ratio Analysis: Daimler Group and Bmw Group Essay\r'

'Abstract\r\nIn this report, we calculate and correspond the monetary performance between Daimler root word and BMW host in twain pecuniary years 2010-2011. The target is to psychoanalyze the monetary performance of two(prenominal) groups and pose our follow’s position, thus suggesting the potential beas for returns for our ships telephoner.\r\nI) Introduction\r\nIn this report, we analyse and comp ar the financial performance between BMW radical and Daimler grouping in 2010 and 2011 using financial propertys analysis. The BMW Group and Daimler Group are two of Germany’s largest industrial companies and are among the almost successful car and motorcycle manufacturers in the world. By doing comparisons, we will be able to identify the financial position and the potential areas of betterment for our firm. All the figures were taken from the firms’ annual reports.\r\nII) financial Ratio Analysis\r\nFinancial balances for BMW Group and Daimler Group are provided beneath.\r\n1) Profitpower\r\nThe ROCE dimension measures how well the business has utilise the with child(p) invested to flummox profits while the ROE indicates the business’s ability to knuckle under profits using shareholders’ funds. The GPM indicates how frequently a c on the wholeer earns taking into consideproportionn the speak to of gross sales. The NPM shows the amount of each sales dollar left everyplace after all expenses pass on been paid. some(prenominal) groups commence achieved signifi dealt adjoin in tax in happen enhancements in 2011 leading to improvements in all profitability symmetrys examine to 2010. twain firms countenance been more efficient in using its resources to reelect returns, where two ROCE and ROE proportionalitys feature showed hearty increases in 2011. It is also worth nonicing that disrespect having higher(prenominal) GPM for both years, Daimler’s NPM figures were lower than t hat of BMW, indicating that Daimler has higher direct expenses than BMW. Overall, BMW has performed better than Daimler in terms of profitability.\r\n2) ability\r\nEfficiency proportionalitys are typically used to analyse how well a partnership uses its additions and liabilities internally. The sales revenue to crownwork employed ratio indicates how well the constitution used the heavy(p) invested in the business to ease up revenue for the company as whole. both companies have experienced an increase in the revenues everyplace the onetime(prenominal) two years but both companies oasis’t experienced an increase in the asset turnover ratio. It has increase with BMW probably as a prove of the reduction in the non-current liabilities. The opposite has occurred with Daimler Group most likely as a result of the massive increase in the non-current liabilities. This ratio can be further explained using the sales revenue to non-current assets and sales revenue to working chapiter of the United States ratio.\r\nThe sales revenue to non-current assets ratio measures how well the managers invested the non-current assets of the company to generate revenue for the growth of the business. This ratio has most unquestionably been impact by the investment in mod non-current assets by both groups but Daimler has managed to use these assets to generate more revenue than BMW but still has used its new non-current assets efficiently to generate a sales revenue which would in turn lead to a ratio higher than the previous year’s ratio figure.\r\nThe sales revenue to working expectant explains how well the company is using its working working capital to generate sales revenue. It is one of the best ways to watch the changes in exchange overtime, this is important because the company needs cash to operate. Daimler has experienced a significant decrease in this ratio and BMW, the opposite occurred. This could be as result of fluctuations in the current assets and liabilities of both companies.\r\nThe stocktaking turnover rate of prey ratio measures the space of time stock is held within the business. two companies are now holding stock for longer than they did in 2010. It takes Daimler 77 days to sell its products while it takes BMW 65days. both results are quite high but BMW has an advantage. This fashion that BMW has fewer inventories in store than Daimler at the give the axe of the year, which means lower holding costs for BMW.\r\nThe barter receivables full stop ratio calculates how long it takes the company to store up brookments from its customers. A business will naturally be concerned with the amount of funds secure up in trade receivables and try to keep this at a minimum as it can have a significant impact on the cash flow of the business. This has not changed much for both companies over the past two years but has increased lissomly for BMW in 2011. Daimler has more funds tied up in trade receivables.\r\nT he trade beables period indicates how long it takes the company to catch up with its suppliers. Most companies would choose this to be as long as come-at-able but this can be taken to outlying(prenominal) and result in the loss of computablewill of suppliers. Both groups have managed to increase the period it takes them to pay their creditors. Both companies take a longer period to pay their suppliers than it takes for their debtors to pay what they owe.\r\nThis shows a good cash flow movement for both companies. The operating cycle is explicit as an indicator of management capacity. It has three components of inventory turnover period, trade receivables period and trade payables period. These come together to form the complete measurement of operating cycle days. This hasn’t changed for Daimler over the past two years and has increased slightly for BMW. It takes BMW a shorter period to generate revenue from its purchase of inventory than it takes Daimler.\r\n3) liqui d\r\nLiquidity ratios attempt to measure a company’s ability to pay off its short-run debt obligations. In general, the greater the coverage of liquid assets to short-term liabilities the better it is, because it gives a clear signal to whether a company can pay its debts that are payable in the near future and still be able to fund its ongoing operations. The current ratio measures a company’s ability to pay back its short-term debts in short notice. The acetous test ratio is similar to the current ratio except does not include inventory and pay expenses as assets but only those that can be turned into cash good. Therefore, it measures the firm’s ability to pay its current obligations immediately. Comparing the two companies, those figures are quite similar. As for manufacturing companies like Daimler and BMW, current ratio of/more than 1 is desirable.\r\nBoth companies did manage well to achieve the target figures in both years. Changes in the ratios betw een two years are not significant, but it is worth pointing out that Mercedes showed a keen improvement in liquidity (from 1.07 to 1.22), whereas BMW got a mild decline (from 1.08 to 1.04). Although the acid test ratios falls below 1 in both years for both firms, thus both firms are unable to pay back its short term debts immediately, it does not inescapably mean that it will go bankrupt †as there are many ways to assenting financing †but it is definitely not a good sign. In general, Daimler’s current and loyal ratios showed a slightly better liquidity position, analyze to BMW’s. In fact, liquidity ratios are remarkably affected by the company’s working capital management.\r\nThat is why we should examine some working capital figures to fully analyze two companies’ liquidity circumstances. The exchange Conversion Cycle (CCC) is similar to the Operating Cycle. enchantment the parts are the comparable †receivables, inventory and paya bles †in the CCC, they are analysed from the perspective of how well the company manages its cash, as opposed to their impact on operational capital assets. The CCC measures the number of days a company’s cash is tied up in the production and sales process of its operations and the put on it gets from payment terms from its creditors.\r\nThe shorter this cycle, the more liquid the company’s working capital position is. In general, both firms have taken longer to crack their stocks, receive payments and pay out their creditors in 2011 comparing to 2010. This trend could mean the demand for the firms’ products has been decreasing. Moreover, BMW performed better than Daimler with all of its figures world noticeably lower in both years. Therefore, the CCC of BMW is considerably lower than that of Daimler. Apparently, we can visualise that both companies had reasonable figures and good working capital management. Yet, overall, BMW seemed to have performed be tter than Daimler, as the processes were faster.\r\n4) Solvency\r\nGearing measures the proportion of a company’s finance which is provided from external sources. In theory, the higher level of gear wheel, the riskier the business, since invade and quittance of debts must be paid regardless of the situations. However, gearing can be a financially levelheaded part of a business’s capital structure, especially if the business has strong, predictable cash flows. Both companies have had a consistent gearing ratio of about 65% (for BMW) and about 55% (for Damlier Group) over the course of 2 years (2010 and 2011) which states that the companies are super geared. Debt Equity Ratio is the ratio of the debt that a company has to the its shareholders’ equity. A higher the percentage means that a company is using more leverage and has a weaker equity position.\r\nOptimally the debt equity ratio of a company should be 1. For most companies, the ratio is normally betwe en 1.5-2. The debt equity ratio of BMW shows a slight fall this year and a slight increase in the case of Daimler Group. BMW’s gearing ratio and debt to equity ratio indicate that BMW is more leveraged than Daimler. care cover ratio is used to determine how easily a company can pay involvement on peachy debt.\r\nThere has been a good amount of increase in this ratio in BMW as well as in Daimler Group as it can be seen above. It can be said that the profit of BMW was 8.5 times and 6.94 times (for Daimler) greater than the amount of interest that it incurred on its respective outstanding debts. A higher interest cover ratio indicates that the business is easily able to meet its interest obligations. Usually any interest coverage ratio higher than 1.6 is considered safe which leaves us to the conclusion that BMW and Daimler Group both are safe companies in matters of invade payable on outstanding debt.\r\nIII) Conclusion\r\nThe 2011 financial year was an excellent one for th e Daimler where sales volume, revenue and earnings figures all significantly improved. Daimler Group should go its operating costs and continue to invest in R&D to maintain and improve its profitability levels. It could also further improve its efficiency by better managing the Operating Cycle. In this paper, we have illustrated relationships between different aspects of the firms’ operations and provided relative measures of the firms’ conditions and performance. By comparing two similar firms in the same industry in two years, we have pitch that BMW has performed slightly better than our firm (Daimler) despite being more leveraged. However, the financial ratios are pure maths and do not take into account different aspects of the business, therefore, users should approach them with caution.\r\n'