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It shows how many cost units of balance profit were received per 1 cost unit of investment.
2. Return on Sale is the ratio of operating income ("operating profit" in the UK) divided by net
sales (total revenue), usually presented in percent.
24
% 100 *
TR
OP
r
This measure is helpful to management, providing insight into how much profit is being produced
per dollar of sales. An increasing ROS indicates the company is growing more efficient, while a
decreasing ROS could signal looming financial troubles.
a. Comparative analysis of development dynamics
Financial indicators for 2012/2013
Bayer AG 2012 2013 Baxter International Inc. 2012 2013
FA 9893 9957 FA 6098 7832
CC 19544 19019 CC 9260 10004
OP 5811 5657 OP 3354 2576
OOP -1883 -723 OOP -155 -9
NOP -752 -727 NOP 310 18
BP 3176 4207 BP 2889 2549
TR 39741 40157 TR 14190 15259
Numerical value of above mentioned characteristics
YIELD OF CAP INV 4,02 4,03 YIELD OF CAP INV 2,33 1,95
FA INTENSITY 0,249 0,248 FA INTENSITY 0,43 0,51
RATE OF
TURNOVER 2,03 2,11 RATE OF TURNOVER 1,53 1,53
RATE OF TIE CC 0,49 0,47 RATE OF TIE CC 0,65 0,66
INV DAYS ON
HAND 177 171 INV DAYS ON HAND 234,93 236,02
RATE OF BP 0,55 0,74 RATE OF BP 0,86 0,99
ROS 0,15 0,14 ROS 0,24 0,17
ROE 0,11 0,15 ROE 0,19 0,14
Conclusions
25
Bayer AG Baxter International Inc
1) Fixed Assets Yield in total increased by
0,01 USD/USD, that means in 2013 each
1 USD invested into Fixed Assets yielded
0,01 USD more Commodity Output
(Total Revenue) worth.
2) A decrease in FA Intensity of 0,001
USD/USD means that in 2013 Fixed
Assets were used more efficiently during
manufacturing process.
3) In 2013 each 1 USD invested in
Circulating Capital yielded 0,08 USD
more to TR worth.
4) In 2013 it was necessary to invest less
by 0,02 USD to obtain 1 USD of TR in
comparison with 2012
5) A 6-day decrease in Inventory Days-on-
Hand in 2013 is favorable as the
company manages to reduce carrying
costs which require significant
investments.
6) As Rate of Balance Profit increased from
0,55 USD/USD to 0,74 USD/USD, I can
assume that dependence of Bayer on the
primary activity decreased.
7) In 2012 the company generated 15 cents
of Profit from each 1 dollar of sales,
while in 2013 only 14 cents. Though the
difference is quite small, the business is
still considered to be sound.
8) In 2012 each 1 dollar of Total Equity
invested into Fixed Assets yielded 11
1) Fixed Assets Yield in total decreased by
0,38 USD/USD, that means in 2013 each
1 USD invested into Fixed Assets yielded
0,38 USD less Commodity Output (Total
Revenue) worth.
2) In 2013 it was necessary to invest 0,08
USD more into Fixed Assets to obtain 1
USD in Total Revenue.
3) In 2013 each 1 USD invested in
Circulating Capital did not yield any
value more to TR worth.
4) In 2013 it was necessary to invest more
by 0,01 USD to obtain 1 USD of TR in
comparison with 2012
5) A 1-day increase in Inventory Days-on-
Hand in 2013 is unfavorable as the
company does not manage to reduce
carrying costs which require significant
investments.
6) As Rate of Balance Profit increased from
0,86 USD/USD to 0,99 USD/USD, I can
assume that dependence of Baxter on the
primary activity decreased.
7) In 2012 the company generated 24 cents
in Profit from each 1 dollar of sales,
while in 2013 occurred a decrease to 17
cents. Baxter may experience financial
troubles.
8) In 2012 each 1 dollar of Total Equity
invested into Fixed Assets yielded 19
26
cents of Total Profit and 15 cents in
2013.
cents of Total Profit and 14 cents in
2013.
b. Factor analysis of Net Sales, Fixed Assets, Circulating Capital
From the tables given above in Comparative analysis of development dynamics it is quite
obvious that Net Sales (Total Revenue) increased in both companies, so did Fixed Assets, while
Circulating Capital in case of Bayer decreased and in case of Baxter increased. To find out the
reasons factor models were used.
Factor analysis of Total Revenue
The change of commodity output is influenced by the change of yield of capital investment. It is
possible to estimate this influence by dint of the two-factor multiplicative model:
FA Y FA CO
FA Y Y CO
FA Y FA Y CO CO CO
FA Y CO
0
1
0 0 1 1 0 1
*
*
,
where the yield of capital investment is qualitative indicator and the value of fixed assets is
quantitative indicator.
Bayer AG Baxter International Inc
The change in TR for Bayer was 416 million
USD in 2013.
1
*FA Y Y CO =0,02*9957=158,907
million USD
Investments into FA were quite reasonable and
a slight increase in capital investment yield
The change in TR for Baxter was 1069 million
USD in 2013.
1
*FA Y Y CO =(-0,38)*7832=-2966
million USD
Investments into FA were not reasonable and a
decrease in capital investment yield caused
27
caused approximately 160 mln USD increase in
Net Sales.
FA Y FA CO
0
=4,02*64=257,093 million
USD
At the same time, a slight increase in FA was
followed by 257 mln USD increase in TR, that
means Fixed Assets were used more efficiently.
approximately 3000 mln USD decrease in Net
Sales
FA Y FA CO
0
=2,33*1734=4035 million
USD
At the same time, an increase in FA was
followed by approximately 4000 mln USD
increase in TR, that means Fixed Assets were
used more efficiently
Factor analysis of Fixed Assets
The change of fixed assets intensity influences on the change of the Fixed Assets. It is possible to
estimate this influence by means of the following model:
CO F CO FA
CO F F FA
CO F CO F FA FA FA
CO F FA
0
1
0 0 1 1 0 1
*
*
,
where the fixed assets intensity is qualitative indicator and the value (volume) of commodity
output is quantitative indicator.
Bayer AG Baxter International Inc
In total, FA increased by 64 mln USD in 2013.
1
*CO F F FA = (-0,001)*40157=-40,157
mln USD
CO F CO FA
0
=0,249*416=103,558 mln
USD
In 2013 a decrease in FA intensity caused a
relevant decrease of 40,157 mln USD in FA,
while positive change in Total Revenue
resulted in 100 mln USD increase in FA value.
In total, FA increased by 1734 mln USD in
2013.
1
*CO F F FA = 0,08*15259=1274,609
mln USD
CO F CO FA
0
=0,43*1069=459,391 mln
USD
In 2013 Baxters Fixed Assets increased by
1274 mln USD due to an increase in FA
intensity and by 460 mln USD due to an
28
increase in TR.
Factor analysis of Circulating Capital
Inventory days-on hand enables us to estimate the value of free surplus of turnover and the value of
laid-down circulating assets. At the heart of the analysis two-factor multiplicative model underlies.
period in Days
PS D
PS CC and
period in Days
PS D
D CC
period in Days
PS D
CC
PS
CC period in Days
D
* *
* *
0 1
The value of free surplus of turnover and the value of laid-down circulating assets are defined using
the positive or negative value of Circulating assets.
Bayer AG Baxter International Inc
In total, CC decreased by 525 mln USD in 2013
period in Days
PS D
D CC
1
*
=
360
40157 * 54 , 6
1