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Introduction:

Quantitative analysis is core of economic applications which is employed for measurement of


performance of an economic activity, evaluation or valuation of financial instruments, and
monetarily predicting real-world events. Comparison analysis of performance based on financial
statements has its limitations as it varies industry to industry. Size of organizations, seasonal
variations and many other factors pose as challenge to draw theoretical conclusion. In order to
minimize these obstacles the periodic ratio analysis of same firm BMW is used for calculations.
Secondary data collection of financial reports of BMW is available on official websites of
organization. After comprehensive study of financial analysis the periodic graphic analysis is
presented to draw conclusions.

Fixed and variable costs

Costs incurred by a business during its business operations are divided into two categories

Fixed costs:

Fixed costs are those costs which are not related to output of business operations. These include

o Advertising
o Insurance
o Depreciation
o Equipment leases
o Subscriptions
o Rent
o Development costs
o Good will costs
o CSR costs

Variable costs:

These are directly related to output of business operations. These include

o Sales commission
o Production wages
o Raw materials

Profit of equity:

Profit of equity can be measured by calculating the rate of return on the ownership benefits.
Increase in shareholders wealth is one of core objective of organizations, ROE is considered
important tool for evaluation of management effectiveness.

𝑃𝑟𝑜𝑓𝑖𝑡 𝑎𝑓𝑡𝑒𝑟 𝑡𝑎𝑥 𝑋100


𝑝𝑟𝑜𝑓𝑖𝑡 𝑜𝑓 𝑒𝑞𝑢𝑖𝑡𝑦 =
𝑠ℎ𝑎𝑟𝑒 𝑐𝑎𝑝𝑖𝑡𝑎𝑙 + 𝑟𝑒𝑠𝑒𝑟𝑣𝑒𝑠

Profit on equity ratios of past five years are calculated as

Year Profit after taxes (ml) Share capital and


reserves

2011 4,907 16690 29.4

2012 5,111 24108 21.2

2013 5,329 20.0


26645

2014 5,817 29085 20.0

2015 6,396 31663 20.2

Graphical analysis shows stable ROE with 0.8 percent increase in2015 as compared to 20 pc of
2014.
Profit margin on Sales:

The profit margin on sales is also an indicator of the productivity of the business. It is calculated
as
Profits before interest and taxes
Profit margin on Sales =
total sales

For BMW this ratio for year 2011 to 2015 is calculated as

Year Profit before taxes Sales Profit margin on sales


and interest (ml)

2011 7,383 63,229 0.1167

2012 7,803 70,208 0.1111

2013 7,893 70,630 0.1117

2014 8,707 75,173 0.1158


2015 9,224 85,536 0.10783

Graphical analysis shows a decline in profit margin on sales mainly due to increased cost of sales
according to annual report of firm 2012.

Percentage of total profit:


Overall return margin is a monetary percentage applied to evaluate the productivity of a
business’s essential activities, eliminate fixed costs.
𝑔𝑟𝑜𝑠𝑠 𝑝𝑟𝑜𝑓𝑖𝑡 𝑋100
𝑃𝑒𝑟𝑐𝑒𝑛𝑡𝑎𝑔𝑒 𝑜𝑓 𝑡𝑜𝑡𝑎𝑙 𝑝𝑟𝑜𝑓𝑖𝑡 =
𝑆𝑎𝑙𝑒𝑠

For BMW this ratio for year 2011 to 2015 is calculated as

Year Gross profit Sales Profit margin on sales

2011 15,494 63,229 25.50


2012 15,494 70,208 22.06

2013 15,268 70,630 21.61

2014 14,620 75,173 19.44

2015 14,787 85,536 17.28

Graphical analysis of this period is as under

Though the results show stability but decreasing gross profit percentage indicates increasing
selling cost and high proportions of total fixed costs.

Overall Asset usage:


Return on assist is measure of financial returns on investment of a firm in its total assist. It
informs the stake holder of corporate about its performance by investment made in total assets of
respected firm or portfolio. ROA is ratio of net income and total assets of a firm in one financial
period. This ratio provides a clear idea about the effectiveness of a company on its performance
over owned assets. It is calculated as
𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝒂𝒔𝒔𝒆𝒕𝒔
𝑻𝒐𝒕𝒂𝒍 𝒂𝒔𝒔𝒆𝒕 𝒖𝒔𝒂𝒈𝒆 =
𝒕𝒐𝒕𝒂𝒍 𝒔𝒂𝒍𝒆𝒔

Overall asset usage of BMW of years 2011 to 2015 is as

Year Averages assets Total sales Asset usage

2011 12,287 63,229 19.4

2012 13,327 70,208 18.98

2013 8,152 70,630 11.54

2014 7,575 75,173 10.07

2015 9,256 85,536 10.82

Calculation shows a decrease in asset usage for BMW from year 2011 to 2015

Current ratio:

The current is also known as liquidity ratio which allows the company's ability to pay short-term

obligation. It is calculated as

𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑎𝑠𝑠𝑒𝑡𝑠
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑟𝑎𝑡𝑖𝑜 =
𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑦

Current ratios for BMW of years 2011-15 are calculated as


Year Current assets liabilities current ratio

2011 17,682 11,515 1.5355

2012 20,097 14,559 1.308

2013 19,773 15,361 1.28

2014 18,903 13,736 1.376

2015 19,333 12,772 1.51

Graphical comparison of BMW’s current ratios is as

The analysis confirms a strong position of BMW to meet its liabilities.

Acid test:
This basic analysis is a fast proportion which gauges the capacity of an organization to utilize its
close money to pay its obligation. It is ratio of current assets less stock by current liabilities of
firm. Formula of acid test ratio is as

(𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑎𝑠𝑠𝑒𝑡𝑠 − 𝑠𝑡𝑜𝑐𝑘)


𝐴𝑐𝑖𝑑 𝑡𝑒𝑠𝑡 =
𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
For BMW this ratio for year 2011 to 2015 is calculated as

Year Current assets Stock liabilities current ratio

2011 17,682 3,755 11,515 1.20

2012 20,097 3,749 14,559 1.12

2013 19,773 3,863 15,361 1.03

2014 18,903 3,859 13,736 1.09

2015 19,333 4,267 12,772 1.17

Graphical presentation of these ratio over mentioned period is presented as

Acid test ratio analysis shows that the firm has maintained strong position to pay its current

liabilities. The liabilities to banks and the financing liabilities to backups expanded essentially.

The diagram above proves that expansion in the liabilities brought in a steep decline in the acid

test in year of 2013.


Rising supply costs:
Prices of the raw materials used by BMW are difficult to foresee because of reasons such as
environmental laws, country politics and fuel costs.

The availability of specific of raw materials and continuous changes in raw materials prices are
significant risks for the BMW Group. In order to safeguard the supply of production materials
and reduce cost risks, commodities markets of raw materials are closely monitored and analyzed
by Research and development department.

Changes in the price of crude oil which is a basic ingredient in many of components have an
indirect effect on production costs. The BMW Group counters this challenge by developing and
selling efficient and economical engine. To mitigate this risk the research and development
department in continuously developing solution by alternative drive technologies.

In the past five years, despite changing external conditions like global financial and economic
crisis, political unrest and environmental concerns, the BMW Group still showed a profit and
paid a dividend

Alternatives to a SWOT analysis (SOAR analysis)


There are several alternatives to a SWOT analysis that can be used. As an example of this is the
SOAR analysis. The SOAR analysis is focused on the strengths of the firm and how they can be
capitalized upon opportunities to increase profits, market shares and effectiveness.
A SCOPE analysis can also be considered as an alternative to a SWOT as the Aspirations of
firms are expression of the position the firm want to be in the coming future. It is a vision to
build on current strengths, provide inspiration, and challenge the current situation.

SOAR analysis also includes the Results which are tangible outcomes of efforts of a specific
period. It is a measure of the effectiveness which firm has achieved for its goals and aspirations.
Recommendations
Like every company, there is still room for improvement for BMW like

According to annual report 2015 the markets for 500 cc plus motorcycles demand is likely to
continue growing in 2016. Registration figures for motorcycles in Europe as a whole are also
expected to rise, including a minor increase in Germany. This increasing in demand is a great
opportunity for BMW to increase its market share.
The BMW Group has contentiously laying its efforts to reduce fuel consumption by providing
highly fuel efficient engines. The demand for economical vehicles is also an opportunity for
BMW.

Increasing concerns on environmental issues for automobile industry like carbon dioxide
emissions. According to annual report 2015 of BMW forecasts, carbon dioxide emissions for the
vehicle fleet has decreased slightly during the 2015-16 period, thus continuing the trend seen in
previous years (2014: 124 grams CO2 / km). Today many companies strive to grow and increase
their profits. During the last decades a lot of companies have tried to create competitive
advantages by becoming more environmentally responsible. Nowadays, some companies try to
green everything from their manufacturing to their distribution. Green marketing is gaining its
importance in strategic decisions in organizations as firms face increasing public sensitivity,
strict regulation, and growing stakeholder pressures focused on preserving the natural
environment (Banerjee et al. 2003).
Reference:
Banerjee, S. B., Iyer, E. S., & Kashyap, R. K. (2003). Corporate environmentalism: antecedents
and influence of industry type. The Journal of Marketing, 67, 106–122.
Brigham, E. and Ehrhardt, M. (2013). Financial Management: Theory and Practice. 14th ed.
BMW annual reports year 2011:
https://www.press.bmwgroup.com/global/article/detail/T0125598EN/bmw-group-annual-report-
2011?language=en
BMW annual reports year 2012:
https://www.bmwgroup.com/content/dam/bmw-group-
websites/bmwgroup_com/ir/downloads/en/2012/2012-BMW-Group-Annual-Report.pdf
BMW annual reports year 2013:
https://www.press.bmwgroup.com/united-kingdom/article/detail/T0172969EN_GB/bmw-group-
annual-report-2013?language=en_GB
BMW annual reports year 2014:
https://www.bmwgroup.com/content/dam/bmw-group-
websites/bmwgroup_com/ir/downloads/en/2014/2014-BMW-Group-Annual-Report.pdf
BMW annual reports year 2015:
https://www.bmwgroup.com/content/dam/bmw-group-
websites/bmwgroup_com/ir/finanzberichte/pdf/en/12784_GB_2015_en_Finanzbericht.pdf
Strengths opportunities aspirations results SOAR analysis
http://asqservicequality.org/glossary/strengths-opportunities-aspirations-results-soar-analysis/