The project requires students to find and analyse the financial figures of a large company & translate them to financial ratios

1. Accounting Project
Lecturer: Chang Jau Ho
Group:
Muhammad Haziq bin HjZariful
0314131
Muhd. Syafiq bin HjAbdZariful
0314702
1|Page

2. Brief Bio of the Businesses
BMW is known as BayerischeMotorenWerke
LOCATION
The main branch is located in Munich, Bavaria, in Germany.at Gurney Drive in 6th
December 2005.
Key people:
Norbert Reithofer(CEO), Joachim Milberg (Chairman of the supervisory board)
BRIEF HISTORY
The company was founded in 1916 / 1917, the BMW Group is now one of the ten
largest car manufacturers in the world and, with its BMW, MINI and Rolls-Royce
brand/brands?, possesses three of the strongest exceptionalbrands in the car industry.
The circular blue and white BMW logo or roundel is portrayed by BMW as the
movement of an aircraft propeller, to signify the white blades cutting through the blue
sky – an interpretation that BMW adopted for convenience in 1929, twelve years after
the roundel was created. The emblem evolved from the circular Rapp Motorenwerke
company logo, from which the BMW company grew, combined with the white and blue
colors of the flag of Bavaria, reversed to produce the BMW roundel. However, the origin
of the logo being based on the movement of a propeller is in dispute, according to an
article recently posted by the New York Times, quoting “At the BMW Museum in Munich,
Anne Schmidt-Possiwal, explained that the blue-and-white company logo did not
represent a spinning propeller, but was meant to show the colors of the Free State of
Bavaria.”(Muenchen, n.d.) The group also has a strong market position in the
motorcycle sector and operates a successful financial services business. The company
aims to generate profitable growth by focusing on the top segments of the international
automobile markets. With this in mind, a wide-ranging product and market offensive
was introduced in 2001, which has resulted in the BMW Group expanding its product
range considerably and strengthening its worldwide market position. The company’s
brand is extremely strong and is associated with high performance, engineering
excellence and innovation.
Indeed, the BMW brand is often cited as one of the ‘best’ in the world, and the company
continues to launch a stream of innovative products as part of its battle with German
peer Mercedes to be the world’s largest luxury car maker.(Zimbio.com, n.d.)
2|Page

3. Ratio Analysis of the business based on 2012 & 2011
Profitability
Ratios
2011
2012
Return on
Enquity (ROE)
=25.7%
=34.6%
=3.6%
=5.3%
Net Profit
Margin (NPM)
Interpretation
During the year 2011 to 2012, the
ROE has increased from 25.7% to
34.6%. This means the owner is
receiving a higher earning on his
capital in the year 2012 than
2011.
Between the period of 2011 to
2012, the NPM has increased
from 3.6% to 5.3% which means
the business is getting better at
controlling expenses
=21.2%
=21.3%
=6.1%
=6.3%
From 2011 to 2012, the GPM for
the business slightly increased
from 21.2% to 21.3%, which
means the business is slightly
getting better at controlling Cost
of Goods Sold
During the period from 2011 to
2012, the SER increased from
6.1% to 6.3%. This shows the
business is getting worse at
controlling selling expenses.
=2.9%
Between the years 2011 to 2012,
the GER increased from 2.6% to
2.9%. This means the business is
getting worse at controlling
general expenses.
=2.8%
During the period, FER has
decreased from 3.8% to 2.8%,
which indicates that the business
is getting better at controlling
financial expenses.
Gross Profit
Margin (GPM)
Selling Expense
Ratio (SER)
General Expense
Ratio (GER)
=2.6%
Financial
Expense Ratio
(FER)
=3.8%
* Units represented in € millions
3|Page

4. Stability
Ratios
2011
2012
Working
Capital
= 1.68 :1
= 1.54: 1
=41.9%
=45.5%
=29.5 days
=29.6 days
Total Debt
Stock
Turnover
Debtor
Turnover
=108 days
=107.1 days
= 3.1 times
=4.4 times
Interest
Coverage
Interpretation
From 2011 to 2012, working
capital has decreased from 1.68:1
to 1.54:1. This does not just
mean the business is getting
worse in paying their liabilities,
but it also does not satisfy the
minimum 2:1 ratio
From 2011 to 2012, total debt
has increased from 41.9% to
45.5%, which means that the
debt level has gone up, however,
it still below the maximum 50%
limit
Between the period of 2011 to
2012, stock turnover has slightly
increased from 29.5 days to 29.6
days. This means the business is
selling their products at a slightly
slower speed.
During the period from 2011 to
2012, debtor turnover has
decreased from 108 days to
107.1 days. This indicates that
the business is getting faster in
collecting their debts from
debtors.
During the period, the business’s
interest coverage has increased
from 3.1 times to 4.4 times. This
means the business’s ability to
pay interest
* Units represented in € millions
4|Page

5. Price/Earning
Currently (24th Jan 2014)
P/E
Ratio
=10.67 years
Interpretation
The P/E ratio for BMW as of 24th January
2014 is 10.67 years. This means an investor
who bought a share of BMW would have to
wait 10.67 years in order to retain his/her
investment, in this case, €84.63. The P/E
ratio is also lower than what a
conservative investor would pay, which is
lower than 15 years
Investment Recommendation
In our recommendation through our analysis, the company BMW would is a company
worth investing on.
One of the reasons is that the company has exhibited good profitability, as shown in the
profitability ratio analysis. Firstly, the Return on Enquity has vastly increased by 9.1%,
which shows that the net profit has also increased through the years. Even though it can be
seen that the Selling Expense & General Expense Ratio has increased, there is only a slight
rise of less than 1%. Moreover, the Net Profit Margin, which shows how the business
controls all its expense, has greatly been increased. This is because of how the Financial
Expense Ratio has prominently been decreased by 1%. Other than the expenses, the
business has also been better at controlling their Cost of Goods Sold.
As for stability, even though the total debt has increased, it is still lower than the maximum
50% limit for both the years of 2011 & 2012, which means the business has kept it below
the limit for a long time. In addition, the debtors are getting faster at paying their debts to
the company as seen in the Debtor Turnover Ratio. The business does have some flaws
however, such as getting slower in selling their products, getting worse at paying liabilities
in addition to not exceeding the minimum limit, & lastly not exceeding the minimum limit
for Interest coverage, even though there is an increase.
Even though the business has shown not to be stable, the price per earning is still lower
than 15 years; the investors can receive their investment after only 10 years.
5|Page

6. References
Muenchen, I. (n.d.). Bmwgroup : company : company portrait : locations. [online]
Retrieved from:
http://www.bmwgroup.com/bmwgroup_prod/e/0_0_www_bmwgroup_com/unternehmen
/unternehmensprofil/standorte/standorte/index.html [Accessed: 24 Jan 2014].
Zimbio.com. (n.d.). [online] Retrieved from:
http://www.zimbio.com/Norbert+Reithofer/articles/JwVX2Ci0vT9/Bayerische+Motoren
+Werke+AG+BMW+Biography [Accessed: 20 Jan 2014].
Bloomberg. (n.d.). Bmw:xetra stock quote - bayerischemotorenwerkeag. [online]
Retrieved from: http://www.bloomberg.com/quote/BMW:GR [Accessed: 20 Jan 2014].
Marketwatch.com. (n.d.). Bayerischemotorenwerkeag. [online] Retrieved from:
http://www.marketwatch.com/investing/stock/bmw?countrycode=de [Accessed: 20 Jan
2014].
Financial statements of BMW AG. (2011). [e-book] BMW Group. p. 4, 5. Available
through: bmwgroup.com
http://www.bmwgroup.com/e/0_0_www_bmwgroup_com/investor_relations/corporate_e
vents/hauptversammlung/2012/BMW_AG_Jahresabschluss_2011_engl.pdf [Accessed:
24 Jan 2014].
Financial statements of BMW AG. (2012). [e-book] BMW Group. p. 4, 5. Available
through: bmwgroup.com
http://www.bmwgroup.com/e/0_0_www_bmwgroup_com/investor_relations/finanzberic
hte/geschaeftsberichte/2012/_pdf/BMW_AG_Jahresabschluss_2012_en.pdf [Accessed:
24 Jan 2014].
6|Page

7. Appendices
BALANCE SHEET 2012
7|Page

8. BALANCE SHEET 2011
8|Page

9. P&L STATEMENT 2012
P&L STATEMENT 2011
9|Page