Bmw and Peugeot

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MBA 503: Managerial Decision Making: Financial Analysis
Professor: Sameer Mustafa
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INVESTMENT IN AUTOMOBILE INDUSTRY:
BMW OR PEUGEOT

Section F12N72
Team members:
Ranjan Saha
Sam Khassawneh
Elena Dugarova

Executive Summary

This report provides a financial analysis and assessment of two automobile companies Bayerische Motoren Werke (BMW Group) and PSA Peugeot Citroën. Methods of analysis include comparison and evaluation of financial ratios, financial SWOT, R&D and cash flow analyses. All calculations can be found in the appendices. Results of data analyzed show that both companies have strengths, weaknesses, threats and opportunities, but Peugeot has more strengths and opportunities in terms of long-run prospective, than in BMW. After analyzing both companies we recommend to invest in Peugeot.

Table of Content
1. Introduction …………………………………………………….…….. 2. SOWT Analysis ………………………………………………….…… 1. BMW Strengths ……………………………………………………………… 2. BMW Weaknesses ……………………………………………………………. 3. BMW Opportunities …………………………………………………………... 4. BMW Threats …………………………………………………………………. 5. Peugeot Strengths ………………………………………………………….. 6. Peugeot Weaknesses ………………………………………………………… 7. Peugeot Opportunities …………………………………………………………. 8. Peugeot Threats ………………………………………………………………….. 3. Comparison of two companies ……………………………………… 4. Recommendations …………...………………………………………… 5. Conclusion ………………………………………………………………. 6. Appendices ………………………………………………………………. 7. References ………………………………………………………………..

1. Introduction

This report provides data on the financial situation of two well-known automobile brands, BMW Group and PSA Peugeot Citroën, over 2009 and 2011. The purpose of the report is to evaluate the financial situation of these companies in order to make an investment decision in any of these companies. First part of the report provides brief description about the companies followed by the situation analysis of both companies. Third part of the report illustrates the comparison followed by recommendation and conclusion. The recommendation will be made based on the result of the situation analysis.

BMW Group was founded in Germany in 1917. This is one of the most prospering automobile, motorcycle, and engine manufacturing companies. BMW Group has three one of the finest brands in this industry: BMW, MINI and Rolls-Royce (Annual report, 2011, p.3). The other company PSA Peugeot Citroën was founded in Paris in 1976. PSA Peugeot Citroën offers automobiles and motorcycles worldwide (PSA Peugeot Citroën, 2012). Nowadays this automobile company is supplying its products to China, Latin America, Russia and Europe (Annual report, 2011, p.4).

2. Situation analysis for BMW and Peugeot
The following section will discuss the financial strengths, weaknesses, threats and opportunities of both companies.

2.1 Strengths of BMW

2.1.1 Sustainability of the company

Maintaining the profitability is vital for any firm in order to be remaining sustainable. From the profitability test, it is apparent that the company improved it’s profitability over the year 2009 to 2011. Gross profitability increased significantly from 13.96% in 2009 to 24.38% in 2010 and continued to climb up to 27.79 by the end of 2011.

2.1.2 Excellent creditworthiness
BMW has been assigned credit rating status as “stable” by both Moody’s (rating A2) and Standard & Poor (rating A) which indicates the firm’s sound solvency position to debt (www.bmwgroup.com). In addition, their interest cover ratio provides very positive indication as it increased from 3.36 in 2009 to 9.54 in 2011. By utilizing this status company will be able to attract potential creditor with lower interest rate. Therefore, their profitability will increase due to the lower interest expenditure.

2.1.3 Increase investment in research and development...
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