Financial Analysis: A comparison between Daimler Group and BMW Group
In this report, we calculate and compare the financial performance between Daimler Group and BMW Group in two financial years 2010-2011. The objective is to analyse the financial performance of both groups and identify our company’s position, thus suggesting the potential areas for improvement for our company.
In this report, we analyse and compare the financial performance between BMW Group and Daimler Group in 2010 and 2011 using financial ratios analysis. The BMW Group and Daimler Group are two of Germany’s largest industrial companies and are among the most 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 improvement for our firm. All the figures were taken from the firms’ annual reports.
II) Financial Ratio Analysis
Financial ratios for BMW Group and Daimler Group are provided below.
| Ratios| BMW| Daimler Group|
| | 2011| 2010| 2011| 2010|
Profitability| Return on Capital Employed (ROCE) (%) | 10.5| 7.3| 9.4| 8.8| | Return on Equity (ROE) (%)| 18.1| 13.5| 14.6| 12.3| | Net Profit Margin (NPM) (%)| 11.7| 8.5| 8.2| 7.4|
| Gross Profit Margin (GPM) (%)| 21.1| 18.1| 24| 23.3| Efficiency| Sales Revenues to Capital Employed| 0.9| 0.86| 1.14| 1.18| | Sales Revenues to non-Current Assets| 0.92| 0.9| 1.22| 1.24| | Sales Revenues to Working Capital| 38.42| 20.0| 17.0| 25.3| | Inventory Turnover Period (days)| 65| 57| 77| 71|
| Trade receivables settlement period (days)| 17| 14| 27| 27| | Trade payables settlement period (days)| 36| 31| 43| 37| | The Operating Cycle (days)| 46| 40| 61| 61|
Liquidity| Current Ratio | 1.04| 1.08| 1.11| 1.07|
| Acid Test Ratio | 0.83| 0.88| 0.8| 0.8|
| The Cash Conversion Cycle (days)| 46| 40| 61| 61|
Solvency| Gearing (%)| 64.4| 65.8| 55.6| 54.1|
| Debt-Equity | 1.81| 1.93| 1.26| 1.18|
| Interest Cover| 8.5| 5.29| 6.94| 4.94|
The ROCE ratio measures how well the business has used the capital invested to generate profits while the ROE indicates the business’s ability to generate profits using shareholders’ funds. The GPM indicates how much a company earns taking into consideration the cost of sales. The NPM shows the amount of each sales dollar left over after all expenses have been paid. Both groups have achieved significant increase in revenues in 2011 leading to improvements in all profitability ratios comparing to 2010. Both firms have been more efficient in using its resources to generate returns, where both ROCE and ROE ratios have showed significant increases in 2011. It is also worth noticing that despite having higher GPM for both years, Daimler’s NPM figures were lower than that of BMW, indicating that Daimler has higher operating expenses than BMW. Overall, BMW has performed better than Daimler in terms of profitability.
Efficiency ratios are typically used to analyse how well a company uses its assets and liabilities internally. The sales revenue to capital employed ratio indicates how well the organization used the capital invested in the business to generate revenue for the company as whole. Both companies have experienced an increase in the revenues over the past two years but both companies haven’t experienced an increase in the asset turnover ratio. It has increased with BMW probably as a result 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 capital ratio.
The sales revenue to non-current...