Electrolux Financial Analysis
Financial analysis
Profitability
Gross profit margin amounted to 18% in 2011 and at 22.2% in 2010 with a decrease of 4% compared to a prior year. Decrease in the gross profit margin had been largely caused by the escalation in COGS which has resulted in a lower gross profit. This may point at an inefficient use of raw materials, labor and manufacturing related costs or basically an increased market price for raw materials and up surged wages.
Followed by lower EBIT or operating profit margin which went down with 3% as the consequence of higher expenses - an increase in operating costs. Lastly, net profit margin has resulted in a lower rate with a difference of - 2% in 2011. Yet, its main competitor in Europe – BSH has realized higher profits, keeping its yearly profit margin as nearly at the same rate of a prior year which is 2010. Though, BSH have had fewer sales in terms of money in both years (see 2nd sheet – profitability ratios for BS).
ROE of Electrolux has decreased nearly twice. Largely, because of lower profits in 2011, however, ROE of the competitor (BS) remained more or less stable with a decrease of only 3% in 2011. As consequence the management of Electrolux didn’t handle to get an adequate return on investments to its shareholders. ROA lowered as well due to the similar cause - the lower profits in 2011.
Liquidity (short term debt)
The short-term solvency ratios have not changed that much for both operating years and remained relatively stable. Company made additional 0.20$ of assets on its liabilities, or 1.20$ in assets against every 1$ in liabilities. Company remains solvent and capable to pay off its short term debts, though the rates are not that high. Likewise, BSH is having a better liquidity position and more solvent with a current ratio of 1.47 times or 1.47 $ in assets vs. every 1$ in liabilities.
Quick ratio equaled to 0.87 in 2011 compared to 1 in 2010 which means that company may not be capable to cover immediately its current
Profitability
Gross profit margin amounted to 18% in 2011 and at 22.2% in 2010 with a decrease of 4% compared to a prior year. Decrease in the gross profit margin had been largely caused by the escalation in COGS which has resulted in a lower gross profit. This may point at an inefficient use of raw materials, labor and manufacturing related costs or basically an increased market price for raw materials and up surged wages.
Followed by lower EBIT or operating profit margin which went down with 3% as the consequence of higher expenses - an increase in operating costs. Lastly, net profit margin has resulted in a lower rate with a difference of - 2% in 2011. Yet, its main competitor in Europe – BSH has realized higher profits, keeping its yearly profit margin as nearly at the same rate of a prior year which is 2010. Though, BSH have had fewer sales in terms of money in both years (see 2nd sheet – profitability ratios for BS).
ROE of Electrolux has decreased nearly twice. Largely, because of lower profits in 2011, however, ROE of the competitor (BS) remained more or less stable with a decrease of only 3% in 2011. As consequence the management of Electrolux didn’t handle to get an adequate return on investments to its shareholders. ROA lowered as well due to the similar cause - the lower profits in 2011.
Liquidity (short term debt)
The short-term solvency ratios have not changed that much for both operating years and remained relatively stable. Company made additional 0.20$ of assets on its liabilities, or 1.20$ in assets against every 1$ in liabilities. Company remains solvent and capable to pay off its short term debts, though the rates are not that high. Likewise, BSH is having a better liquidity position and more solvent with a current ratio of 1.47 times or 1.47 $ in assets vs. every 1$ in liabilities.
Quick ratio equaled to 0.87 in 2011 compared to 1 in 2010 which means that company may not be capable to cover immediately its current