# Financial Analysis of Bmw

Pages: 12 (1732 words) Published: January 23, 2011
7.0 Ratio Analysis

Ratio analysis is the starting point in developing the information desired by the analyst. Ratio analysis provides only a single snapshot, the analysis being for one given point or period in time. In the ratio analysis, it is possible to define the company ratio with a standard one. I different ratio that can be classified as follows:

➢ Liquidity ratio

➢ Activity ratio

➢ Profitability ratio

➢ Debt-coverage ratio.

7.1 Liquidity ratio:

A liquidity ratio is a ratio that shows the relationship of a firm’s cash and other current assets to its liabilities. A “liquid firm” is one that can easily meet its short-term obligations as they come due.

7.1.1 Current Ratio:

The current ratio measures the firm’s ability to meet its short-term obligations. It indicates the extent to which current liabilities are covered by those assets expected to be converted to cash in the near future. It is expressed as follows:

Current Ratio = Current Asset/ Current Liability

|Current Ratio |  | | | |  | |  | | | | | |  | |  |Current Asset |  |102|183,804,896 |120,641,172 | | | | | |,83| | | | | | | |8,2| | | | | | | |23 | | | | |  |  |  |  |  |

Analysis: The Company’s current ratio of 2008 is greater than the current ratio of 2007. That means it has less liquid asset to fulfill its current liability than it had in 2007. Thus the company is in a quite good condition than the previous year.

7.1.2 Quick (acid-test) Ratio:
Quick ratio is similar to the current ratio except that it excludes inventory, which is generally the least liquid current ratio. The quick ratio is calculated as follows:

Quick Ratio = (Current Asset – Stock)/ Current Liability

|Acid-Test Ratio |  | | | |  | |  | | | | | |  | |  |Current Asset |  |102,838|183,804,896 |120,641,172 | | | | | |,223 | | | | |  |Current Liabilities |  |  |96,242,458 |245,906,441 |113,697,920 | |  |Acid-Tes|0.2164244 |0.2912065 |0.8766111 | | |t Ratio | | | | |  | | | | | |  | |  |Accounts |  |7,077,42|17,651,989 |83,743,496 | | | |Recivables | |0 | | |...