Table of Contents

1 LIQUIDITY RATIOS 1.1 CURRENT RATIO 1.2 QUICK RATIO 1.3 CASH RATIO 1.4 WORKING CAPITAL RATIO 1.5 DAYS SALES IN INVENTORY 1.6 INVENTORY TURNOVER RATIO 1.7 DAYS SALES IN RECEIVABLES RATIO 1.8 ACCOUNT RECEIVABLE TURNOVER RATIO 2 LONG TERM DEBT PAYING ABILITY 2.1 TIMES INTEREST EARNED 2.2 DEBT RATIO 2.3 DEBT /EQUITY RATIO 2.4 DEBT TO TANGIBLE NET WORTH RATIO 3. PROFITABILITY RATIOS 3.1 NET PROFIT MARGIN 3.2 TOTAL ASSETS TURNOVER RATIO 3.3 RETURN ON ASSETS 3.4 OPERATING INCOME MARGIN 3.5 OPERATING ASSET TURNOVER 3.6 RETURN ON OPERATING ASSETS 3.8 DUPONT RETURN ON OPERATING ASSETS 4 INCOME STATEMENT 4.1 COMMON SIZE ANALYSIS (HORIZONTAL) 4.2 COMMON SIZE ANALYSIS (VERTICAL) 1 1 1 2 2 3 3 4 4 5 5 5 6 7 7 7 8 8 9 9 10 10 12 12 13

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Ratio Analysis of BMW 2007 To 2009

1 Liquidity Ratios
Ratio analysis provides a quick, easy-to-use measure of liquidity. 1.1 Current ratio

Current ratio= Current Asset Current Liabilities 2009 Current ratio= = 39944 36919 Current ratio= 1.08 times 2008 Current ratio= 38670 39287 Current ratio= 0.98 times 2007 Current ratio= 32378 33784 Current ratio = 0.95 times Analysis: This ratio tell us to pay 1 liability company has 1.08 current asset. Although in three years the position of the company is better in its short term debt. In 2009 the company increases their current asset and minimizes their current liabilities so the company current ratio is better.

1.2 Quick ratio 2009 Quick ratio = Current Asset- Inventory Current Liabilities Quick ratio = 39944 6555 36919 2008 1 0.88 times

Quick ratio = 38670 7290 39287 2007 Quick ratio = 38670 7290 39287

0.78 times

0.73 times

Analysis: The Quick ratio shows also the better position than previous years because BMW decreased inventory from 7290 to 6555 and also increase the current asset. 1.3 Cash Ratio Cash Ratio= Cash Equivalents + Marketable Securities Current Liabilities = 7767 36919 Cash Ratio= 0.21 times 2008 Cash Ratio= 7454 39287 Cash Ratio= 0.19 times 2007 Cash Ratio= 2393 33784 Cash Ratio= 0.07 times Analysis: Cash ratio is improving, and they increase their cash and cash equivalents. And reduce the currently liabilities. 2009 Cash Ratio=

1.4 Working Capital Ratio 2009 Working Capital Ratio = Current Assets - Current Liabilities 39944 36919 = 3025 2008 Working Capital Ratio = Current Assets - Current Liabilities 38670 39287 = -617 2

2007 Working Capital Ratio = Current Assets - Current Liabilities 32378- 33784 = -1406 Analysis The position of working capital is much better in 2009. BMW increase the current asset and reduce the current liabilities from the previous years. 1.5 Days Sales in Inventory Days Sales in Inventory = Ending Inventory *365 CGS 2009 Days Sales in Inventory = 6555 45356 Days Sales in Inventory = 52.75 days 2008 Days Sales in Inventory = 7290 47148 Days Sales in Inventory = 56.44 days 2007 Days Sales in Inventory =7349 43832 Days Sales in Inventory = 61.33 days Analysis This formula tells us the number of days in a year in to cost of good sold. According to the result company is going in better position. 1.6 Inventory Turnover Ratio Inventory Turnover Ratio = Cost of Goods Sold Average Inventory 2009 Inventory Turnover Ratio = 45356 6923 Inventory Turnover Ratio = 6.5 times 2008 Inventory Turnover Ratio = Inventory Turnover Ratio = 2007 3

47148 7320 6.44 times

Inventory Turnover Ratio =

43832 7072 Inventory Turnover Ratio = 6.20 times

Analysis Inventory turnover ratio indicates the liquidity of inventory. In 2009 company show that Inventory Turnover Ratio is going better.

1.7 Days Sales in Receivables Ratio Days Sales in Receivables Ratio = Gross Receivables*365 Net Sales 2009 Days Sales in Receivables Ratio = 18973 50681 Days Sales in Receivables Ratio = 136 days 2008 Days Sales in Receivables Ratio = 18176 53197 Days Sales in Receivables Ratio = 124 days 2007 Days Sales in Receivables Ratio = 13996 56018 Days Sales in Receivables Ratio = 91 days Analysis This formula tells us how many days required converting the sale in receivables. This time company shows weakness that they do not recover their receivable early.

1.8 Account Receivable Turnover Ratio Account Receivable Turnover Ratio = Net sales Average Gross Receivables 2009 Account Receivable Turnover Ratio = 50681 18575 Account Receivable Turnover Ratio = 2.73 times 2008 4

Account Receivable Turnover Ratio = 53197 16086 Account Receivable Turnover Ratio = 3.31 times 2007 Account Receivable Turnover Ratio = 56018 13200 Account Receivable Turnover Ratio = 4.24 times

Analysis Account Receivable Turnover Ratio indicates the liquidity of receivables. The receivables ratio tells us that company receives their ratio 2.73 times in a year at after 160 days approximately.

2 Long Term Debt Paying Ability

2.1 Times interest Earned TIE = Recurring Earnings Excluding Interest Exp, Tax Exp, Equity & minority Earnings Interest Expense, including Capitalize Interest 1180 1014 Times interest Earned = 1.16 times 2008 Times interest Earned = 1632 930 Times interest Earned = 1.75 times 2007 Times interest Earned = 4212 897 Times interest Earned = 4.7 times 2009 Times interest Earned =

Analysis This ratio tells us that BMW has 1.16 earning to pat their interest expenses in 2009. but in 2008 they have 1.75 and in 2007 they have 4.75, which is better then 2009. in this year company earning is going down. 2.2 Debt Ratio Debt Ratio =Total Liabilities 5

Total Assets 82038 101953 Debt Ratio = 0.80 times 2008 Debt Ratio = 80813 101086 Debt Ratio = 0.799 times 2007 Debt Ratio =67253 88997 Debt Ratio = 0.756 times 2009 Debt Ratio =

Analysis This ratio tell us that company total asset is decreasing but in opposite direction total liabilities also increasing. This is the weakness of BMW 2.3 Debt /Equity Ratio Debt /Equity Ratio = Total Liabilities Stock Holder Equity 2009 Debt /Equity Ratio = 82038 19915 Debt /Equity Ratio = 4.12 times 2008 Debt /Equity Ratio = 80813 20273 Debt /Equity Ratio = 3.99 times 2007 Debt /Equity Ratio = 67253 19130 Debt /Equity Ratio = 3.52 times

Analysis This ratio determines the company long term debt paying ability. Company debt paying ability in 2009 is weak then the previous years.

2.4 Debt to Tangible net worth Ratio Debt to Tangible net worth Ratio = Total Liabilities (Stock holders Equity Intangible Assets) 2009 Debt to Tangible net worth Ratio = 82038 14536 Debt to Tangible net worth Ratio = 5.6 times

2008 Debt to Tangible net worth Ratio = 80813 14632 Debt to Tangible net worth Ratio = 5.5 times 2007 Debt to Tangible net worth Ratio = 67253 13460 Debt to Tangible net worth Ratio = 5 times

Analysis This ratio indicates how well creditors are protected in case of the firms insolvency. This ratio is also showing the weak position of the company.

3. Profitability Ratios
3.1 Net profit Margin Net profit Margin = Net income*100 Net Sales 2009 Net profit Margin = 21000 50681 Net profit Margin = 0.41%

2008 Net profit Margin = 33000 53197 Net profit Margin = 0.62% 2007 Net profit Margin = 313400 56018 Net profit Margin = 5.5 % 7

Analysis This ratio gives a measure of net income generated by each dollar of sales. This ratio show the weakness of company their net income is lower then previous years

3.2 Total Assets Turnover Ratio Total Assets Turnover Ratio =Net Sales Average Total Assets 2009 Total Assets Turnover Ratio = 50681 101520 Total Assets Turnover Ratio = 49%

2008 Total Assets Turnover Ratio = 53197 95042 Total Assets Turnover Ratio = 56% 2007 Total Assets Turnover Ratio =56018 84027 Total Assets Turnover Ratio = 66% Analysis Total asset turnover measure the activity of the assets and the liability of the firm to generate sales through the use of the assets. In this analysis we find that company toatal asset turnover decreased from 56% to 49%. It is weak for BMW.

3.3 Return on Assets Return on Assets =Net income Average Total Assets 2009 Return on Assets = 210 101520 Return on Assets = 0.21% 2008 Return on Assets = 330 8

95042 Return on Assets = 0.35 2007 Return on Assets =3134 84027 Return on Assets = 3.7 % Analysis This ratio measures the firms ability to utilize its assets to create profits by comparing profits with assets that generates profits. This show weak, because company return on asset decreasing.

3.4 Operating Income Margin Operating Income Margin = Operating Profit*100 Net Sales 2009 Operating Income Margin = 289 50681 Operating Income Margin = 0.57 2008 Operating Income Margin = 921 53197 Operating Income Margin = 1.73 2007 Operating Income Margin = 4212 56018 Operating Income Margin = 7.52

Analysis The operating income margin is also decreased because of decrease in the operating profit and decrease of net sale. 3.5 Operating Asset Turnover Operating Asset Turnover =Net Sales Average Operating Assets (Total Assets-Intangibles-Deferred Income Taxes) 2009 Operating Asset Turnover = 50681 94944 Operating Asset Turnover = 53.38 % 9

2008 Operating Asset Turnover = 53197 88593 Operating Asset Turnover = 60.05 % 2007 Operating Asset Turnover = 56018 77799 Operating Asset Turnover = 72%

Analysis This ratio measures the ability of operating assets to generate sale. Operating asset turnover is decreasing in 2009 due to low net sale and high operating assets. 3.6 Return on Operating Assets Return on Operating Assets =Operating Income Average Operating Assets 2009 Return on Operating Assets = 289 94944 Return on Operating Assets = 0.3% 2008 Return on Operating Assets = 921 88593 Return on Operating Assets = 1.05% 2007 Return on Operating Assets = 4212 77799 Return on Operating Assets = 5.4%

Analysis Adjusting the non operating items results in the following formula for return on operating assets. There is weak in the operating income of BMW. 3.8 DuPont Return on Operating Assets DuPont Return on Operating Assets =Operating Income Margin*Operating Assets Turnover 2009 DuPont Return on Operating Assets = 0.57*53.38 DuPont Return on Operating Assets = 0.3% 10

2008 DuPont Return on Operating Assets = 1.73*60.05 DuPont Return on Operating Assets = 1.05% 2007 DuPont Return on Operating Assets = 7.52*72 DuPont Return on Operating Assets = 5.4%

Analysis In this ratio we view the operating income margin with operating assets turnover. And in 2009 DuPont is minimizing due to less operating income margin

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4 Income Statement

2007 Revenues Cost of sales Gross Profit Selling & Admin Expense Research & Development Other Operating Income Other Operating Expenses Financial Results Profit Before Tax 56018 (43832) 12186 (5254) (2920) 730 (530) (339) 3873

Amounts 2008 53197 (47148) 6049 (5369) ---1428 (1187) (570) 351

2009 50681 (45356) 5325 (5040) ---808 (804) 124 413

Common Size ( % ) 2007 2008 2009 100.00 (100.00) 100.00 (100.00) (100.00) 100.00 (100.00) (100.00) 100.00 94.96 (107.57) 49.64 (102.19) ---195.62 (223.96) (168.14) 9.06 90.47 (103.48) 43.70 (95.93) ---110.68 (151.70) 36.58 10.66

4.1 Common Size Analysis (Horizontal)

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Income Tax Net Profit Analysis

(739) 3134

(21) 330

(203) 210

(100.00) 100.00

(2.84) 10.53

(27.47) 6.70

The horizontal analysis shows the decrease in the revenues approximately 10% and 3% increase in CGS due to this GP decreased in 2009. Research & Development expenses also increase but lower then 2008. But other expenses increase 50% then 2007. And due to this only 6.7 % Net profit.

4.2 Common Size Analysis (Vertical)

Amounts 2008 53197 (47148) 6049 (5369) ---1428 (1187) (570) 351 (21) 330 Common Size ( % ) 2007 2008 2009 100.00 78.25 21.75 (9.38) (5.21) 1.30 (0.95) (0.61) 6.91 (1.32) 5.59 100.00 (88.63) 11.37 (10.09) ---2.68 (2.23) (1.07) 0.66 (0.04) 0.62 100.00 (89.49) 10.51 (9.94) ---1.59 (1.59) 0.24 0.81 (0.40) 0.41 13

2007 Revenues Cost of sales Gross Profit Selling & Admin Expense Research & Development Other Operating Income Other Operating Expenses Financial Results Profit Before Tax Income Tax Net Profit 56018 (43832) 12186 (5254) (2920) 730 (530) (339) 3873 (739) 3134

2009 50681 (45356) 5325 (5040) ---808 (804) 124 413 (203) 210

Analysis In the vertical analysis of the income statement shows that the sales are decreased and the cost of goods sold is more than the previous years. This means that BMW have more inventory or they purchases the material costly. The other expenses are also comparatively increased. In 2009 then the 2007 the major increase in the cost of sales has caused the decrease in the net income.

BMW Income Statement of different years in graph

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