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Accounting Project

Lecturer: Chang Jau Ho

Group:

Muhammad Haziq bin Hj Zariful


0314131

Muhd. Syafiq bin Hj Abd Zariful


0314702

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Brief Bio of the Businesses

BMW is known as Bayerische Motoren Werke

LOCATION

The main branch is located in Munich, Bavaria, in Germany. at Gurney


Drive in 6th December 2005.

Key people:

Norbert Reithofer (CEO), Joachim Milberg (Chairman of the supervisory


board)

BRIEF HISTORY

The company was founded in 1916 / 1917, the BMW Group is now one of
the ten largest car manufacturers in the world and, with its BMW, MINI
and Rolls-Royce brand/brands?, possesses three of the strongest
exceptional brands in the car industry. The circular blue and white BMW
logo or roundel is portrayed by BMW as the movement of an aircraft
propeller, to signify the white blades cutting through the blue sky an
interpretation that BMW adopted for convenience in 1929, twelve years
after the roundel was created. The emblem evolved from the circular Rapp
Motorenwerke company logo, from which the BMW company grew,
combined with the white and blue colors of the flag of Bavaria, reversed
to produce the BMW roundel. However, the origin of the logo being based
on the movement of a propeller is in dispute, according to an article
recently posted by the New York Times, quoting At the BMW Museum in
Munich, Anne Schmidt-Possiwal, explained that the blue-and-white
company logo did not represent a spinning propeller, but was meant to
show the colors of the Free State of Bavaria. (Muenchen,n.d.)The group
also has a strong market position in the motorcycle sector and operates a
successful financial services business. The company aims to generate
profitable growth by focusing on the top segments of the international
automobile markets. With this in mind, a wide-ranging product and market
offensive was introduced in 2001, which has resulted in the BMW Group
expanding its product range considerably and strengthening its worldwide
market position. The companys brand is extremely strong and is
associated with high performance, engineering excellence and innovation.

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Indeed, the BMW brand is often cited as one of the best in the world, and
the company continues to launch a stream of innovative products as part
of its battle with German peer Mercedes to be the worlds largest luxury
car maker.(Zimbio.com,n.d.)

Ratio Analysis of the business based on 2012 & 2011


Profitability
Ratios 2011 2012 Interpretation
net profit net profit During the year 2011 to
X 100 X 100
'
avg . owne r s enquity '
avg . owne r s enquity 2012, the ROE has
Return on increased from 25.7% to
Enquity 1,970 3,131
X 100 X 100 34.6%. This means the
(ROE) (8,222+7,088) 2 (9,864+ 8,222) 2 owner is receiving a higher
earning on his capital in
=25.7% =34.6% the year 2012 than 2011.
net profit 1,970 net profit Between the period of
X 100= X 10 0 X 10 0
net sales 55,007 net sales 2011 to 2012, the NPM has
Net Profit increased from 3.6% to
Margin (NPM) =3.6% 3,131 5.3% which means the
X 10 0
58,805 business is getting better
at controlling expenses
=5.3%
gross profit gross profit From 2011 to 2012, the
X 10 0 X 10 0
net sales net sales GPM for the business
Gross Profit slightly increased from
Margin (GPM) 11,687 12,553 21.2% to 21.3%, which
X 10 0 X 10 0
55,007 58,805 means the business is
slightly getting better at
=21.2% =21.3%
controlling Cost of Goods
Sold
total selling expense total selling expense During the period from
X 100 X 100
net sales net sales 2011 to 2012, the SER
Selling increased from 6.1% to
Expense 3,381 3,684 6.3%. This shows the
X 10 0 X 10 0
Ratio (SER) 55,007 58,805 business is getting worse
at controlling selling
=6.1% =6.3%
expenses.
total general expense tal general expense Between the years 2011 to
X 100 X 100
General net sales net sales 2012, the GER increased
Expense from 2.6% to 2.9%. This
Ratio (GER) 1,410 1,701 means the business is
X 10 0 X 10 0
55,007 58,805 getting worse at controlling
general expenses.
=2.6% =2.9%

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total financial expense total financial expense During the period, FER has
X 100 X 100
Financial net sales net sales decreased from 3.8% to
Expense 2.8%, which indicates that
Ratio (FER) 2,096 1,666 the business is getting
X 10 0 X 10 0
55,007 58,805 better at controlling
financial expenses.
=3.8% =2.8%

* Units represented in millions

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Stability
Ratios 2011 2012 Interpretation
From 2011 to 2012,
total current asset total current asset working capital has
Working total current libailities total current libailities decreased from 1.68:1 to
Capital 1.54:1. This does not just
17,802 20,215 mean the business is

10,604 13,151 getting worse in paying
their liabilities, but it also
= 1.68 : 1 = 1.54: 1
does not satisfy the
minimum 2:1 ratio
total liabilities total liabilities From 2011 to 2012, total
X 10 0 X 10 0
total asset total asset debt has increased from
Total Debt 41.9% to 45.5%, which
11,515 14,559 means that the debt level
X 10 0 X 10 0
27,508 31,965 has gone up, however, it
still below the maximum
=41.9% =45.5%
50% limit
Between the period of

Stock
365 [ COGS
avg .inventory ] 365 [ COGS
avg .inventory ] 2011 to 2012, stock
turnover has slightly
Turnover
365
[ 43,320
(3,755+ 3,259) 2 ] 365
[ 46,252
( 3,749+3,755 ) 2 ] increased from 29.5 days
to 29.6 days. This means
the business is selling their
=29.5 days =29.6 days products at a slightly
slower speed.
During the period from

Debtor
365
[ credit sales
avg .debtors ] 365
[ credit sales
avg .debtors ] 2011 to 2012, debtor
turnover has decreased
Turnover
365
[ 55,007 2
( 8,035+8,237 ) 2 ] 365
[ 58,805 2
( 9,216+ 8,035 ) 2 ] from 108 days to 107.1
days. This indicates that
the business is getting
=108 days =107.1 days faster in collecting their
debts from debtors.
Interest interest expense+ ne t profit interest expense+ net profit During the period, the
Coverage interest expense interest expense businesss interest
coverage has increased
943+ 1,970 913+ 3,131 from 3.1 times to 4.4

943 913 times. This means the
businesss ability to pay
= 3.1 times =4.4 times
interest

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* Units represented in millions

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Price/Earning Currently (24th Jan 2014) Interpretation
Current share price The P/E ratio for BMW as of 24th
Earnings per share January 2014 is 10.67 years. This
P/E means an investor who bought a
Ratio 84.63 share of BMW would have to wait

7.93 10.67 years in order to retain
his/her investment, in this case,
=10.67 years
84.63. The P/E ratio is also lower
than what a conservative investor
would pay, which is lower than 15
years

Investment Recommendation

In our recommendation through our analysis, the company BMW would is a


company worth investing on.

One of the reasons is that the company has exhibited good profitability, as
shown in the profitability ratio analysis. Firstly, the Return on Enquity has
vastly increased by 9.1%, which shows that the net profit has also increased
through the years. Even though it can be seen that the Selling Expense &
General Expense Ratio has increased, there is only a slight rise of less than
1%. Moreover, the Net Profit Margin, which shows how the business controls
all its expense, has greatly been increased. This is because of how the
Financial Expense Ratio has prominently been decreased by 1%. Other than
the expenses, the business has also been better at controlling their Cost of
Goods Sold.

As for stability, even though the total debt has increased, it is still lower than
the maximum 50% limit for both the years of 2011 & 2012, which means the
business has kept it below the limit for a long time. In addition, the debtors
are getting faster at paying their debts to the company as seen in the Debtor
Turnover Ratio. The business does have some flaws however, such as getting
slower in selling their products, getting worse at paying liabilities in addition
to not exceeding the minimum limit, & lastly not exceeding the minimum
limit for Interest coverage, even though there is an increase.

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Even though the business has shown not to be stable, the price per earning
is still lower than 15 years; the investors can receive their investment after
only 10 years.

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References
Muenchen,I.(n.d.).Bmwgroup:company:companyportrait:locations.[online]
Retrievedfrom:
http://www.bmwgroup.com/bmwgroup_prod/e/0_0_www_bmwgroup_com/unternehmen
/unternehmensprofil/standorte/standorte/index.html[Accessed:24Jan2014].

Zimbio.com.(n.d.).[online]Retrievedfrom:
http://www.zimbio.com/Norbert+Reithofer/articles/JwVX2Ci0vT9/Bayerische+Motoren
+Werke+AG+BMW+Biography[Accessed:20Jan2014].

Bloomberg.(n.d.).Bmw:xetrastockquotebayerischemotorenwerkeag.[online]
Retrievedfrom:http://www.bloomberg.com/quote/BMW:GR[Accessed:20Jan2014].

Marketwatch.com.(n.d.).Bayerischemotorenwerkeag.[online]Retrievedfrom:
http://www.marketwatch.com/investing/stock/bmw?countrycode=de[Accessed:20Jan
2014].

FinancialstatementsofBMWAG.(2011).[ebook]BMWGroup.p.4,5.Available
through:bmwgroup.com
http://www.bmwgroup.com/e/0_0_www_bmwgroup_com/investor_relations/corporate_e
vents/hauptversammlung/2012/BMW_AG_Jahresabschluss_2011_engl.pdf[Accessed:
24Jan2014].

FinancialstatementsofBMWAG.(2012).[ebook]BMWGroup.p.4,5.Available
through:bmwgroup.com
http://www.bmwgroup.com/e/0_0_www_bmwgroup_com/investor_relations/finanzberic
hte/geschaeftsberichte/2012/_pdf/BMW_AG_Jahresabschluss_2012_en.pdf[Accessed:
24Jan2014].

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Appendices

BALANCE SHEET 2012

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BALANCE SHEET 2011

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P&L STATEMENT 2012

P&L STATEMENT 2011

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