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Financial Analysis of BMW & Daimler (Mercedes-Benz)

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DOI: 10.2139/ssrn.3766088

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Financial Analysis of BMW & Daimler (Mercedes-Benz)

Haitham Nobanee

Abu Dhabi University, Haitham.nobanee@adu.ae.ae

Farah Altayr

Abu Dhabi University, 1062554@students.adu.ac.ae

Mariam Alhosani

Abu Dhabi University, 1063492@students.adu.ac.ae

Fatima Alshamsi

Abu Dhabi University, 1067386@students.adu.ac.ae

Dana Ali

Abu Dhabi University, 1071357@students.adu.ac.ae

Noura Mubarak

Abu Dhabi University, 1062918@students.adu.ac.ae

Siba Mahfouz

Abu Dhabi University, 1062334@students.adu.ac.ae

Maryam Mohammed

Abu Dhabi University, 1069781@students.adu.ac.ae

 Abstract

BMW and Daimler are both German international companies that deal with vehicles and

motorcycles. In this article, we will analyze the two companies' financial performance and find out

their positions. We will look at their financial data from 2016 to 2019 to determine their financial

state, and include figures and tables for easier analysis, thus giving suggestions for potential

improvement areas.

Keywords: working capital management, BMW, Daimler, sustainability, ratios

Introduction

Daimler AG, also known as Mercedes Benz, is one of the leading cars and truck makers

whose headquarters are in Stuttgart, Baden-Wurttemberg. It is a German global automotive

corporation with Ola Kallenius as the current chief executive officer. The company was founded

in 1886 by Gottlieb Daimler and Carl Benz, focusing on innovation, green technologies, and the

production of safe and superior vehicles. Daimler continues to invest in developing efficient

powertrains with a long-term goal of making driving emission-free, owing to its responsibility to

the society and the environment. Mercedes Benz vehicles and services are sold in almost all

countries globally, thus listed on the Frankfurt and Stuttgart stock exchanges. By 2019, a tentative

workforce of 298,700 and a sell of 3.34 million vehicles amounted to a revenue of €172.7 billion.
 BayerischeMotorenWerk (BMW) A.G. or Bavarian Motor Works is also a German

international corporation having its headquarters in Munich, Bavaria, and it produces luxurious

vehicles, engines, and motorcycles. However, it started by manufacturing aircraft engines from

1916 to 1918 and 1933 to 1945 (Boisjoly et al. 2020, pp. 6). BMW is the parent company of Rolls-

Royce Motor Cars, owns and produces Mini cars, and manufactures motorcycles under the BMW

Motorrad. Dixi, which was based on the Austin 7 and licensed by the Austin Motor Company in

Birmingham, was the first car produced successfully by BMW. On the other hand, BMW Illa

inline-six liquid-cooled engine was the first aircraft engine to be commercialized in 1918 because

of its high-altitude performance.

Working capital management is a business or an accounting strategy used by firms to

ensure a balance between a company's current assets and liabilities. It represents the relationship

between the short-term assets of a firm and its short-term liabilities. To cover its financial

obligations and boost earnings, a company needs to have an effective working capital management

system. When it is effective, a company can afford its daily operating expenses as it makes

investments in its assets in the most prolific way. There are four main components of working

capital management: cash, accounts receivable, accounts payable, and inventory. To calculate the

working capital of a business, we use the current ratio, which is the current assets divided by the

current liabilities (Pakdel and Ashrafi 2019, pp. 64). When the current assets exceed the liabilities,

it means that the business is doing well, and if not, then the company needs to check on where to

make changes.

Literature Review

The main reason people start businesses is for them to provide essential services and

products to their target market and, in turn, make profits. A business that does not make profits
cannot manage its daily activities because the accounts payable become more than the accounts

receivable, thus draining the business. The daily operating expenses of a firm should be afforded

without strain and investments on the company's assets made in the most fruitful means. For all

these to be possible, an organization needs to have a stable working capital management system.

A business always strives to grow and be able to provide better services and products to its

customers. That is why feedback from clients and partners is essential in the growth of a company.

Growth helps to provide better products and to gain trust from different clients. It also helps to

improve the management of risks and maximize their position in the market. A business ought to

have efficient sustainability practices by having the right financial sustainability decision-making

strategies.

Working capital management should always ensure that a firm's short-term assets are more

than the short-term liabilities, thus covering its short-term arrears. It is responsible for the profits

made and their maximization besides using the current assets and the working capital in the right

way. Therefore, every organization's finance department has a great responsibility of ensuring that

they balance their financial data well (Aminu and Zainudin 2015, pp. 13). Cash requirements, the

efficiency of operation, changes in technology, inventory turnover, sales volume, current assets

requirements, and the terms of purchase and sales should be given much attention because they

affect decisions made about the capital management system.

 Data and Methodology

Bavarian Motor Works (BMW)

Table 1: Financial Data of BMW

Item/Year 2019 2018 2017 2016

Receivable 1463000 11251000 4597000 9356000

s
Accounts 4290800 32856000 14143200 73876000
payables 0 0

Sales (Net 5205096 20459478 75536312 24271488

Operating 0 0 0 0
cash flow)
Cost of 2653000 1891000 1165000 2441000
Goods Sold
(COGS)
Source: Yahoo finance

Table 2: Liquidity Ratios of BMW

Ratio/Year 2016 2017 2018 2019

Inventory 5.4211 6.0492 6.1969 6.3713
Period

Receivable 2.3725 2.3649 2.8372 2.8488

Period
Payable Period 153.8492 154.3424 128.6477 128.1219

Operating 7.1116 9.3568 10.0124 9.9678

Cycle

Cash 10.3325 15.366 19.3106 17.6249

Conversion
Cycle
Net Trade Cycle 50.5647 54.9867 60.8765 65.8925
Source: Yahoo finance

Daimler AG (Mercedes Benz)

 Table 3: Financial Data of Daimler

Item/Year 2019 2018 2017 2016

Inventories 29533000 29155000 25,389000 25146000

Receivables 63113000 58026000 51364000 48240000

Accounts 12707000 14185000 12474000 11567000

payables
Sales 7408000 6573000 7684000 5473000

Cost of 145231000 137104000 132464000 124846000

goodssold
Source: Yahoo finance

Table 4: Liquidity Ratios of Daimler

Ratio/Year 2016 2017 2018 2019

Inventory 117.45 68.51 59.71 120.45

Period
Receivable 25.65 38.33 46.23 47.55
Period
Payable 38.09 41.88 55.63 62.45
Period

Operating 120.88 100.56 123.76 80.47

Cycle

Cash 80.44 67.99 79.87 89.34

Conversion
Cycle
Net Trade 48.743109 57.191425 53.296677 63.257695
Cycle
 Table 5 : Cash Flow Ratios

2019 2018 2017 2016

Operating CashFlow 52050960 204594780 755363120 242714880
Total Assets 67890987 565476543 55765433 48975400
Sales 7408000 6573000 7684000 5473000
Operating cash flow/total assets 0.77 0.36 13.55 4.96
Operating cash flow/Sales 7.03 31.13 98.30 44.35

Table 6: Liquidity Ratios

Cash 2656765 3765898 2907654 2498750
current Assets 4678590 3899000 4100987 3287000
Current Liabilities 5670900 3670765 4598705 3086570
Inventories 15678000 40354000 129343000 74912000
current ratio 0.83 1.06 0.89 1.06
Quick(Acid-Test) Ratio -1.94 -9.93 -27.23 -23.21
Cash Ratio 0.47 1.03 0.63 0.81

Table 7 : Debt Ratios

2019 2018 2017 2016
Total Liabilities 85679760 65089847 95690900 75609887
Total Assets 67890987 565476543 55765433 48975400
Total Equity 2450987 5678764 3095764 3459876
Long Term Debt 80008860 61419082 91092195 72523317
Debt Ratio 1.26 0.12 1.72 1.54
Debt to Equity Ratio 34.96 11.46 30.91 21.85
Long Term Debt to Equity 32.64 10.82 29.42 20.96
 Table 8 : Profitability Ratio
2019 2018 2017 2016
Net Income 1481600 1324600 1280660 995090
Total Equity 2450987 5678764 3095764 3459876
Total Assets 67890987 565476543 55765433 48975400
Sales 7408000 6573000 7684000 5473000
Return on Equity 60.45% 23.33% 41.37% 28.76%
Return on total Assets 0.02 0.002 0.02 0.02
Profit Margin 0.20 0.20 0.17 0.18

Operational Profitability
Table 9: Ratios
2019 2018 2017 2016
Operating Income 1682750 1795899 1569850 1056080
Total Equity 2450987 5678764 3095764 3459876
Total Assets 67890987 565476543 55765433 48975400
Sales 7408000 6573000 7684000 5473000
Operating Income to Equity 0.69 0.32 0.51 0.31
Operating Income to total
Assets 0.02 0.003 0.03 0.02
Operating Income to sales 0.23 0.27 0.20 0.19
Source: Yahoo finance
 Results and Discussions

Figure 1: Inventory Period of BMW

Inventory Period
6.6

6.4

6.2

5.8

5.6 6.3713
6.1969
5.4 6.0492

5.2
5.4211
5

4.8
2016 2017 2018 2019

Column2

➢ An inventoryperiod ratio shows us the liquidity of a company’sinventory. It shows how

muchittakes the company for it to sell lits inventory. It becomesbetter for the companyif
the sales value is high.
➢ In 2019, BMW haditsinventory ratio peak, followed by 2018, 2017, then 2016. It
meansthatitis in a good position for growthsinceits sales are improvingeveryyear.

Figure 2: ReceivablePeriod of BMW :

 Receivable Period
3

2.5

1.5
2.8372 2.8488
2.3725 2.3649
1

0.5

0
2016 2017 2018 2019

Column2

➢ The number of times a companycollectsitsreceivablesiswhatwe call areceivableperiod.

➢ In BMW, the ratio wasincreasingfrom 2016 through 2019. This meansthatthey are
makingsignificantimprovements, and their collection of receivablesisgettingbetter.

Figure 3: Payable Period of BMW :

Payable Period
180

160

140

120

100

80 153.8492 154.3424
60 128.6477 128.1219

40

20

0
2016 2017 2018 2019

Column2
➢ We call the payable period the number of days a firmtakes to pay back money to
itssuppliers and coveritsliabilities. This ratio shouldbelowratherthan high.
➢ BMW takesfewerdays to pay back in 2019than the perioditused to takein 2016, thus a good
sign.

Figure 4: Operating Cycle of BMW :

Operating Cycle
12

10

6
10.0124 9.9678
9.3568
4
7.1116

0
2016 2017 2018 2019

Column2

➢ A business startsits operating cycle whenitstartsmanufacturinggoodsuntilthey are sold.

When an operating cycle isshorter, it shows that the firmcan manage itsinventory, and
itgetssoldfaster.
➢ The operating cycle for BMW isincreasingfrom 2016 to 2019, showing a challenge
thatneeds to bechecked for the company to maintain a healthy state. The inventory of BMW
shouldbeworked on for thisproblemto besolved.

Figure 5: Cash Conversion Cycle of BMW :

 Cash Conversion Cycle
25

20

15

10 19.3106
17.6249
15.366
5 10.3325

0
2016 2017 2018 2019

Column2

➢ The time acompanytakes to manage itsinventory and convertitinto cash-flow from sales
iscalled the cash conversion cycle.
➢ The value isincreasingfrom 2016 to 2019, whichis a good sign in business. BMW
Companyneeds to keepworking to ensurethatitkeepsincreasing the value.

Figure 6: Net Trade Cycle of BMW :

Net Trade Cycle

70

60

50

40
65.8925
30 60.8765
54.9867
50.5647
20

10

0
2016 2017 2018 2019

Column2
➢ The period in which an organization'scurrentassetsmake a full turniscalled the net trade
cycle. Aftermaking a transaction, the cash gets back after a certain period.
➢ The net trade cycle of BMW isincreasing, showingthatittakes more time to convertits cash
within the four years, whichis a good thing.
Figure 7: Inventory Period of Daimler

Inventory Period
140

120

100

80

60 117.45 120.45

40
68.51
59.71
20

0
2016 2017 2018 2019

Column2

➢ The inventoryperiod of Daimler hit itspeakin 2019 and lowestin 2018. It shows a
significantimprovementin 2019, meaningthatitismaking favorable changes for the ratio to
keepgrowing.

Figure 8 : Recevable Period of Daimler

➢ The receivableperiodfor Daimler isincreasing as the years go by. Theirreceivables are

highestin 2019, whichis a good sign of theirgrowth.

Figure 9: Payable Period of Daimler

 Payable Period
70

60

50

40

30 62.45
55.63

20 41.88
38.09

10

0
2016 2017 2018 2019

Column2

➢ Daimler'speriod of paying back isincreasingwith the years. In 2016, itwasdoingwell but has
increasedeveryyearsincethen. This meansthatitneedssome changes in the payable period
for it to maintainitssustainability.

Figure 10: Operating Cycle of Daimler

Operating Cycle
140

120

100

80

60 120.88 123.76
100.56
40 80.47

20

0
2016 2017 2018 2019

Column2
➢ The operating cycle of Daimler has itshighestlevelin 2018 and lowestin 2019. However,
itisinconsistentconsidering the years, so the inventoryneeds to beworked on for the ratio to
keepgoing down.
Figure 11: Cash Conversion Cycle of Daimler

Cash Conversion Cycle

100
90
80
70
60
50
89.34
40 80.44 79.87
67.99
30
20
10
0
2016 2017 2018 2019

Column2

➢ The cash conversion cycle of Daimler hit itspeakin 2019 and has a sign of growth. A high
ratio in thisisa good sign in a business setting.

Figure 12: Net Trade Cycle of Daimler

 Net Trade Cycle
70

60

50

40

30 63.257695
57.191425
53.296677
48.743109
20

10

0
2016 2017 2018 2019

Column2

➢ The net trade cycle of Daimler isalsoincreasingfrom 2016, and thisis a good sign.

Conclusion

Working capital management refers to individuals in an organization that manages the

working capital and is responsible. In contrast, working capital refers to the assets used to pay for

the daily expenses and any other short-term cost. The management of cash, receivables, inventory,

and payables is critical in analyzing the working capital of a business. Analyzing a company's

working capital management helps to know its ability to pay debts and its liquidity. From the

analysis of BMW and Daimler, some of the results were good and others wrong, which means that

various points need to be worked on to remain stable and become successful.

BMW Company and Daimler are among the best car manufacturers globally, considering

their favorite products that perform highly and are very luxurious. They have experienced a great

profit and growth rate. The companies can operate for a long time, a conclusion made from the

financial analysis conducted. The firms' ability to cover their short-term liabilities is stable, and
their profitability is around the industry level. The organizations have investors that are willing to

invest in them with great confidence, and their financing ability in the market is outstanding.

Therefore, it is possible for the BMW Group and Daimler to expand their business since they have

a significant improvement in space and remain in operation for an extended period. The firms'

financial condition is healthy, and the expected value is more significant than their book value,

placing them in a good position for growth and development.

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