BMW

INDEX:

NAME: KIRAN GORWANI

CLASS: BBA SEMESTER I SEC A
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REGISTRATION NO: - 230203030
ABSTRACT:
This is a study which is done analyze financial statements of BMW for last 2years namely
2021-22. Bayerische motoren Werke ag (BMW) is a German multinational vehicle
manufacturer established in 1916. BMW has intensified its focus on electric mobility,
expanding its lineup to include electric and plug-in hybrid vehicles. BMW remains at the
forefront of automotive technology by investing in autonomous driving capabilities,
connectivity features, and cutting-edge infotainment systems, all aimed at enhancing the
driving experience. The financial analysis is done in this study using ratio analysis. The ratio
used here varies from liquidity, solvency, activity ratio to profitability. This study has shown
us that BMW is a well performing company. Its ratios compared to 2 years are majorly
improving except few. The liquidity ratio teaches us that BMW as a company has have
sufficient current assets to cover current liabilities. It also tells us that they are slight change
in ratios over one year that is it has reduced by .04 from earlier year.it is just a marginal
change in ratios which is normal as business is dynamic in nature. Even in acid test ratio we
come to know that quick assets have reduced and so did ratio marginally by 0.06 between two
years. In the solvency ratio we understand that BMW has improved through debit equity
ratio, debt to total assets ratio and times interest earned ratio. Through the debit equity ratio,
we understand BMW has dropped from 1.13 to 0.82. One of the reasons could be that the
company's financial risk has been reduced by paying off debts that have been reduced. We
also get to understand that the debt to total assets ratio that the ratio has reduced which could
be due to repayment of debt and increase in total asset. It shows that BMW’s financial
situation is stable. Through times interest earned ratio we understand that BMW has a
favorable situation as there has been an increase of 34.16 times in the number of times that
interest can be paid from the total assets which could be due to repayment of debt which
reduced interest expense. Through activity ratio we understand that the goods are moving out
of company quickly and it takes days compared to selling them from last year. In 2022, BMW
made sales of its products about 7 days shorter. Through profitability ratio we understand that
gross profit margin as reduced of BMW, one of the reasons could be increase in cost of goods
sold by 28,789,000 euros. Hence BMW is overall going great but can improve its position if
only it just made a slight change. These changes are a reduction in current liabilities by
paying off short-term debt, improving the quick assets of BMW and managing their gross
profit as it reduces companies’ profitability. The company should bring its attention cost of
goods sold which increased by 28,789,000euros in 2022 which is bring the firm’s profit
down. It will not only improve its liquidity situation but also its profitability because of these
slight changes by BMW.

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INTRODUCTION:
Bayerische Motoren Werke AG (BMW) is a German multinational vehicle manufacturer
established in 1916. Initially focused on aircraft engine production during World War I, BMW
shifted its attention to motorcycles and eventually automobiles due to post-war restrictions
on aircraft production. Throughout the 1920s, BMW gained renown for manufacturing
motorcycles, earning recognition for their quality and performance.

Today, BMW boasts a robust global presence with manufacturing and assembly plants across
multiple countries including Germany, the United States, China, South Africa, India, Brazil,
and several other locations. Its extensive sales and distribution network spans over 140
countries, ensuring widespread availability of its vehicles and services. BMW holds a strong
position in major automotive markets like the United States, China, Germany, the UK, and
other European countries. Additionally, it encompasses other well-known car companies
such as MINI and Rolls-Royce.

In recent years, BMW has intensified its focus on electric mobility, expanding its lineup to
include electric and plug-in hybrid vehicles like the BMW iX and i4, showcasing the brand's
dedication to sustainable solutions. Furthermore, BMW remains at the forefront of
automotive technology by investing in autonomous driving capabilities, connectivity
features, and cutting-edge infotainment systems, all aimed at enhancing the driving
experience. Embracing digital transformation, BMW implements state-of-the-art digital
platforms for services like remote updates, connected apps, and personalized customer
experiences.

PROBLEM IDENTIFICATION:
In compliance with international financial reporting standards, BMW of North America
handles carrying out operational accounting and reporting. Ethical investing, corporate
benchmarking indices and increased engagement by stakeholders highlight the importance of
generating a longer-term shareholder value. The annual reports should reflect all these
factors. Financial statements should supply an appropriate overview of the performance of
the business to interested parties after the reporting period has ended. The following
information should be provided:
 Reflects activity of the company in a coherent financial picture.
 Dividing information with a view to evaluating future cash flows.
 Provide users with the ability to evaluate an entity's liquidity and financial flexibility.

Financial analysis offers detailed information about the history, current situation and overall
financial health of an entity for internal or external purposes over a period. For financial
statements analysis, it is possible to carry out several methods that allow identifying
investment projects and companies, analysing trends or developing a long-term financial
strategy. In this study we the problem we are dealing is BMW financial stable company
which were going to find out using its financial statements such as annual balance sheet and
annual income statement of 2 year (2021-22). In this study the financial statement is going to

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be analysed with help of ratio analysis. The various ratios that going to be used here are
liquidity, solvency, activity ratio and profitability.
RATIOS ANALYSIS
LIQUIDITY RATIO:
A financial ratio that is used to assess a company's ability to fulfill its short-term debt
commitments. The current ratio, quick ratio, and cash ratio are the three most widely used
liquidity ratios. The current liabilities amount is placed in the denominator of each liquidity
ratio, while the liquid assets amount is placed in the numerator. A ratio of one show that a
company's current assets are sufficient to cover all its current obligations. A ratio less than
one (e.g., 0.75) shows that a corporation is unable to meet its present liabilities. A ratio larger
than one (e.g., 2.0) shows that a corporation can pay its existing debts.

CURRENT RATIO
It assesses a company's ability to satisfy its short-term commitments due within a year. The
weight of total current assets versus total current liabilities is considered in the ratio. It
denotes how well a business is doing financially.

CURRENT RATIO = CURRENT ASSET / CURRENT LIABILITY

YEAR RATIO
2022 1.09:1
2021 1.13:1

Through the current ratio we understand that BMW ensures that they have sufficient current
assets to cover current liabilities .the ratio has gone worse. It also tells us that they are slight
change in ratios over one year that is it has reduced by .04 from earlier year.it is just a
marginal change in ratios which is normal as business is dynamic in nature.

QUICK ASSET RATIO/ ACID TEST RATIO

It defines the company's ability to deal with its financial obligations over a limited period.
by exploiting their highest liquid assets.

QUICK RATIO = QUICK ASSET / CURRENT LIABILITY

QUICK ASSET= CURRENT ASSETS – INVENTORY – PREPAID EXPENSES.

YEAR RATIO
2022 0.86:1
2021 0.92:1

This table tells us that the companies’ ability to fulfil their short-term obligations using highly
liquid assets is 0.86 in 2022 which is possible around 86% but compared to 2021 which is
highly possible around 92% it has reduced. Hence ratio has gone worse. There's not much
difference of 0.06 between two years, which is modest and understandable given the dynamic
nature of business.

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SOLVENCY RATIO
The solvency ratios are a key element of the analysis, which helps in figuring out if an
undertaking has enough cash flow to meet its debt obligations. For banks and creditors,
companies with a higher solvency ratio are more likely to meet their debt obligations, while
companies with a lower solvency ratio are more likely to pose a risk.

DEBIT-EQUITY RATIO
This ratio aids in understanding whether a company's equity could cover all its debts if it is
experiencing challenging times. As it shows that a company is using its borrowings for
growth, high debt to equity ratios is linked to an increased risk in the business. This also
shows a decrease in the company's solvency.

DEBT TO EQUITY RATIO = LONG TERM DEBT / SHAREHOLDER’S FUNDS

YEAR RATIO
2022 0.82:1
2021 1.13:1

The table above shows that the ratio's gotten better over time. It has dropped from 1.13 to
0.82. One of the reasons could be that the company's financial risk has been reduced by
paying off debts that have been reduced.

DEBT TO TOTAL ASSETS RATIO

Total debt to total assets is a leverage ratio that defines how much debt a company has
compared to its assets. A debt ratio of more than 1.0 or 100% means that the company has
more debt than assets, while a debt ratio of less than 100% means that the company has more
assets than debt.

DEBT TO TOTAL ASSETS RATIO= TOTAL DEBT/ TOTAL ASSET

YEAR RATIO
2022 0.29:1
2021 0.36:1

As the ratio decreased from 0.36 to 0,29, the table shows an improvement. A general increase
in assets and repayment of debt could be some of the reasons. It shows that the company's
financial situation is stable.

TIMES INTEREST EARNED RATIO

The solvency ratio, which shows the ability to pay all interest on a firm's debt liabilities, is
the Time Interest earned ratio. A higher ratio shows that the company is less risky to investors
and creditors, while a lower interest rate suggests that it might generate insufficient earnings
to pay off its debt.

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TIMES INTEREST EARNED RATIO =EARNING BEFORE INTEREST AND
TAX/INTEREST EXPENSE

YEAR RATIO
2022 103.21 times
2021 69.05 times
This ratio has become more favorable over time, as shown in the table above. There has been
an increase of 34.16 times in the number of times that interest can be paid from the total
assets. A reduction in interest costs of 6000, which could be due to repayment of the debt,
could be one of the reasons. Hence the firm is financially stable enough to pay off the debt
interest.

ACTIVITY/ TURNOVER RATIO

The effectiveness of an organization in using its assets to generate cash and income shall be
measured by the activity ratio. These ratios are also used to check the level of investments
made in an asset and the revenue it produces.

INVENTORY TURNOVER RATIO

The relationship between the inventory or stock in the business and the price of the goods
sold is shown. It tells us how quickly inventories are disposed of during the accounting
period. The high stock turnover ratio in the company shows that goods move quickly, while a
low stock turnover is shown by products not being sold and stored for prolonged periods of
time.

INVENTORY TURNOVER RATIO = COST OF GOODS SOLD/AVERAGE INVENTORY

YEAR RATIO
2022 6.69 TIMES
2021 5.96 TIMES

The above table shows that compared to 2021 in 2022 the average inventory ratio has
increased which is better. It tells us that now it takes a slight lesser time to sell goods
compared to last year.

DAYS’ SALES IN INVENTORY

A financial ratio showing the average time taken by a company to turn its inventory into
sales, including goods that are being sold, is the days sales of inventories. It's an indicator that
analysts use to determine the effectiveness of sales. A high number of days taken to sale can
show that a firm is not effectively managing its inventory or that it has inventory that is
difficult to sell.

DAYS’ SALES IN INVENTORY= 365/ INVENTORY TURNOVER RATIO

YEAR RATIO
2022 54.56 DAYS
2021 61.24 DAYS

The table below provides a breakdown of the number of days that BMW sells its products
and shows an increase in their effectiveness as the ratio has improved. In comparison to last
year, it showed that in 2022, BMW made sales of its products about 7 days shorter.

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ASSET TURNOVER
The ratio of total sales or revenue to average assets is the asset turnover ratio. This measure
aids investors in understanding how efficiently companies are using their assets for the
purpose of generating sales. The higher the asset turnover ratio, the better the company's
performance, since higher ratios imply higher revenues per dollar of assets.

ASSET TURNOVER= NET SALES/ AVERAGE ASSET

YEAR RATIO
2022 0.60:1
2021 0.50:1

The above table shows that the ratio has been improved over the period. It also shows
BMW’s efficiency of using assets in generating sales.

PROFITABLITY RATIO
Profitability ratios are a type of accounting ratio that helps in figuring out the financial
performance of a business at the end of an accounting period. Profitability ratios show how
well a company can make profits from its operations.

GROSS PROFIT RATIO

A profitability ratio is a measure of the relation between gross profits and revenues from
sales. If the number is greater, more efficient management will generate profit for every
dollar of expenditure involved.

GROSS PROFIT RATIO= GROSS PROFIT/NET SALES

YEAR RATIO
2022 17.22%
2021 19.76%

The above table shows us that the ratio has gotten worse and as it has reduced by 2.54 from
the previous year, the table shows that BMW’s efficiency to generate profit has reduced.

RETURN ON SALE
Return on sales (ROS) is a ratio used to evaluate a company's operational efficiency. This
measure provides an indication of how much profit is generated for each dollar of sales.
Increasing returns on sales show a company's improvement in efficiency, while decreasing is
a sign of impending financial difficulties.

RETURN ON SALE= NET INCOME/NET SALES

YEAR RATIO
2022 12.58%
2021 11.30%

The above graph shows that the ratio has improved. The above table shows that the measure
of profit earned from each sale is increased by 1.28%.

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 RECCOMENDATION
This study has been conducted on the financial analysis of BMW during the last two years,
namely 2021 and 22. The balance sheets and income statements used in this report have been
generated by yahoo finance. BMW is listed and traded on the Frankfurt stock exchange
(FWB) and NASDAQ. This ratio analysis confirms that BMW is performing well and could
do much better, if only it just made a slight change. These changes are a reduction in current
liabilities by paying off short-term debt, improving the quick assets of BMW and managing
their gross profit as it reduces companies’ profitability. The company should bring its
attention cost of goods sold which increased by 28,789,000euros in 2022 which is bring the
firm’s profit down. It will not only improve its liquidity situation but also its profitability
because of these slight changes by BMW.

REFRENCES
https://finance.yahoo.com/quote/BMW.DE/balance-sheet?p=BMW.DE

ANNEXURES
CURRENT RATIO

CURRENT RATIO = CURRENT ASSET / CURRENT LIABILITY

YEAR CURRENT ASSET CURRENT RATIO
LIABILTY
2022 92,204,000 84,421,000 1.09:1
2021 86,173,000 76,466,000 1.13:1
Changes 6,031,000 7,955,000 Decreased by .04

QUICK RATIO

QUICK RATIO = QUICK ASSET / CURRENT LIABILITY

QUICK ASSET= CURRENT ASSETS – INVENTORY – PREPAID EXPENSES.
YEAR QUICK ASSET CURRENT RATIO
LIABILTY
2022 72,199,000 84,421,000 0.86:1
2021 70,245,000 76,466,000 0.92:1
changes 1,954,000 7,955,000 0.06 decreased

2022
QUICK ASSET= CURRENT ASSETS – INVENTORY – PREPAID EXPENSES
92,204,000- 19,746,000 - 259,000 = 72,199,000
2021
86,173,000-15,539,000-389,000=70,245,000

DEBIT-EQUITY

DEBT TO EQUITY RATIO = LONG TERM DEBT / SHAREHOLDER’S FUNDS

YEAR DEBIT EQUITY RATIO
2022 71,561,000 87,125,000 0.82:1

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 2021 83,733,000 74,366,000 1.13:1
changes -12,172,000 12,759,000

DEBT TO TOTAL ASSETS RATIO

DEBT TO TOTAL ASSETS RATIO= TOTAL DEBT/ TOTAL ASSET

YEAR DEBIT TOTAL ASSET RATIO
2022 71,561,000 246,926,000 0.29:1
2021 83,733,000 229,527,000 0.36:1
changes -12,172,000 17,399,000 -0.07

TIMES INTEREST EARNED RATIO

TIMES INTEREST EARNED RATIO =EARNING BEFORE INTEREST AND

TAX/INTEREST EXPENSE
YEAR EBIT INTEREST RATIO
EXPENSE
2022 23,739,000 230,000 103.21 times
2021 16,296,000 236,000 69.05 times
changes 7,443,000 -6,000

INVENTORY TURNOVER RATIO

INVENTORY TURNOVER RATIO = COST OF GOODS SOLD/AVERAGE INVENTORY

YEAR COGS AVERAGE RATIO
INVENTORY
2022 118,042,000 17,642,500 6.69 TIMES
2021 89,253,000 14,966,000 5.96 TIMES
changes 28,789,000 2,676,500 0.73 TIMES
INCREASED

AVERAGE INVENTORY = OPENING INVENTORY + CLOSING INVENTORY/2

2022
15,539,000+19,746,000/2 =17,642,500
2021
14,393,000+15,539,000/2=14,966,000

DAYS’ SALES IN INVENTORY RATIO

DAYS’ SALES IN INVENTORY RATIO= 365/ INVENTORY TURNOVER RATIO

YEAR INVENTORY DAYS’ SALES
TURNOVER IN INVENTORY
RATIO RATIO
2022 6.69 TIMES 54.56 DAYS
2021 5.96 TIMES 61.24 DAYS
changes 0.73 TIMES 6.68 DAYS LESS
INCREASED TAKEN

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ASSET TURNOVER
ASSET TURNOVER= NET SALES/ AVERAGE ASSET

YEAR NET SALES AVERAGE ASSET RATIO

2022 142,610,000 238,226,500 0.60:1
2021 111,239,000 223,092,500 0.50:1
changes 31,371,000 15,134,000 0.10:1

2022
229,527,000+246,926,000/2 = 238,226,500
2021
216,658,000+229,527,000/2 = 223,092,500

GROSS PROFIT MARGIN

GROSS PROFIT RATIO= GROSS PROFIT/NET SALES
YEAR NET SALES GROSS PROFIT RATIO
2022 142,610,000 24,568,000 17.22%
2021 111,239,000 21,986,000 19.76%
Changes 31,371,000 2,582,000 -2.54

RETURN ON SALE
RETURN ON SALE= NET INCOME/NET SALES
YEAR NET SALES NET INCOME RATIO
2022 142,610,000 17,941,000 12.58%
2021 111,239,000 12,382,000 11.30%
changes 31,371,000

STATEMENTS

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INCOME STATEMENT

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