Financial Statement Analysis — BMW

Paule M.

Order the writing of a tailor-made Finance Case study

Free quote online

Case study Format .docx

Financial Statement Analysis — BMW

Download

Read an extract

Themes

financial analysis, financial performance, statement, BMW, financial situation, recommendations, advice, liquidity, solvency, industry, competitors, customers, company, payment risks, debt, sustainability, earnings, sales, finance

Reader
Abstract
Contents
Extract

Abstract

The Liquidity and Solvency section aims to analyze the financial situation of BMW through two different perspectives: Firstly, by analyzing its liquidity, which indicates the ability to pay its short-term liabilities, and secondly, by evaluating its solvency, which indicates the ability to pay its long-term liabilities. In order to put in perspective BMW Group's situation, the most important ratios will be compared with the industry or its main competitor.

Liquidity and solvency
Income statement
Cash flow statement
Auditor's opinion
Financial state of BMW
Recommendations
Our advice

Get this table of contents for free after login.

Extract

[...] Therefore, the free cash flow for that year was Euro429 million. Cash flow statement Applying the same concept, BMW recorded a huge increase in its operating cash flow to Euro13,251 million in 2020 (BMW Group Report 2020, p.190) and a reduction in capital investment to Euro2,790 million. Hence, the free cash flow for that year was Euro10,461 million. Hence, BMW's free cash flow reduced from 2018 to 2019 before recording a huge subsequent rise from 2019 to 2020. As the free cash flow shows the ability of the company to pay back dividends and reimburse creditors, these numbers are good news to both shareholders as well as bankers who deal with BMW Group. [...]

[...] Finally, a huge change in provisions is noted in 2019, which is attributed to the EU Commission's investigation about BMW cooperation to restrict competition in the development of emissionsreduction technologies. This required a Euro1.4 Billion provision. In 2020, the Euro1 Billion value was due to provisions in connection with recalls of exhaust gas coolers and contaminated battery cells in hybrid cars. Investments BMW Group had a negative cash outflow in the last three years, meaning the company is making investments and growing. [...]

[...] Selling and administrative expenses (Profit & Loss): Selling expenses represent more than 60%. Income statement From the horizontal analysis, it can be observed a huge variation in "Financial results" and "Profit/loss from discontinued operations", which is due to: Financial results: A likelihood of a fine that could be issued by EU and related to diesel and petrol-driven passenger vehicles. Apparition of discontinued operations: Agreement with Daimler group regarding the merger of certain business units that provide mobility services (Done in 03/2018 and closed in 01/2019). [...]

[...] The dividend history shows a similar decrease from to $3.5 to $2.5 throughout these three past years. Indeed, this shows that BMW Group has been paying less dividends, which is natural given the decline in profits. This decline is mostly due to pandemic circumstances, and BMW has been favoring investments over dividend distribution. This in no way should discourage investors, as investors should also keep in mind the future of the company and its investments, which in the case of BMW look very promising. [...]

[...] The analysis of trends in these categories helps to determine the financial performance and health of the company. In its financial statement, BMW Group present their cash flow statement, which is a summary of cash and its equivalents inflows and outflows during the year. Calculating percentage changes allows to highlight variations that had a large impact and that are worthy of further investigation. These are highlighted in red. As shown, the cash flow statement is made up of 3 parts: operating, investing, and financing. [...]

docx