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

Return on
Enquity
(ROE)

Net Profit
Margin (NPM)

Gross Profit
Margin (GPM)

Selling
Expense
Ratio (SER)

General
Expense
Ratio (GER)

2011

2012

Interpretation
During the year 2011 to
net profit
net profit
X 100
X 100
'
'
2012, the ROE has
avg . owne r s enquity
avg . owne r s enquity
increased from 25.7% to
1,970
3,131

X 100

X 100 34.6%. This means the

(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.
Between the period of
net profit
1,970
net profit
X 100=
X 10 0
X 10 0
2011 to 2012, the NPM has
net sales
55,007
net sales
increased from 3.6% to
=3.6%
3,131
5.3% which means the

X 10 0
58,805
business is getting better
at controlling expenses
=5.3%
From 2011 to 2012, the
gross profit
gross profit
X 10 0
X 10 0
GPM for the business
net sales
net sales
slightly increased from
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
During the period from
total selling expense
total selling expense
X 100
X 100
2011 to 2012, the SER
net sales
net sales
increased from 6.1% to
3,381
3,684
6.3%. This shows the

X 10 0

X 10 0
55,007
58,805
business is getting worse
at controlling selling
=6.1%
=6.3%
expenses.
Between the years 2011 to
total general expense
tal general expense
X 100
X 100
2012, the GER increased
net sales
net sales
from 2.6% to 2.9%. This
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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Financial
Expense
Ratio (FER)

During the period, FER has

total financial expense
total financial expense
X 100
X 100
decreased from 3.8% to
net sales
net sales

2,096

X 10 0
55,007
=3.8%

1,666

X 10 0
58,805
=2.8%

2.8%, which indicates that

the business is getting
better at controlling
financial expenses.

* Units represented in millions

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Stability
Ratios

Working
Capital

2011

2012

total current asset

total current libailities

total current asset

total current libailities

17,802
10,604

= 1.68 : 1

= 1.54: 1

total liabilities
X 10 0
total asset
Total Debt

total liabilities
X 10 0
total asset

11,515
X 10 0
27,508

=41.9%

365
Stock
Turnover

365

365

43,320
(3,755+ 3,259) 2

=29.5 days

365
Debtor
Turnover

365

credit sales
avg .debtors

55,007 2
( 8,035+8,237 ) 2

943+ 1,970
943

= 3.1 times

365

365

interest expense+ ne t profit

interest expense

COGS
avg .inventory

46,252
( 3,749+3,755 ) 2

=29.6 days

=108 days
Interest
Coverage

14,559
X 10 0
31,965

=45.5%

COGS
avg .inventory

20,215
13,151

365

credit sales
avg .debtors

58,805 2
( 9,216+ 8,035 ) 2

=107.1 days

interest expense+ net profit

interest expense

913+ 3,131
913

=4.4 times

Interpretation
From 2011 to 2012,
working capital has
decreased from 1.68:1 to
1.54:1. This does not just
mean the business is
getting worse in paying
their liabilities, but it also
does not satisfy the
minimum 2:1 ratio
From 2011 to 2012, total
debt has increased from
41.9% to 45.5%, which
means that the debt level
has gone up, however, it
still below the maximum
50% limit
Between the period of
2011 to 2012, stock
turnover has slightly
increased from 29.5 days
to 29.6 days. This means
the business is selling their
products at a slightly
slower speed.
During the period from
2011 to 2012, debtor
turnover has decreased
from 108 days to 107.1
days. This indicates that
the business is getting
faster in collecting their
debts from debtors.
During the period, the
businesss interest
coverage has increased
from 3.1 times to 4.4
times. This means the
businesss ability to pay
interest

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* Units represented in millions

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Price/Earning

Currently (24th Jan 2014)

Current share price

Earnings per share
P/E
Ratio

84.63
7.93

=10.67 years

Interpretation
The P/E ratio for BMW as of 24th
January 2014 is 10.67 years. This
means an investor who bought a
share of BMW would have to wait
10.67 years in order to retain
his/her investment, in this case,
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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