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Capital University of science and technology, Islamabad.

Report:
Financial statement analysis of BMW and FIAT.

Submitted by:
Faheem ul Hassan
Mubeen Zubair
Sadia Musa
Maria Tariq
Shaharyar Cheema
Osama Muhammad
CH Muzamil
Muhib ul Haq

Subject:
MANAGERIAL ACCOUNTING

Submitted to:
Sir. Zia ul Islam
1

Introduction:
Bayerische Motoren Werke AG; German for Bavarian Motor Works), usually
known under its abbreviation BMW is a German luxury vehicle, motorcycle, and engine
manufacturing company founded in 1916. Headquartered in Munich, Bavaria, Germany. BMW
owns Mini cars and is the parent company of Rolls-Royce Motor Cars. BMW produces motorcars
under the BMW Motorsport division and motorcycles under BMW Motorrad, and plug-in electric
cars under the BMW i sub-brand and the "iPerformance" model designation within the regular
BMW lineup. It is one of the best-selling luxury automakers in the world. The company is a
component of the Euro Stoxx 50 stock market index

Competitor FIAT
Fiat Automobiles S.p.A. (FIAT, Italian: Fabbrica Italiana Automobili Torino, lit. 'Italian
Automobiles Factory, Turin'), is the largest automobile manufacturer in Italy, a subsidiary of
FCA Italy S.p.A. which is part of Fiat Chrysler Automobiles. Fiat Automobiles S.p.A. was
formed in January 2007 when Fiat reorganized its automobile business, and traces its history
back to 1899 when the first Fiat automobile was produced.

Internal Analysis (BMW):

Liquidity ratio:
Liquidity ratios shows a decreasing pattern form base year because company increase in short
term borrowing to entertain their day to day operations and other obligations. But according to
historical data company will be entertain its obligations in very brief period.
Profitability:
Company has a bad impression from its return on investment and margins because they are
decreasing. Because they are declining from the previous year although company has increased
its revenue but to meet its obligations the profitability of the company has plunged.
Investor Analysis:
Although company has to meet its obligations it ensures the investors do get their return on
investment as company promises. The EPS and the dividends have increased from the previous
years to sustain its market image and their investors trust and confidence.
Solvency:
2

As company increases its short term borrowing their debt to equity ratio spikes with that their
interest coverage declines from the previous year but company manages to decrease its long-term
debt.
Activity:
As company manages to increase its sales the inventory turnover spikes form the last year but it
has no visible effect on receivable turnover and the total asset turnover. As mentioned above
with the increase in companys current liabilities working capital is on the negative side but
company tried to coupe up with this situation.

Internal Analysis (FIAT):


Liquidity ratios:
Companys liquidity has decreased due to the increase in payables from the previous year and
the liabilities held for distribution. But as company tried to invest in short term instruments they
are trying to handle the situation.

Profitability:
Companys profitability is currently in a bumpy situation due to the increase in operating
expenses and R&D expenses but once they achieve their goal the companys revenue will be
better than ever because they are expecting to reap the maximum benefits from their massive
allocation to the R&D department.

Investor analysis:
From the last three years the company reinvest its profit into the new projects and R&D the
company didnt offer any dividend so investors were not able to get any return on investment
from this company but market has an opinion once the company launches its new product in the
market the company will gain good impression which will add to its goodwill and its share price.

Solvency:
As company try to minimize its debt the companys debt to asset and debt to equity ratio has
declined very sharply.

Activity:
As company manages to increase its sales the companys inventory turnover and the working
capital turnover spikes from the previous year the company also manages to collect its
receivables in a very short period of time and quite efficiently.

BMW vs FIAT
LIQUIDITY:
The liquidity of both companies has decreased but for the different reason for BMW it was due
to increase its short term borrowing and for FIAT it was the case of rapid increase in the
payables. But as compared to BMW FIAT has a very solid position because there is a big gap
between the ratios of the two competing companies.

PROFITABILITY:
The profitability of both competing giants is decreasing. But the profit margin and the return of
BMW is in much better than FIAT.

INVESTOR ANALYSIS:
When we talk about the investor analysis one thing is for sure that BMW is in much better
position compared to its rival because it is paying dividends to its shareholders which boosts
their confidence in the company on the other hand it is not the case with the FIAT because they
are not engaged in such an activity they are pinning all of their hope on the future because of the
huge allocation to the R&D department.
But till now according to our analysis BMW is a much better option if you want to short sell
their shares.

Solvency:
Debt to equity ratios of the both competitor companies is declining which in itself is a good and
healthy thing but FIAT is doing a better job compared to BMW. But the interest coverage ratio
of BMW is much healthier than FIAT.
ACTIVITY:
Both of them tried their best to increase their sales but according to inventory, total asset,
working capital turnover FIAT is at an advantage in the market and also FIAT manages to collect
its receivables in a very short period of time compared to its rival.

Conclusion:
Though both of them are competing on a global scale its investor perspective. If they want to
hold their share or short sell. If they want to buy and hold their share and dont want any
dividend soon they should go for FIAT but if they want return on their investment and want to
earn extra money by short selling they should look for BMW.