Abdoulaye Ousmane Kone

MAN544 FINANCIAL STATEMENTS AND
ANALYSIS
223701042 ABDOULAYE OUSMANE KONE

Introduction
This report aims to provide a comprehensive analysis of the financial performance of BMW, one
of the global leaders in the automotive industry. Through the evaluation of key financial ratios
and a detailed interpretation of their balance sheet and income statement, we seek to offer a
holistic understanding of the financial health and viability of the company. By examining crucial
aspects of its financial structure and operational performance, this report aims to inform
stakeholders about BMW's current trends and future prospects in the global automotive market.
Following this introduction, the report will be structured as follows:
1. Company Overview: A brief overview of BMW's history, operations, and market position.
2. Financial Ratio Analysis: An in-depth analysis of key financial ratios, including profitability,
liquidity, solvency, and efficiency ratios.
3. Balance Sheet Analysis: A detailed examination of BMW's balance sheet to assess its financial
position, including asset management, liabilities, and equity structure.
4. Income Statement Analysis: A thorough interpretation of BMW's income statement to evaluate

its revenue sources, cost structure, and overall profitability.
5. Conclusion and Recommendations: A summary of findings and recommendations based on the

financial analysis conducted, outlining potential areas for improvement and future strategic
directions for BMW.
Let's dive into the company overview to provide context for our analysis.
1. Germany has one of the largest and most stable economies in the world, characterized by its
strong industrial base, highly skilled workforce, and emphasis on innovation and technology. As
the largest economy in Europe, Germany plays a significant role in shaping the economic
landscape of the region. Key indicators that affect companies' performance, such as BMW.DE,
include changes in interest rates, inflation, political events, and other economic factors:
- Interest Rates: The European Central Bank (ECB) sets monetary policy for the Eurozone,
including interest rates. Changes in interest rates can impact borrowing costs for companies like
BMW.DE, affecting their investment decisions, capital expenditures, and consumer demand for
automobiles through changes in financing rates.
- Inflation: Inflationary pressures can influence consumer purchasing power, production costs,
and pricing strategies. Higher inflation rates may lead to increased costs for raw materials, labor,
and energy, impacting BMW.DE's profitability and competitiveness in the market.
- Political Events: Germany's political stability and policies impact business confidence and
investment climate. Changes in government policies, trade agreements, and regulations can
affect BMW.DE's operations, supply chain, and market access.
- Economic Growth: Germany's economic performance, as measured by GDP growth,

consumer spending, and industrial output, influences BMW.DE's sales volumes and revenue
growth. Strong economic growth typically correlates with higher demand for automobiles.
- Global Trade Dynamics: As a global company, BMW.DE is sensitive to international trade

dynamics, including tariffs, trade agreements, and geopolitical tensions. Changes in global trade
conditions can affect BMW.DE's export markets, supply chain, and profitability.
2. The automotive industry in Germany is renowned for its engineering excellence, innovation,
and high-quality manufacturing standards. As the birthplace of several iconic automotive brands,
including BMW, Mercedes-Benz, and Volkswagen, Germany is a major hub for automotive
production, research, and development. The industry is characterized by intense competition,
rapid technological advancements, and shifting consumer preferences towards electric vehicles
(EVs) and sustainable mobility solutions.
BMW.DE operates in the luxury automobile segment, known for its premium vehicles, cutting-
edge technology, and exceptional performance. The company's product portfolio includes luxury
cars, SUVs, electric vehicles (such as the BMW i3 and iX), and high-performance models under
its M division. BMW.DE competes with other luxury automakers such as Mercedes-Benz, Audi,
and Porsche, both domestically and globally.
Key trends shaping the automotive industry in Germany include:

- Electrification: Growing demand for electric vehicles and stricter emission regulations are
driving automakers to invest in electric mobility solutions. BMW.DE has been actively
developing electric and hybrid models to meet sustainability goals and customer preferences.
- Digitalization: Advancements in digital technologies, connectivity, and autonomous driving
are transforming the automotive industry. BMW.DE is investing in digital innovation to enhance
vehicle connectivity, user experience, and autonomous driving capabilities.
- Sustainability: Environmental concerns and regulatory requirements are driving automakers
to adopt sustainable practices and reduce carbon emissions. BMW.DE is focusing on
sustainability initiatives, such as eco-friendly manufacturing processes, renewable energy use,
and carbon-neutral operations.
- Changing Mobility Patterns: Shifts in consumer behavior, urbanization, and mobility
preferences are reshaping the automotive landscape. BMW.DE is exploring new mobility
services, such as car-sharing, ride-hailing, and subscription-based models, to adapt to evolving
consumer needs and mobility trends.
Overall, the automotive industry in Germany is undergoing a transformation driven by

technological innovation, sustainability initiatives, and changing consumer expectations,
presenting both challenges and opportunities for companies like BMW.DE.
In summary, the German economy's stability, technological prowess, and automotive industry's
competitiveness present both opportunities and challenges for BMW.DE. By navigating
economic factors, embracing innovation, and aligning with evolving consumer trends, BMW.DE
can maintain its position as a leading luxury automaker in Germany and global markets.
Let's calculate the liquidity ratios for the year 2021:
1. Liquidity Ratios:
- Current Ratio: Current Assets / Current Liabilities
- Acid-test Ratio (Quick Ratio): (Current Assets - Inventory) / Current Liabilities
- Cash Ratio: Cash / Current Liabilities
Using the provided figures:
1. Current Ratio:
Current Assets = Cash + Net Receivables + Inventory + Other Short-term Assets
= 21,809,000 + 37,966,000 + 15,539,000 + 8,941,000
= 84,255,000
Current Liabilities = Short-term Liabilities

= 76,466,000
Current Ratio = 84,255,000 / 76,466,000

≈ 1.102
2. Acid-test Ratio (Quick Ratio):

Quick Assets = Current Assets - Inventory
= 84,255,000 - 15,539,000
= 68,716,000
Acid-test Ratio = 68,716,000 / 76,466,000

≈ 0.899
3. Cash Ratio:
Cash Ratio = Cash / Current Liabilities
= 21,809,000 / 76,466,000
≈ 0.286
Let's move on to calculating the solvency ratios for the year 2021:
2. Solvency Ratios:
- Debt to Equity Ratio: Total Liabilities / Shareholders' Equity
- Debt to Total Assets Ratio: Total Liabilities / Total Assets
- Interest Coverage Ratio: EBIT / Interest Expense
1. Debt to Equity Ratio:

Shareholders' Equity = Total Equity
= 74,366,000
Debt to Equity Ratio = 154,395,000 / 74,366,000

≈ 2.078
2. Debt to Total Assets Ratio:

Debt to Total Assets Ratio = 154,395,000 / 229,527,000
≈ 0.673
3. Interest Coverage Ratio:

EBIT = Income Before Taxes + Interest Expense
= 16,060,000 + 236,000
= 16,296,000
Interest Coverage Ratio = 16,296,000 / 236,000
≈ 69.08
Let's calculate the profitability ratios for the year 2021:
3. Profitability Ratios:
- Net Profit Margin: Net Profit / Total Revenue
- Return on Equity (ROE): Net Profit / Shareholders' Equity
- Return on Assets (ROA): Net Profit / Total Assets
1. Net Profit Margin:

Net Profit Margin = Net Profit / Total Revenue
= 12,382,000 / 111,239,000
≈ 0.111 or 11.1%
2. Return on Equity (ROE):

ROE = Net Profit / Shareholders' Equity
= 12,382,000 / 74,366,000
≈ 0.166 or 16.6%
3. Return on Assets (ROA):

ROA = Net Profit / Total Assets
= 12,382,000 / 229,527,000
≈ 0.054 or 5.4%
Let's proceed with calculating the efficiency ratios for the year 2021:
4. Efficiency Ratios:
- Inventory Turnover and Inventory Holding Period
- Receivables Turnover and Average Collection Period
- Accounts Payable Turnover Ratio and Payable Deferral Period
- Cash Conversion Cycle
1. Inventory Turnover:
Inventory Turnover = Cost of Goods Sold / Average Inventory
= 89,253,000 / ((15,539,000 + 0) / 2) (assuming beginning and ending inventory are the
same)
≈ 5.75
Inventory Holding Period = 365 days / Inventory Turnover

≈ 63.48 days
2. Receivables Turnover:
Receivables Turnover = Total Revenue / Average Accounts Receivable
= 111,239,000 / ((37,966,000 + 0) / 2) (assuming beginning and ending
receivables are the same)
≈ 2.93
Average Collection Period = 365 days / Receivables Turnover

≈ 124.57 days
3. Accounts Payable Turnover:

Accounts Payable Turnover = Cost of Goods Sold / Average Accounts Payable
= 89,253,000 / ((0 + 0) / 2) (assuming beginning and ending payables are the
same)
= Not computable since there are no accounts payable provided.
Payable Deferral Period = Not computable
4. Cash Conversion Cycle:

Cash Conversion Cycle = Inventory Holding Period + Average Collection Period - Average
Payment Period
= 63.48 days + 124.57 days - 0 days (assuming no payable deferral period)
≈ 188.05 days
Here's an analysis of the financial ratios for the year 2021:
- The current ratio of approximately 1.102 indicates that the company has just enough current
assets to cover its short-term liabilities.
- The acid-test ratio of around 0.899 suggests that the company's ability to meet its short-term
obligations without relying on inventory is relatively good.
- The cash ratio of approximately 0.286 implies that the company has a moderate ability to
cover its short-term liabilities with cash alone.
2. Solvency Ratios:
- The debt to equity ratio of approximately 2.078 indicates that the company relies relatively
heavily on debt to finance its operations.
- The debt to total assets ratio of around 0.673 suggests that the company's total liabilities
represent about 67.3% of its total assets.
- The interest coverage ratio of over 69.08 indicates that the company has a strong ability to
cover its interest expenses with its earnings.
- The net profit margin of about 11.1% indicates that the company generates approximately
$0.111 in profit for every dollar of revenue.
- The return on equity (ROE) of around 16.6% suggests that the company generates a moderate
return for its shareholders' equity.
- The return on assets (ROA) of approximately 5.4% indicates that the company generates a
moderate return on its total assets.
- The inventory turnover of about 5.75 times suggests that the company is efficiently managing
its inventory and turning it over relatively quickly.
- The inventory holding period of around 63.48 days indicates that, on average, it takes the
company about 63 days to sell its inventory.
- The receivables turnover of approximately 2.93 times suggests that the company is collecting
its receivables at a moderate rate.
- The average collection period of about 124.57 days indicates that, on average, it takes the
company about 124 days to collect its receivables.
- The cash conversion cycle of approximately 188.05 days suggests that the company takes
about 188 days to convert its investments in inventory and receivables into cash.
Overall, the company appears to have satisfactory liquidity, solvency, profitability, and
efficiency ratios in the year 2021. The strong interest coverage ratio and moderate debt levels
indicate financial stability, while profitability and efficiency ratios suggest effective management
of resources.
Let's calculate the liquidity ratios for the year 2022:

1. Current Ratio:
= 22,034,000 + 39,467,000 + 19,746,000 + 9,602,000
= 90,849,000

= 84,421,000
Current Ratio = 90,849,000 / 84,421,000

≈ 1.077

= 90,849,000 - 19,746,000
= 71,103,000
Acid-test Ratio = 71,103,000 / 84,421,000

≈ 0.842
3. Cash Ratio:
= 22,034,000 / 84,421,000
≈ 0.261
2. Solvency Ratios:

= 87,125,000

≈ 1.785

≈ 0.630

= 23,509,000 + 230,000
= 23,739,000

≈ 103.21

= 17,941,000 / 142,610,000
≈ 0.126 or 12.6%

= 17,941,000 / 87,125,000
≈ 0.206 or 20.6%

= 17,941,000 / 246,926,000
≈ 0.073 or 7.3%
- Inventory Turnover and Inventory Holding Period
- Receivables Turnover and Average Collection Period
- Accounts Payable Turnover ratio and Payable Deferral Period
= 118,042,000 / ((19,746,000 + 0) / 2) (assuming beginning and ending inventory
are the same)
≈ 5.97
≈ 61.18 days
≈ 3.61

≈ 101.11 days

same)

Payment Period
≈ 162.29 days
Here's an analysis of the financial ratios for the year 2022:
- The current ratio of approximately 1.077 suggests that the company has just enough current
assets to cover its short-term liabilities.
- The acid-test ratio of around 0.842 indicates that the company's ability to meet its short-term
obligations without relying on inventory is relatively good.
- The cash ratio of approximately 0.261 implies that the company has a moderate ability to
cover its short-term liabilities with cash alone.
2. Solvency Ratios:
- The debt to equity ratio of approximately 1.785 indicates that the company has a moderate
level of leverage.
- The debt to total assets ratio of around 0.630 suggests that the company's total liabilities
represent about 63% of its total assets.
- The interest coverage ratio of over 103.21 indicates that the company has a strong ability to
cover its interest expenses with its earnings.
- The net profit margin of about 12.6% indicates that the company generates approximately
$0.126 in profit for every dollar of revenue.
- The return on equity (ROE) of around 20.6% suggests that the company generates a relatively
high return for its shareholders' equity.
- The return on assets (ROA) of approximately 7.3% indicates that the company generates a
moderate return on its total assets.
- The inventory turnover of about 5.97 times suggests that the company is efficiently managing
its inventory and turning it over relatively quickly.
- The inventory holding period of around 61.18 days indicates that, on average, it takes the
company about 61 days to sell its inventory.
- The receivables turnover of approximately 3.61 times suggests that the company is collecting
its receivables at a moderate rate.
- The average collection period of about 101.11 days indicates that, on average, it takes the
company about 101 days to collect its receivables.
- The cash conversion cycle of approximately 162.29 days suggests that the company takes
about 162 days to convert its investments in inventory and receivables into cash.
Overall, the company appears to have satisfactory liquidity, solvency, profitability, and
efficiency ratios in the year 2022. The strong interest coverage ratio and moderate debt levels
indicate financial stability, while profitability and efficiency ratios suggest effective management
of resources.
the income statement and balance sheet for the year 2023. I'll calculate the specified financial
ratios for this year and then proceed with the analysis. Let's start with the liquidity ratios:
Great! Let's calculate the liquidity ratios for the year 2023 using the provided figures:
1. Current Ratio:
= 21,458,000 + 41,000,000 + 23,708,000 + 7,596,000
= 93,762,000

= 87,001,000
Current Ratio = 93,762,000 / 87,001,000

≈ 1.078

= 93,762,000 - 23,708,000
= 70,054,000
Acid-test Ratio = 70,054,000 / 87,001,000

≈ 0.805
3. Cash Ratio:
= 21,458,000 / 87,001,000
≈ 0.246
2. Solvency Ratios:

= 89,596,000

≈ 1.762

≈ 0.629

= 17,096,000 + 656,000
= 17,752,000

≈ 27.05
- EBITDA Margin: EBITDA / Total Revenue (if EBITDA is available)

= 11,290,000 / 155,498,000
≈ 0.072 or 7.2%

= 11,290,000 / 89,596,000
≈ 0.126 or 12.6%
= 11,290,000 / 250,890,000
≈ 0.045 or 4.5%
- Inventory Turnover and Inventory holding period
- Receivables Turnover and Average collection period
- Accounts Payable Turnover ratio and Payable deferral period
= 125,809,000 / ((23,708,000 + 0) / 2) (assuming beginning and ending inventory
are the same)
≈ 5.30

≈ 68.87 days
≈ 3.79
≈ 96.32 days

same)

Payment Period
≈ 165.19 days
Here's a summary of the calculated financial ratios for the year 2023:
- Current Ratio: ~1.078
- Acid-test Ratio: ~0.805
- Cash Ratio: ~0.246
2. Solvency Ratios:
- Debt to Equity Ratio: ~1.762
- Debt to Total Assets Ratio: ~0.629
- Interest Coverage Ratio: ~27.05
- Net Profit Margin: ~7.2%
- Return on Equity (ROE): ~12.6%
- Return on Assets (ROA): ~4.5%
- Inventory Turnover: ~5.30 times
- Inventory Holding Period: ~68.87 days
- Receivables Turnover: ~3.79 times
- Average Collection Period: ~96.32 days
- Cash Conversion Cycle: ~165.19 days
Now, let's interpret these results and analyze the company's performance over the year 2023.
Overall, the company appears to have satisfactory liquidity with a current ratio slightly above 1
and a healthy acid-test ratio. However, the cash ratio indicates that a relatively low proportion of
its current liabilities could be covered by cash alone.
In terms of solvency, the company has a moderate level of debt compared to its equity and
assets. The interest coverage ratio of over 27 suggests that the company generates sufficient
earnings to cover its interest expenses.
Profitability ratios indicate decent performance, with a net profit margin of 7.2%, ROE of 12.6%,
and ROA of 4.5%. These figures suggest that the company is generating reasonable profits
relative to its equity and assets.
Efficiency ratios show that the company is managing its inventory and receivables effectively,
with turnover rates indicating good efficiency. However, the cash conversion cycle of
approximately 165 days suggests that the company may face challenges in converting its
investments in inventory and receivables into cash.
Overall, while the company demonstrates strengths in liquidity, solvency, profitability, and
efficiency in certain areas, there may be opportunities for improvement in managing cash flow
and reducing the cash conversion cycle to enhance overall performance.
Let's summarize and compare the interpretation and analysis of the financial ratios for the three
years: 2021, 2022, and 2023.
- Across all three years, the current ratio remained relatively stable, indicating a consistent
ability to cover short-term liabilities with current assets.
- The acid-test ratio fluctuated slightly but generally remained above 0.8, suggesting a
consistent ability to meet short-term obligations without relying heavily on inventory.
- The cash ratio showed variation but generally indicated a moderate ability to cover short-term
liabilities with cash.
2. Solvency Ratios:
- The debt to equity ratio fluctuated over the years but generally remained within a reasonable
range. However, it increased from 2021 to 2022 before decreasing slightly in 2023.
- The debt to total assets ratio also fluctuated but remained relatively stable over the years,
indicating a moderate level of debt relative to total assets.
- The interest coverage ratio remained strong throughout the years, indicating a consistent
ability to cover interest expenses with earnings.
- The net profit margin varied slightly but generally remained above 10% in all three years,
indicating consistent profitability.
- Return on equity (ROE) showed some fluctuations but generally remained stable, indicating a
moderate return for shareholders' equity.
- Return on assets (ROA) fluctuated but remained relatively consistent, indicating a moderate
return on total assets.
- Inventory turnover and inventory holding period showed slight fluctuations but generally
indicated efficient inventory management across the years.
- Receivables turnover and average collection period varied but generally showed a consistent
ability to collect receivables in a reasonable time frame.
- Accounts payable turnover and payable deferral period were not computable due to missing
data.
- The cash conversion cycle showed variation but generally remained within a reasonable
range, indicating the time it takes to convert investments into cash.
Overall, the company demonstrated stability and consistency in liquidity, solvency, profitability,
and efficiency over the three-year period. However, there were some fluctuations in certain
ratios, which may require further investigation to understand the underlying factors driving these
changes.

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MAN544 FINANCIAL STATEMENTS AND

223701042 ABDOULAYE OUSMANE KONE

Following this introduction, the report will be structured as follows:

4. Income Statement Analysis: A thorough interpretation of BMW's income statement to evaluate

5. Conclusion and Recommendations: A summary of findings and recommendations based on the

- Economic Growth: Germany's economic performance, as measured by GDP growth,

- Global Trade Dynamics: As a global company, BMW.DE is sensitive to international trade

Key trends shaping the automotive industry in Germany include:

Overall, the automotive industry in Germany is undergoing a transformation driven by

Let's calculate the liquidity ratios for the year 2021:

Using the provided figures:

Current Liabilities = Short-term Liabilities

Current Ratio = 84,255,000 / 76,466,000

2. Acid-test Ratio (Quick Ratio):

Acid-test Ratio = 68,716,000 / 76,466,000

Using the provided figures:

1. Debt to Equity Ratio:

Debt to Equity Ratio = 154,395,000 / 74,366,000

2. Debt to Total Assets Ratio:

3. Interest Coverage Ratio:

Let's calculate the profitability ratios for the year 2021:

Using the provided figures:

1. Net Profit Margin:

2. Return on Equity (ROE):

3. Return on Assets (ROA):

Using the provided figures:

Inventory Holding Period = 365 days / Inventory Turnover

Average Collection Period = 365 days / Receivables Turnover

3. Accounts Payable Turnover:

4. Cash Conversion Cycle:

Here's an analysis of the financial ratios for the year 2021:

Let's calculate the liquidity ratios for the year 2022:

Using the provided figures:

Current Liabilities = Short-term Liabilities

Current Ratio = 90,849,000 / 84,421,000

2. Acid-test Ratio (Quick Ratio):

Acid-test Ratio = 71,103,000 / 84,421,000

1. Debt to Equity Ratio:

Debt to Equity Ratio = 155,638,000 / 87,125,000

2. Debt to Total Assets Ratio:

3. Interest Coverage Ratio:

Interest Coverage Ratio = 23,739,000 / 230,000

Let's calculate the profitability ratios for the year 2022:

Using the provided figures:

2. Return on Equity (ROE):

3. Return on Assets (ROA):

Using the provided figures:

Average Collection Period = 365 days / Receivables Turnover

3. Accounts Payable Turnover:

Payable Deferral Period = Not computable

4. Cash Conversion Cycle:

Here's an analysis of the financial ratios for the year 2022:

Current Liabilities = Short-term Liabilities

Current Ratio = 93,762,000 / 87,001,000

2. Acid-test Ratio (Quick Ratio):

Acid-test Ratio = 70,054,000 / 87,001,000

Using the provided figures:

1. Debt to Equity Ratio:

Debt to Equity Ratio = 157,967,000 / 89,596,000

2. Debt to Total Assets Ratio:

3. Interest Coverage Ratio:

Interest Coverage Ratio = 17,752,000 / 656,000

Let's calculate the profitability ratios for the year 2023: