BMW continues to perform well financially. Sales volume, revenues, and profits increased in the first quarter of 2015 compared to the previous year. Profitability ratios like return on equity and net profit margin improved from 2013 to 2014, indicating better control of expenses. Financial stability ratios also improved over time, with lower debt levels, faster inventory turnover, and higher interest coverage, though debtor collections slowed slightly. Given these positive trends, the document recommends BMW as a worthwhile investment.

1. SCHOOL OF ARCHITECTURE, BUILDING AND DESIGN
THE DESIGN SCHOOL
FOUNDATION IN NATURAL BUILD ENVIRONMENT
Assignment: Financial Ratio Analysis
Company: BMW
Group members:
Name Student ID
Fong Wen Ying Cynthia 0320499
Nurafiqah Zariful 0321196
Sim Chia Ting 0320932
Basic Accounting (ACC30205)
Lecturer: Mr Chang Jau Ho
Submission date: 4th June 2015, Thursday

2. 1
Table of Content
No. Title Page
1. Company’s Background 2 - 3
2. Recent Developments 4 - 5
3. Ratio Analysis:
4.1 - Profitability Ratios
4.2 - Stability Ratios
4.3 - P/E Ratio
6-13
4. Investment Recommendation 14 - 15
5. Appendices:
Appendix A - Consolidated Balance Sheet
Appendix B - Consolidated Statements of Income
16- 17

3. 2
2) Biography of The Company
BMW stands for Bayerische Motoren Werke. It is based on
German automobile and motorcycle manufacturer. It was founded
in 1916 by Franz Josef Popp, Karl Rapp and Camillo Castiglioni.
The headquarters are located in Munich, Bavaria, Germany. BMW
also owns and produces other company such as Mini Cars and
Roll-Royce Motor Cars.
It is now one of the ten largest car manufacturers in the world and
since it also produces Mini and Roll-Royce Cars as mentioned, it
possesses three of the strongest exceptional brands in the car
industry. The circular blue and white BMW logo portrays the the
movement of an aircraft propeller, signifying the white blades
cutting through the blue roundel was created. The emblem evolved
from the circular Rapp Motorenwerke company logo from which
BMW grew from, combined with the white and blue colors of the
flag of Bavaria.

4. 3
The group also has a strong market position in the motorcycle
sector and operates a successful financial service business. BMW
aims to generate profitable growth by focusing on the top
segments of the international automobile markets. With this in
mind, a wide range of products and market offensive was
introduced in 2001 which made the BMW group expanding its
product range considerably and also strengthening its worldwide
market position.
The company’s brand is extremely strong and is associated with
high performance, engineering excellence and innovation. 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 world’s
best largest luxury car maker.

5. 4
3) Recent developments
Automobile sales volume of the BMW Group have set a new
record for the period. The BMW Group continued to perform well
during the first three months of 2015, with sales volume, revenues,
profit before financial result and profit before tax all rising to new
highs for the first quarter period.
The size of the workers have grew compared to the end of the
previous year's first quarter. Overall, the BMW Group had a
worldwide labor force of 117,554 employees at the end of the
reporting period. The BMW Group continues to recruit engineers
and other skilled workers, in order to keep pace with rising demand
for BMW Group vehicles, push ahead with innovations and
develop new technologies.
The BMW brand also recorded a new sales volume high, with
451,576 units as of in 2014 the sales volume were up to 428,259
units which is 5.4% more than the recent development sold during
the first quarter. Tailwind came from numerous models, including
the BMW X5 and the 4, 5 and 6 Series, each of which achieved
the pole position in their relevant segments.
The Financial Services segment continued to perform well during
the period from January to March, recording new first quarter highs.
Segment revenues were higher compared to last year, and profit
before tax rose. The segment result benefited in particular from
favorable exchange rate developments. In total, new financing and
leasing contracts were signed during the first quarter, more than
in the previous year. The number of lease and financing contracts
have also increased.

6. 5
They can look ahead to the rest of the year with confidence,
thanks to its attractive range of models. Economic conditions in
some regions will, however, continue to pose challenges. The
situation on the Russian automobile market, for instance, is likely
to remain difficult. The ongoing process of normalisation of the
Chinese automobile market is also likely to continue, resulting in
less dynamic growth. The political and economic environment is
also expected to remain tense.
The BMW Group expects growth in economy in 2015 due to its
attractive model range, the market launch of 15 new models and
model revisions and because of the forecast positive development
of international automobile markets. Automotive segment
revenues are forecast to grow significantly due to the increase in
sales volume and exchange rate factors. The company had
previously expected a solid growth in revenues. The Financial
Services segment should also continue to perform well throughout
2015. Despite rising equity capital requirements worldwide, the
BMW Group forecasts a return on equity (ROE) in line with the
previous year’s level of 19.4%, thus remaining ahead of the target
of at least 18%.

7. 6
4) Ratio Analysis & P/E Ratio
4.1 Profitability Ratios:
Workings 2013 Workings 2014
Return On
Equity
( 2 )
× 100%
22.4%
( 2 )
× 100%
28.5%
Net Profit
Margin
×
100%
3.7%
×
100%
4.8%
Gross
Profit
Margin
×
100%
22.1%
×
100%
22.2%
Selling
Expenses
Ratio ×
100%
5.8%
×
100%
5.3%
General
Expenses
Ratio
×
100%
3.5%
×
100%
3.3%
2289
10529+9864 3229
12066+10529

8. 7
Financial
Expenses
Ratio
1674
60474
× 100%
2.7%
×
100%
2.9%

9. 8
Interpretations:
2013 2014 Interpretation
Return On
Equity
22.4% 28.5% Over the year of 2013 to 2014, the ROE
has increase from 22.4% to 28.5%. This
means that the owner is getting more
return from their capital compared to last
year.
Net Profit Margin 3.7% 4.8% Over the year of 2013 to 2014, the NPM
has increase from 3.7% to 4.8%. The
business’ ability to control its expenses
is getting better.
Gross Profit
Margin
22.1% 22.2% Over the year of 2013 to 2014, GPM has
increase from 22.1% to 22.2%. This
means the business ability to control its
Cost Of Goods Sold (COGS) expenses
is getting bettercompared to last year.
Selling
Expenses Ratio
5.8% 5.3% Over the year of 2013 to 2014, the
selling expenses ratio has decreased
from 5.8% to 5.3%. This means the
business expenses is getting better
compared to last year. ability to control
its selling compared to
General
Expenses Ratio
3.5% 3.3% Over the year of 2013 to 2014, the
general expenses ratio has decreased
from 3.5% to 3.3%. This means that the
business expenses is getting better last

10. 9
year. ability to control its general
compare to
Financial
Expenses Ratio
2.7% 2.9%
Over the year of 2013 to 2014, the
financial expenses ratio has increase
from 2.7% to 2.9%. This means that the
business ability to control its financial
expenses is getting worst compare to
last year.

11. 10
4.2 Financial Stability:
Workings 2013 Workings 2014
Working
Capital
1.43:1 1.61:1
Total Debt
×
100%
45.4%
×100%
40.1%
Stock
Turnover
365 ÷ 29.5 days 365 ÷ 27.1 days
Debtor
Turnover
365÷ 311.5
Days 365 ÷
(80401÷2)
318.0 days
(32616+37438)÷2
Interest
Coverage
5.8 times 7.2 times

12. 11
Interpretations:
2013 2014 Interpretations
Working
Capital
(WCR)
1.43:1 1.61:1 From 2013 to 2014,
working capital Increased
from 1.43 to 1.61. This
means the business has
improved in paying their
liabilities, but this does not
satisfy the minimum 2:1
ratio.
Total Debt
(TDR)
45.4% 40.1% From 2013 to 2014, the
total debt has decreased
from 45.4% to 40.1%,
which means that the debt
level has become better
but it does not satisfy the
maximum limit of 50%.
Stock
Turnover
(ITR)
29.5 days 27.1 days From 2013 to 2014, the
stock turnover decreased
from 29.5 days to 27.1
days. This means that the
business’ selling products
ability is getting better.

13. 12
Debtor
Turnover
(DTR)
311.5 days 318.0 days
During the period from
2013 to 2014, debtor
turnover has been
decreased from 311.5 days
to 318 days. This show that
the business is getting
slower in collecting their
debts from debtors.
Interest
Coverage
(ICR)
5.8 times 7.2 times From 2013 to 2014, the
interest coverage
increased from 5.8 times to
7.2 times. This means the
business ability to pay
interest is getting better but
it does not satisfy the
minimum limitations of 5
times.

14. 13
4.3 P/E Ratio:
Price/Earning Currently (26th May 2015) Interpretation
P/E
Ratio
=
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑆ℎ𝑎𝑟𝑒 𝑃𝑟𝑖𝑐𝑒
𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝑃𝑒𝑟 𝑆ℎ𝑎𝑟𝑒
=
𝐸𝑢𝑟𝑜 104.515
𝐸𝑢𝑟𝑜 8.91
= 11.73 years
The P/E ratio for BMW as
of 26th May 2015 is 11.73
years. This means that an
investor who bought a
share of BMW would have
to wait for 11.73 years in
order to retain his/her
investment, in this case, €
104.515. Hence, the P/E
ratio is lower than what a
conservation investor
would pay, which is lower
Than 15 years.

15. 14
5) Investment Recommendation
Based on the calculations and thorough analysis, we conclude that
the BMW Company is worth investing in.
The company has exhibited good profitability, as shown in the
profitability ratio analysis. The Return on Equity has increased by
6.1% and that the Net Profit and Gross Profit has also increased
throughout 2013 and 2014. Moreover, the Selling and General
Expenses Ratio decreased by 0.5% and 0.2% respectively. These
are good improvements for BMW compared within the year 2013
and 2014. The Financial Expenses Ratio increased by 0.2% but it
would not have any big changes.
From the stability ratio table, we can see that the Working Capital
Ratio shows that the company is improving at paying its current
liabilities with its current assets. Even though it does not satisfy the
minimum ratio, the BMW Company did improved compared to the

16. 15
previous year. Its Total Debt Ratio indicated that it has reduced
5.3% of debts and this is good. For the Inventory Turnover Ratio,
it shows that the company is selling stocks 2.4 days faster than the
year 2013. However, Debtor Turnover Ratio states that BMW
would be getting their debts for debtors about 6.5 days later than
before. Lastly for the stability ratio, the Interest Coverage
increased by 1.4 times, meaning that BWW’s ability to pay interest
is getting better compared to 2013 though it does not satisfy the
minimum limitations of 5 times.
In conclusion, the company is a good company to invest in as it is
financially stable and is able to make good profit at the same time.
Its Price Earnings Ratio is 11.73 years meaning that investors will
have to wait for 11.73 years before recouping his or her
investments, which is lower than what a conservation investor
would pay - 15 years.

17. 16
6) Appendices
Appendix A: Consolidated Balance Sheet:
(from
http://www.bmwgroup.com/bmwgroup_prod/e/0_0_www_bmwgroup_co
m/investor_relations/finanzberichte/12611_BMW_AG_Jahresabschluss
_2014_en_Online.pdf )

18. 17
Appendix B: Consolidated Statements of Income
(fromhttp://www.bmwgroup.com/bmwgroup_prod/e/0_0_www_b
mwgroup_com/investor_relations/finanzberichte/12611_BMW_A
G_Jahresabschluss_2014_en_Online.pdf)