Volkswagen AG Financial Analysis - Submitted as a partial requirement for the fulfillment of Advanced Accounting course - MBA Degree - The German University in Cairo - Spring 2011 - Dr. Mowafak Mostafa

2. Volkswagen AG
Financial Analysis
Hamed
Akram
Youssef
Dr. Mowafak Moustafa

3. Road Map
• Reasons for Financial Analysis.
• Introduction of Volkswagen.
• VW Competitive Vehicles.
• Volkswagen Profitability Analysis.
• Horizontal analysis of the Income Statement.
• Vertical analysis of the Balance Sheet.
• Ratios Comparison.
• Conclusion.

4. Road Map
• Reasons for Financial Analysis.
• Introduction of Volkswagen.
• VW Competitive Vehicles.
• Volkswagen Profitability Analysis.
• Horizontal analysis of the Income Statement.
• Vertical analysis of the Balance Sheet.
• Ratios Comparison.
• Conclusion.

5. Reasons for Financial
Analysis.
• To use financial statements to evaluate an organisation’s
o Financial performance
o Financial position.
• There are two key factors for business survival
o Intercompany basis (within the company itself)
o Intercompany basis (between companies)
o Industry Averages (against that particular industry’s averages
• There are three key factors for business survival
o Liquidity
o Profitability
o Solvency

6. Road Map
• Reasons for Financial Analysis.
• Introduction of Volkswagen.
• VW Competitive Vehicles.
• Volkswagen Profitability Analysis.
• Horizontal analysis of the Income Statement.
• Vertical analysis of the Balance Sheet.
• Ratios Comparison.
• Conclusion.

7. Introduction to Volkswagen
• Volkswagen (abbreviated VW) is the original and
biggest-selling marque of the Volkswagen Group, which
now also owns
the Audi, Bentley, Bugatti, Lamborghini, SEAT and Škod
a marques and the truck manufacturer Scania.
• Volkswagen means "people's car" in German, Its
current slogan is Das Auto (in English The Car).
• Volkswagen operates worldwide, but core market is
primarily Europe.
• In 2000 Volkswagen spent 3.1 Billion Euros to modernize
their factories,
• Volkswagen's second-largest market China, spent 1.7
Billion Euros in the Chinese market, selling more than
one million vehicles in 2008.

8. Volkswagen overview.
• Volkswagen shares are primarily traded on the Frankfurt
stock exchange, listed under the symbol “VLKAY”.
• In 2009 Volkswagen was the third biggest motor vehicle
manufacturer, with 6.29 million units delivered to
customers, After Toyota and General Motors, and
planning to go to No.1 in 2014
• Porsche and Volkswagen Group reached an agreement
that they would merge in 2011.

9. Road Map
• Reasons for Financial Analysis.
• Introduction of Volkswagen.
• VW Competitive Vehicles.
• Volkswagen Profitability Analysis.
• Horizontal analysis of the Income Statement.
• Vertical analysis of the Balance Sheet.
• Ratios Comparison.
• Conclusion.

10. VW Competitive Vehicles
Passat
Golf
Touareg
Phaeton
New Beetle Jetta
Volkswagen AG

11. Road Map
• Reasons for Financial Analysis.
• Introduction of Volkswagen.
• VW Competitive Vehicles.
• Volkswagen Profitability Analysis.
• Horizontal analysis of the Income Statement.
• Vertical analysis of the Balance Sheet.
• Ratios Comparison.
• Conclusion.

12. Volkswagen AG
10 Year Total Sales Trend
Year Sales Percent Change
2010 121,697.00 21.3%
2009 100,303.00 (8.4%)
2008 109,451.00 0.5%
2007 108,897.00 3.8%
2006 104,875.00 11.6%
2005 93,996.00 5.7%
2004 88,963.00 4.9%
2003 84,813.00 (2.5%)
2002 86,948.00 (1.8%)
2001 88,540.00
€ Million

13. Volkswagen AG
10 Year Total Sales Trend Graph
140,000.00
120,000.00
100,000.00
80,000.00
60,000.00
40,000.00
20,000.00
0.00
2010 2009 2008 2007 2006 2005 2004 2003 2002 2001
Sales
€ Million

14. Volkswagen AG
10 Year Net Income Graph
8,000.00
7,000.00
6,000.00
5,000.00
4,000.00
3,000.00
2,000.00
1,000.00
0.00
2010 2009 2008 2007 2006 2005 2004 2003 2002 2001
Sales
€ Million

15. Road Map
• Reasons for Financial Analysis.
• Introduction of Volkswagen.
• VW Competitive Vehicles.
• Volkswagen Profitability Analysis.
• Horizontal analysis of the Income Statement.
• Vertical analysis of the Balance Sheet.
• Ratios Comparison.
• Conclusion.

16. Horizontal analysis of the Income Statements
2010 2009 Amount Percent
Revenue 121,697.0 100,303.0 21,394.00 21.3%
Other Revenue, Total 5,178.0 4,884.0 294.00 6.0%
Total Revenue 126,875.0 105,187.0 21,688.00 20.6%
Cost of Revenue, Total 105,431.0 91,608.0 13,823.00 15.1%
Gross Profit 16,266.0 8,695.0 7,571.00 87.1%
Selling/General/Admin Exp., Total 15,500.0 13,276.0 2,224.00 16.8%
Unusual Expense (Income) -10.0 -38.0 28.00 -73.7%
Other Operating Expenses, Total -865.0 -785.0 -80.00 10.2%
Operating Income 7,142.0 1,855.0 5,287.00 285.0%
Interest Income (Expense), Net Non-Opts. 715.0 705.0 10.00 1.4%
Income Before Tax 8,994.0 1,260.0 7,734.00 613.8%
Income Tax – Total 1,767.0 349.0 1,418.00 406.3%
Income After Tax 7,227.0 911.0 6,316.00 693.3%
Minority Interest -392.0 49.0 -441.00 -900.0%
Net Income Before Extra. Items 6,835.0 960.0 5,875.00 612.0%
Total Extraordinary Items 0.0 0.0 0.00
Net Income 6,835.0 960.0 5,875.00 612.0%
€ Million

17. Road Map
• Reasons for Financial Analysis.
• Introduction of Volkswagen.
• VW Competitive Vehicles.
• Volkswagen Profitability Analysis.
• Horizontal analysis of the Income Statement.
• Vertical analysis of the Balance Sheet.
• Ratios Comparison.
• Conclusion.

18. Vertical analysis of the Balance Sheet
2010 2009
Assets
Amount Percent Amount Percent
Cash and Short Term Investments 24,171.00 28.1% 23,869.00 30.7%
Total Receivables, Net 44,134.00 51.4% 39,784.00 51.2%
Total Inventory 17,631.00 20.5% 14,123.00 18.2%
Total Current Assets 85,936.00 100.0% 77,776.00 100.0%
Property/Plant/Equipment, Total – Net 37,911.00 33.4% 34,947.00 35.2%
Goodwill, Net 3,410.00 3.0% 2,929.00 2.9%
Intangibles, Net 9,694.00 8.5% 9,977.00 10.0%
Long Term Investments 14,168.00 12.5% 10,928.00 11.0%
Note Receivable - Long Term 44,025.00 38.8% 37,606.00 37.8%
Other Long Term Assets, Total 4,249.00 3.7% 3,017.00 3.0%
Total Assets 199,393.00 100.0% 177,180.00 100.0%
€ Million

19. Road Map
• Reasons for Financial Analysis.
• Introduction of Volkswagen.
• VW Competitive Vehicles.
• Volkswagen Profitability Analysis.
• Horizontal analysis of the Income Statement.
• Vertical analysis of the Balance Sheet.
• Ratios Comparison.
• Conclusion.

20. Ratios Comparison

21. Highlighted Ratios
 Debit/equity = Total Liabilities / Shareholders Equity
 Account receivable turnover =
Net Credit Sales / Average account receivable

22. Ratios Comparison

23. Road Map
• Reasons for Financial Analysis.
• Introduction of Volkswagen.
• VW Competitive Vehicles.
• Volkswagen Profitability Analysis.
• Horizontal analysis of the Income Statement.
• Vertical analysis of the Balance Sheet.
• Ratios Comparison.
• Conclusion.

24. Conclusion
A high debt/equity ratio generally means that BMW has
been aggressive in financing its growth with debt. This can
result in volatile earnings as a result of the additional interest
expense.
 A high Accounts Receivables Turnover ratio implies either
that BMW operates on a cash basis or that its extension of
credit and collection of accounts receivable is efficient.
A low Accounts Receivables Turnover ratio implies VLKAY
should re-assess its credit policies in order to ensure the
timely collection of imparted credit that is not earning interest
for the firm.

25. Thank you