Bombardier - Financial Analysis Essay

1420 Words Apr 22nd, 2013 6 Pages
Bombardier Financial Analysis

Liquidity 1) Current Ratio 2) Working Capital

Leverage 1) Debt/Equity Ratio 2) Financial Leverage

Operational Efficiency

1) Inventory Turnover Ratio 2) Receivables Turnover Ratio 3) Fixed Asset Turnover Ratio

Liquidity
Bombardier has maintained a Current Ratio of close to 100% over the past 10 years with the highest being in F’05 (121%) and the lowest in F’08 (95%). This is typical for the industry in which Bombardier operates. Current Ratio has been increasing since F’08 as Bombardier has focused on improving its cash from operating activities.

Historically, Bombardier has efficiently used its cash resources, taking into consideration working cap requirements,
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Even though the ratio has been declining since 2010, the F’12 number is still higher than the 10 year average. Net additions to PP&E and intangible assets totaled $2.0 billion in F’12, compared to $1.3 billion in F’11. The Fixed Asset Turnover Ratio is likely improve in the coming years as sales are expected to rise while net PP&E is not expected to increase significantly.

When compared the Fixed Asset Turnover Ratio to its competitors, Bombardier was able to achieve a higher ratio (6.89) than that of Airbus (3.03) but lower than that of Boeing (7.29).

We manage our creditworthiness using the global metrics as described in the Capital structure section. Our recent debt issuance is expected to have a temporary negative impact on our global metrics but we believe that the addition of liquidity in a relatively high investment period warrants the increased leverage. As a result of this increase in leverage, Standard & Poor’s and Fitch lowered our credit rating from BB+ to BB, in line with Moody’s Ba2.

Profitability

Bombardier has seen its Gross Margin increase steadily over the past 10 years with a 14.9% result in
2012 but peaking at 18.6% in 2009. This period, also mirrored by growing revenues, saw its Cost of
Goods Sold (COGS, represented as a percentage of revenue) decrease from 93.78% in 2003 to 85.1% in 2012. From a holistic view of the past decade, we can see that in 2009 COGS

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