Financial Ratio Analysis: Daimler Group and Bmw Group Essay

2088 Words Feb 12th, 2013 9 Pages
To: Board Directors of Daimler Group

Financial Analysis: A comparison between Daimler Group and BMW Group

In this report, we calculate and compare the financial performance between Daimler Group and BMW Group in two financial years 2010-2011. The objective is to analyse the financial performance of both groups and identify our company’s position, thus suggesting the potential areas for improvement for our company.

I) Introduction
In this report, we analyse and compare the financial performance between BMW Group and Daimler Group in 2010 and 2011 using financial ratios analysis. The BMW Group and Daimler Group are two of Germany’s largest industrial companies and are among the most successful car and motorcycle
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Daimler has more funds tied up in trade receivables. The trade payables period indicates how long it takes the company to pay its suppliers. Most companies would prefer this to be as long as possible but this can be taken to far and result in the loss of goodwill of suppliers. Both groups have managed to increase the period it takes them to pay their creditors. Both companies take a longer period to pay their suppliers than it takes for their debtors to pay what they owe. This shows a good cash flow movement for both companies.
The operating cycle is expressed as an indicator of management efficiency. It has three components of inventory turnover period, trade receivables period and trade payables period. These come together to form the complete measurement of operating cycle days. This hasn’t changed for Daimler over the past two years and has increased slightly for BMW. It takes BMW a shorter period to generate revenue from its purchase of inventory than it takes Daimler.

3) Liquidity
Liquidity ratios attempt to measure a company's ability to pay off its short-term debt obligations. In general, the greater the coverage of liquid assets to short-term liabilities the better it is, because it gives a clear signal to whether a company can pay its debts that are due in the near future and still be able to fund its ongoing operations.
The current ratio measures

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