BMW

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THE COMPANY


BMW Group worldwide mission statement is To be the most successful premium manufacturer in the industry.


BMW (Bavarian Motor Works) began life as a manufacturer of aircraft engines during World War 1 when it built a reputation of reliability and excellence.


In 1, BMW built its first motorcycle and in 18, its first motorcar - a version of the Austin Seven built under license


Buy BMW term paper


The famous white and blue symbol of BMW stems from the companys origins as aero plane engine manufacturers. The BMW Company was formed in 117, from the merger of two small aero engine makers.


Many aircraft were painted in regional colors and those of the Bavarian Luftwaffe were the Bayern white and blue.


It is said that the pilots view through the propeller was one of white and blue alternating segments.


Through the years this image has become stylized into solid quarters of blue and white to declare the identity of todays BMW cars and motorcycles. Since the end of the 170s BMW has worked to create a standardized international image in terms of statement and presentation so that today whenever people encounter the companys symbols they recognize BMW.


BMW is a major company in the UK employing over 7500 people.


• BMW (GB) Ltd commenced operations in January 180 and is responsible for the sales and marketing of BMW cars and motorcycles, and MINI cars in the UK. 15 dealers are franchised to sell BMW cars, of which 148 sell MINIs. 7 dealers are franchised to sell BMW motorcycles.


• Oxford plant is one of the worlds most modern and advanced car factories currently producing 10,000 MINIs a year for worldwide market.


• Hams Hall plant, near Birmingham produces BMW four-cylinder petrol engines, employing revolutionary Valvetronic technology and was the first BMW engine plant to be built outside Germany and Austria.


• The new manufacturing plant and Head Office for Rolls-Royce motor cars is based at Goodwood, West Sussex.


• BMW Financial Services, Hook offers a broad range of finance and insurance products for consumers and businesses. Also based at Hook is Alphabet (GB) Ltd, BMWs multi-make contract hire and leasing company.


OPERATIONS


BMW Group products are in great demand worldwide. The BMW Group range includes a variety of performance cars and motorcycles (see below).


At the beginning of 00 BMW Group will assume full brand responsibility for Rolls-Royce motor cars and complete its brand spectrum in the absolute top segment of the car market.


Production plants


Berlin, Germany


Dingolfing, Germany


Einsenach, Germany


Hams Hall, UK


Landshut, Germany


Munich, Germany


Oxford, UK


Regensburg, Germany


Rosslyn, South Africa


Spartanburg, USA


Steyr, Austria


Swindon, UK


Tritec Motors Ltda


Wackersdorf, Germany


Assembly Plants


Cairo, Egypt


Hanio, Vietnam


Jakarta, Indonesia


Kaliningrad, Russia


Kuala Lumpur, Malaysia


Manila, Philippines


Rayong, Thailand


Toluca, Mexico


BMW believe the only way for a successful car maker to hold its own in a highly competitive future is through superior innovations. As at the end of 001 BMW Group employed more than 8000 people worldwide within the research & development network and invested over €.1 billion.


In late 187 the company centralised its R&D resources and opened the BMW Research and Engineering Centre (FIZ) in Munich, Germany.


Employing engineers, designers, model builders, computer experts and scientists of various disciplines FIZ co-ordinates and optimises research activities across the group to create the BMW cars of the future.


Innovative technologies, covering all aspects of the car include


the use of new materials


light-weight structures


mechatronics


communication technologies


The best approved designs are developed to Series readiness in BMWs pilot plant, where all conceivable tests and trials including acoustic, climate and crash are carried out.


The Centre has proved so successful that it has set the benchmark for other car manufacturers.


BMW have also responded to the current trend taking place in the car industry to replace mechanical parts with electronically controlled components and at the end of 001 opened a new subsidiary BMW Car IT GmbH.


BMW Car IT GmbH allows the BMW Group to expand its activities in the area of automobile related software and IT development.


All BMW Group research and development departments have a clear objective advanced product design with minimum environmental impact.


ANALYSIS OF LIQUIDITY


Ratios that show the relationship of a firm’s cash and other current assets to its current liabilities, and thus its ability to meet maturing debts. Two commonly used liquidity ratios are the current ratio and quick ratio.


CURRENT RATIO


This ratio is calculated by dividing current assets by current liabilities. It indicates the extent to which current liabilities are covered by those assets expected to be converted to cash in the near future.


Current Ratio = Current Assets / Current Liabilities


Year Current Ratio


18 1.7


1 1.5


000 1.44


001 0.64


00 1.1


After carefully reviewing the current ratio of the company for the past five years, there has been a constant decline in the liquidity between 18 and 000 and it hit its lowest ratio in the year 001. This implies that the company’s ability to pay off current liabilities using the current resources was below the satisfactory mark as the desired current ratio should be at least 1. In the year 00, the company’s liquidity has increased by a significant amount which implies that the liquidity is beginning to rise.


ASSET TURNOVER RATIO


This ratio is calcularted by deducting inventories from current assets and dividing the remainder by current liabilities. This measures the firms’ ability to pay off short term obligations without relying on the scale of inventories.


ATR = Liquid Assets / Liabilities


Year Liquid Ratio


18 .7


1 .08


000 1.1


001 .8


00 .


The trend line of the asset turnover ratio is very unstable as it is declining between the years 18 and 1 and then suddenly shoots up to a high of 1.1. This implies that there might have been a change in the management during these years and the new management has been able to manage the assets better than the older one. But then in the next two years there is yet again a gradual decline in the ration which suggests that the company’s liquidity is not up to the mark and they need to make necessary changes to manage their assets in a better manner.


ANALYSIS OF ASSET MANAGEMENT


A set of ratios that measure how effectively a firm is managing its assets. These ratios include inventory turnover , days sales outstanding, fixed assets turnover, and total assets turnover.


INVENTORY TURNOVER RATIO


This ratio is calculated by dividing sales by inventories. It measures how quickly the inventories are converted to sales.


ITR = Cost of goods sold / Average Inventory


Year Inventory Turnover Ratio


18 8.45


1 .5


000 11.0


001 .7


00 8.7


The past trends show that the inventory turnover ratio has been fairly good. It has been increasing from 18 to 1 which implies that the company is utilizing its resources at an optimum level. It begins declining at a minimal rate in the next two years but these could be a result of a decline in the world economy due to some mishaps. This could also be a result of non-moving inventories or having excessive stocks of inventories. One can conclude that this company has a good turnover ratio and hence its asset management is efficient.


RECIEVABLE TURNOVER RATIO


This ratio measures how much of the sales are on credit and is calculated by diving the net credit sales by the average receivables.


RTR = Net Credit Sales/Average Receivables


Year Receivable Turnover Ratio


18 .7


1 .


000 1.56


001 1.6


00 1.54


In the years 18 and 1 the company has a high receivable turnover ratio which implies that the resources and inventories are being converted to cash more frequently. In the next three years BMW had introduced a new credit policy of easy financing due to which there has been a decline in the ratio. This has been a result of offering credit for longer periods ( financing cars for -4 years) and a fear of creditors not paying the payments on time.


FIXED ASSETS TURNOVER RATIO


The fixed assets turnover ratio measures how effectively the firm uses its plant and equipment. It is the ratio of sales to fixed assets.


Fixed Assets Turnover Ratio = Sales/Net Fixed Assets


Year Fixed Asset Turnover Ratio


18 4.1


1 .


000 4.55


001 .08


00 .5


After reviewing the past financial statements and calculating the fixed asset turnover ratio one can notice that there is an increase in the turnover ratio between 18 and 000. This shows that the asset utilization was efficient. This could be because the inventories were moving faster. After the September 11 incident there has been a constant decline in sales and hence the ratio has become lowers. This is because there was les demand, there was high inflation and they had more than the required amount invested in fixed assets.


ANALYSIS OF FINANCIAL LEVERAGE


The extent to which a firm uses debt financing or financial leverage has three important implications (1) by raising funds through debt, stockholders can maintain control of a firm while limiting their investment. () Creditors look to the equity or owner supplied funds to provide margins of safety. () If the firm earns more on investments financed with borrowed funds then it pays in interest, the return on the owner’s capital is leveraged.


DEBT � EQUTIY RATIO


Debt � Equity Ratio = Long Term Debt/ Stockholders Equity


Year Debt-Equity Ratio


18 1.1


1 .64


000 1.6


001 1.6


00 1.15


The debt-equity ratio has been fairly constant through the years 18 and 00. The company has had its ups and downs but its ability to pay off debts has been more or less the same and hence we can conclude that there is sufficient protection to the creditors.


DEBT RATIO


The ratio of debt to total assets, generally called the debt ratio measures the percentage of funds provided by the creditors.


Debt Ratio = Total Debt/ Total Assets


Year Debt Ratio


18 .56


1 .5


000 .65


001 1.0


00 .57


The past trends of the Debt � Ratio shows that company has been financing 50% of its assets from financial institutions and the remaining 50% comes from the stock holders. Since this ratio has been more or less the same for all the years one can say that its financial position is pretty strong.


INTEREST COVERAGE RATIO


A ratio whose numerator includes all cash flows available to meet fixed financial charges and whose denominator includes all fixed financial charges.


Interest Coverage Ratio = EBIT/Interest Expense


Year Interest Coverage Ratio


18 .47


1 1.4


000 0


001 0


00 0


In the year 18 the interest coverage ratio is below one which implies that the company’s ability to pay interest wasn’t good. Same goes for the year 1 where its ability to pay interest was doubtful. These were the only years the company’s financial leverage was low. In the next years they had no interest expense which implies that the company had not much debt financing and hence they didn’t have to pay any interest.


ANALYSIS OF PROFITABILITY


A group of ratios that shows the combined effects of liquidity, asset management, and debt on operating results. Profitability is the net result of a number of policies and decisions. They include the profit margin on sales, the basic earning power ratio, the return on total assets and the return on common equity.


GROSS PROFIT MARGIN RATIO


This ratio helps calculate the percentage of gross profit on sales.


Gross Profit Margin Ratio = (Gross Margin/Net Sales)100


Year Gross Profit Margin Ratio


18 16.04%


1 16.40%


000 .70%


001 5.0%


00 5.40%


After reviewing the past 5 years financial statements it is clearly evident that the company has been making a constant increase in profits. This implies that the percentage of gross margin on sales has been increasing constantly and the company is making a good percentage of profits.


PROFIT MARGIN RATIO


This ratio measures net income per dollar of sales; it is calculated by dividing the net income by sales.


Profit Margin Ratio = (Net Income/Net Sales)100


Year Profit Margin Ratio


18 1.4%


1 -7.%


000 .5%


001 4.85%


00 4.78%


On the average the company’s profit margin ratio has been increasing constantly from 18 to 00. This implies that there is a good amount of profit generated from the sales. Further this says the cost of production is being managed well and is not very high and the sales have also been good.


RETURN ON ASSETS


The ratio of net income to total assets measures the return on total assets (ROA) after interests and taxes.


Return on assets = (Net Income + Interest Expenses)/Average Assets


Year Return on Assets


18 .6%


1 -5.47%


000 .45%


001 .64%


00 .64%


After reviewing the past 5 years financial statements and calculating the return on assets has been increasing. The high return results is because of the companies high basic earning power plus the low interest costs resulting from the below average use of debt, both of which causes its net income to be relatively high.


RETURN ON STOCKHOLDERS EQUITY


The ratio of net income to stockholders equity; measures the rate of return on stockholders investment.


Return on stockholders equity = (Net Income/ Average Stockholders Equity)100


Year Return on Stockholders Equity


18 7.17%


1 -6.5%


000 1.81%


001 17.%


00 14.56%


Stockholders invest to get a return on their money and this ration tells us how well they are doing in an accounting sense. BMW percent return is pretty high between 18 and 00. This is because of the company’s efficient use of debt.


RETURN ON COMMON EQUITY


The ratio of net income to common equity; it measures the rate of return on common stockholders investment.


Return on Common Equity = ((Net Income � Preferred Dividend)/Average Common Stock)100


Year Return On Common Equity


18 7.17%


1 -6.5%


000 4.6%


001 11.01%


00 14.56%


BMW percent return is pretty high between 18 and 00. This is because of the company’s efficient use of debt. This implies that the common stock holders are kept happy because they are getting good returns on the money that has been invested. All in all the company’s profitability is on the rise.


EARNINGS PER SHARE


This ratio measures how much the investors have earned on the par value of the common stock.


EPS = ((Net Income � Preferred Dividends)/No. Of Outstanding Common Stock)100


Year EPS


18 7.7%


1 -40.77%


000 1.7%


001 1.8%


00 .7%


CONCLUSION


AVERAGE RATIO DECISION





Liquidity









































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