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Corporate finance: Financial analysis of Ford and BMW

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  1. Introduction.
  2. Ford's financial analysis.
    1. The liquidity ratios.
    2. Current ratio.
    3. Net working capital.
    4. Net working capital to total assets ratio.
    5. The profitability ratios.
  3. BMW financial analysis.
    1. The liquidity ratios.
    2. The efficiency ratios.
    3. The profitability ratios.
  4. Conclusion.
  5. Bibliography.

This report will deal with the financial analisys of two main competitors of car market. Effectively, Ford and BMW (Bayerish Motoren Werke AG) are two important car manufacturers in the world. Even if they are competing on the same market, we can't say that these two manufacturers are directly in competition. In fact,the two firms are not targetting the same consumer. Ford is a popular brand contrary to BMW which is producing more exclusive cars of higher quality. BMW sells quite expensive cars contrary to Ford which has always produced low price cars. We can remember the fact that Ford was the first car manufacturer to process through mass production with the Ford "T" in 1913. This production process was a great invention which changed the industry world. Ford is present wordwide and is one of the most famous brand of the world. Ford has a very huge range of products because it proposes adapted products to the different markets. For example, Ford is selling pick-ups (long cars) in the US market which represent the main part of its sales. In Europe, Ford proposes small cars at low prices to attract people. Pick-up are not adapted to the European consumers. Ford's best sales in Europe are the "Fiesta" models, which are small cars with poor motors (contrary to the US market where people are fond of big motors, even if it is changing because of the rise of the petrol prices). Contrary to Ford, BMW hasn't any specific offer for different markets. BMW has a unique range of product. This range is quite wide because BMW has diversified its segment market since the end of the 90's. BMW has really grown during the 90's because of its attractive cars which are creating passion among the potential consumers. BMW is the favorite generalist brand of the world (cf: L'automobile Magazine's study). BMW has a great image of quality and sport. Thanks to this notoriety, BMW has become very successful and profitable, what has increased its offer.

[...] It represents the capacity of Ford to pay its liability only with the quick avaible money. The efficiency ratios These ratios represent the efficacity of the use of the assets. It calculates if the investments are productive or not. Asset turnover ratio = sales / average total assets = 149,3533 / (232,9728 + 214,4861) / 2 = 149,3533 / 223,72945 = 0,66 This ratio compares the revenue of the sales with the capital invested in assets. These figures means that every Euro invested in the assets generates 0,66 Euros. [...]

[...] The net profit margin ratio represents of the revenues which is very low (in addition, we can add that these figures seem to be far from the reality because they are published directly by Ford . Concerning the R.O.E ratio, we can say that it constitutes one of the main reason of the difference of profitability between the two firms. Effectivelly, if we make a zoom on Ford's past investments, we see that the American firm has purshased two English car manufacturers. [...]

[...] In addition, these figures can't be very high because car manufacturers are very asset intensive (sales are directly related to investments). It is a very important point that we will discuss in the global conclusion. It is one of the main difference between BMW and Ford. Return on equity = net income / average equity = 2,2388 / ((16,9714 + 17,5113) / = 2,2388 / 17,24135 = 0,12985 = Higher is the return on equity, more the firm is able to produce internal cash flow. [...]

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