Tuesday, August 27, 2019

Financial analysis of BMW and Kraft Foods Essay

Financial analysis of BMW and Kraft Foods - Essay Example The researcher states that the profitability ratios of both the companies depict that Kraft Foods has higher profitability in terms of high operating margin, net profit margin and return on equity. Besides, both the firms had maintained their current ratio above 1. With respect to interest coverage ratio, BMW had higher rank than Kraft Foods which indicates that it has strong financial strength in the industry. The current economic crisis of 2008 had impacted on the financial performance of BMW Group. Due to bad financial condition, the spending of customers had reduced considerably which impacted on the expenditure on vehicles. As a result, the automobile industry had faced drop in sales volume. BMW Group was also unable to evade the impact of financial crisis and therefore the group income had reduced by 5% in the year 2008 to 53,197 million Euros. As the international economy was recovering from the clutches of economic crisis by the end of the year 2010, BMW Group was able to rec over its financial position in the automobile market. The global automobile industry has also become stabilised to certain degree. In 2010, BMW Group had experienced severe increase in sales revenue by 19.3% than 2009 to 60,477 million Euros. Kraft Foods is a financially stable company with revenues of 40.4 billion USD in the year 2009. In the year 2009, the total value of net assets of the company was 25.9 billion USD. Despite bad economic conditions, the revenue of Kraft Foods was slightly affected. In 2007, the net revenue was 35,858 million USD which had increased to 41,932 million USD in 2008 (Kraft Foods Inc, 2010). Ratio Analysis Valuation Ratio Price-Earnings (P/E) Ratio Price-Earnings or P/E Ratio is the ratio of organisation’s share price with earning per share. From the analysis of BMW, it can be observed that the earnings per share of BMW Group had decreased considerably in the time of 2008 to 2009 to 0.49 Euro and 0.31 Euro and increased in 2010 to 4.91 Euro. His torically, the P/E ratio of BMW Group was strong and was always more than the industry average which is around 15-25. In the year 2007, the P/E ratio was below average i.e. 8.5 which had increased to 11.98 in 2010 (BMW Group, 2008; 2010). The price earnings ratio of Kraft Foods was

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