Volkswagen AGFinancial Analysis

Volkswagen AGFinancial Analysis

HamedAkramYoussef

Dr. Mowafak Moustafa

Road Map• Reasons for Financial Analysis.• Introduction of Volkswagen.• VW Competitive Vehicles.• Volkswagen Profitability Analysis.• Horizontal analysis of the Income Statement.• Vertical analysis of the Balance Sheet.• Ratios Comparison.• Conclusion.

Road Map• Reasons for Financial Analysis.• Introduction of Volkswagen.• VW Competitive Vehicles.• Volkswagen Profitability Analysis.• Horizontal analysis of the Income Statement.• Vertical analysis of the Balance Sheet.• Ratios Comparison.• Conclusion.

Reasons for Financial Analysis.

• To use financial statements to evaluate an organisation’so Financial performanceo Financial position.

• There are two key factors for business survivalo Intercompany basis (within the company itself)o Intercompany basis (between companies)o Industry Averages (against that particular industry’s averages

• There are three key factors for business survivalo Liquidityo Profitability o Solvency

Road Map• Reasons for Financial Analysis.• Introduction of Volkswagen.• VW Competitive Vehicles.• Volkswagen Profitability Analysis.• Horizontal analysis of the Income Statement.• Vertical analysis of the Balance Sheet.• Ratios Comparison.• Conclusion.

Introduction to Volkswagen• Volkswagen (abbreviated VW) is the original and

biggest-selling marque of the Volkswagen Group, which now also owns the Audi, Bentley, Bugatti, Lamborghini, SEAT and Škoda marques and the truck manufacturer Scania.

• Volkswagen means "people's car" in German, Its current slogan is Das Auto (in English The Car).

• Volkswagen operates worldwide, but core market is primarily Europe.

• In 2000 Volkswagen spent 3.1 Billion Euros to modernize their factories,

• Volkswagen's second-largest market China, spent 1.7 Billion Euros in the Chinese market, selling more than one million vehicles in 2008.

Volkswagen overview.• Volkswagen shares are primarily traded on the Frankfurt

stock exchange, listed under the symbol “VLKAY”.• In 2009 Volkswagen was the third biggest motor vehicle

manufacturer, with 6.29 million units delivered to customers, After Toyota and General Motors, and planning to go to No.1 in 2014

• Porsche and Volkswagen Group reached an agreement that they would merge in 2011.

Road Map• Reasons for Financial Analysis.• Introduction of Volkswagen.• VW Competitive Vehicles.• Volkswagen Profitability Analysis.• Horizontal analysis of the Income Statement.• Vertical analysis of the Balance Sheet.• Ratios Comparison.• Conclusion.

VW Competitive Vehicles

Volkswagen AG

Golf

JettaNew Beetle

Passat

PhaetonTouareg

Road Map• Reasons for Financial Analysis.• Introduction of Volkswagen.• VW Competitive Vehicles.• Volkswagen Profitability Analysis.• Horizontal analysis of the Income Statement.• Vertical analysis of the Balance Sheet.• Ratios Comparison.• Conclusion.

Year Sales Percent Change

2010 121,697.00 21.3%

2009 100,303.00 (8.4%)

2008 109,451.00 0.5%

2007 108,897.00 3.8%

2006 104,875.00 11.6%

2005 93,996.00 5.7%

2004 88,963.00 4.9%

2003 84,813.00 (2.5%)

2002 86,948.00 (1.8%)

2001 88,540.00

Volkswagen AG10 Year Total Sales Trend

€ Million

Volkswagen AG

10 Year Total Sales Trend Graph

2010 2009 2008 2007 2006 2005 2004 2003 2002 20010.00

20,000.00

40,000.00

60,000.00

80,000.00

100,000.00

120,000.00

140,000.00

Sales

€ Million

Volkswagen AG

10 Year Net Income Graph

2010 2009 2008 2007 2006 2005 2004 2003 2002 20010.00

1,000.00

2,000.00

3,000.00

4,000.00

5,000.00

6,000.00

7,000.00

8,000.00

Sales

€ Million

Road Map• Reasons for Financial Analysis.• Introduction of Volkswagen.• VW Competitive Vehicles.• Volkswagen Profitability Analysis.• Horizontal analysis of the Income Statement.• Vertical analysis of the Balance Sheet.• Ratios Comparison.• Conclusion.

Horizontal analysis of the Income Statements  2010 2009 Amount Percent

Revenue 121,697.0 100,303.0 21,394.00 21.3%

Other Revenue, Total 5,178.0 4,884.0 294.00 6.0%

Total Revenue 126,875.0 105,187.0 21,688.00 20.6%

Cost of Revenue, Total 105,431.0 91,608.0 13,823.00 15.1%

Gross Profit 16,266.0 8,695.0 7,571.00 87.1%

Selling/General/Admin Exp., Total 15,500.0 13,276.0 2,224.00 16.8%

Unusual Expense (Income) -10.0 -38.0 28.00 -73.7%

Other Operating Expenses, Total -865.0 -785.0 -80.00 10.2%

Operating Income 7,142.0 1,855.0 5,287.00 285.0%

Interest Income (Expense), Net Non-Opts. 715.0 705.0 10.00 1.4%

Income Before Tax 8,994.0 1,260.0 7,734.00 613.8%

Income Tax – Total 1,767.0 349.0 1,418.00 406.3%

Income After Tax 7,227.0 911.0 6,316.00 693.3%

Minority Interest -392.0 49.0 -441.00 -900.0%

Net Income Before Extra. Items 6,835.0 960.0 5,875.00 612.0%

Total Extraordinary Items 0.0 0.0 0.00

Net Income 6,835.0 960.0 5,875.00 612.0%

€ Million

Road Map• Reasons for Financial Analysis.• Introduction of Volkswagen.• VW Competitive Vehicles.• Volkswagen Profitability Analysis.• Horizontal analysis of the Income Statement.• Vertical analysis of the Balance Sheet.• Ratios Comparison.• Conclusion.

Vertical analysis of the Balance Sheet

Assets2010 2009

Amount Percent Amount Percent

Cash and Short Term Investments 24,171.00 28.1% 23,869.00 30.7%

Total Receivables, Net 44,134.00 51.4% 39,784.00 51.2%

Total Inventory 17,631.00 20.5% 14,123.00 18.2%

Total Current Assets 85,936.00 100.0% 77,776.00 100.0%

Property/Plant/Equipment, Total – Net 37,911.00 33.4% 34,947.00 35.2%

Goodwill, Net 3,410.00 3.0% 2,929.00 2.9%

Intangibles, Net 9,694.00 8.5% 9,977.00 10.0%

Long Term Investments 14,168.00 12.5% 10,928.00 11.0%

Note Receivable - Long Term 44,025.00 38.8% 37,606.00 37.8%

Other Long Term Assets, Total 4,249.00 3.7% 3,017.00 3.0%

Total Assets 199,393.00 100.0% 177,180.00 100.0%

€ Million

Road Map• Reasons for Financial Analysis.• Introduction of Volkswagen.• VW Competitive Vehicles.• Volkswagen Profitability Analysis.• Horizontal analysis of the Income Statement.• Vertical analysis of the Balance Sheet.• Ratios Comparison.• Conclusion.

Ratios Comparison

Highlighted Ratios

Debit/equity = Total Liabilities / Shareholders Equity

Account receivable turnover =Net Credit Sales / Average account receivable

Ratios Comparison

Road Map• Reasons for Financial Analysis.• Introduction of Volkswagen.• VW Competitive Vehicles.• Volkswagen Profitability Analysis.• Horizontal analysis of the Income Statement.• Vertical analysis of the Balance Sheet.• Ratios Comparison.• Conclusion.

ConclusionA high debt/equity ratio generally means that BMW has been aggressive in financing its growth with debt. This can result in volatile earnings as a result of the additional interest expense.

 A high Accounts Receivables Turnover ratio implies either that BMW operates on a cash basis or that its extension of credit and collection of accounts receivable is efficient.

A low Accounts Receivables Turnover ratio implies VLKAY should re-assess its credit policies in order to ensure the timely collection of imparted credit that is not earning interest for the firm.

Thank you