Accountancy Project

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The project in accountancy on BMW

The history of BMW

BMW (Bayerische Motoren Werke) is a German


multinational manufacturer of luxury vehicles and
motorcycles headquartered in Munich, Bavaria, Germany.
Founded in 1916 as a manufacturer of aircraft engines, the
company has since expanded to become one of the world's
leading premium suppliers of automobiles, motorcycles,
and mobility services.

BMW Historyical background


BMW has its roots in the early 20th century, when Germany was a major
producer of aircraft engines. In 1916, Karl Rapp founded Rapp
Motorenwerke, which later merged with the company's largest shareholder,
the Rapp Motorenwerke, to become Bayerische Motoren Werke (BMW).

During World War I, BMW produced aircraft engines, including the


famous BMW IIIa engine. After the war, the company struggled to adapt to
the post-war economy, but in the 1920s, it began to produce motorcycles
and cars.
BMW's early cars were based on licensed versions of British models, but
in the 1930s, the company began to develop its own engines and designs.
During World War II, BMW produced aircraft engines and motorcycles for
the German military.

After the war, BMW was forced to cease production and was eventually
taken over by the British. In the 1950s, the company began to rebuild and
introduced its first post-war car, the BMW 501

Throughout the 20th century, BMW continued to grow and develop,


introducing new models and technologies, including the iconic BMW 2002
and the M1 sports car. Today, BMW is one of the world's leading premium
automobile manufacturers

.
BMW Executive Profile Summary

The current CEO of BMW is Oliver Zipse,


who has been in the position since August
2019. He has spent his entire professional
life at BMW AG and holds a degree in
mechanical engineering from the
Technische Universität Darmstadt. Zipse
also graduated from the Kellogg-WHU
Executive MBA Program.
Other notable executives at BMW include:
•Harald Krüger: Former Chairman of the
Board of Management (2015-2019)
•Stefan Kramer: Executive Vice
President & CFO for BMW of North
America
•Sebastian Mackensen: President & CEO
for BMW of North America and head of
BMW Group Region Americas
The BMW Group has a diverse executive
team with various backgrounds and
expertise.

Understanding Statements. Definition and Goals

Financial statements are documents that give a summary of a


companys financial transactions and status during a certain
timeframe in accordance with accounting rules.They contain
reports like the Balance Sheet, Income Statement (Profit and Loss
Statement) Cash Flow Statement and the Statement of Changes in
Equity.These papers offer a detailed look, at a companys financial
condition, performance and cash flow. They play a role for
stakeholders to evaluate profitability, liquidity, solvency and overall
financial performance.

Goals;

Financial data disclosure is essential in helping stakeholders, like


investors and analysts gain insight into a companys health and
performance to guide their decision making process accurately
and effectively.

Investors and creditors rely on statements to make important


decisions regarding investment opportunities and strategic
business plans.

Evaluate Profit Margins and Cash Flow Situation. These metrics


help individuals assess how effectively a business can earn profits
and sustain cash flow to cover expenses and commitments.

Financial statements play a role, in ensuring that businesses


adhere to legal regulations and accounting standards to maintain
transparency and ethical operations.

To draw in investors trustworthy financial reports give investors


the assurance needed to invest by showcasing the firms stability
and opportunities for growth.

Financial Statement Analysis: By the end of this treatment, the


reader should be clear on the meaning of mean, median,
mode and range, as well as the objectives behind the use of
each measure.

Meaning: Financial statement analysis refers to the process


of utilizing a company’s financial statements in order to
assess its performance and solvency. These statements are
the Balance Sheet, Income Statement and Cash Flow
Statement interpretation forms part of this process. They
include: profitability, solvency and liquidity, depending with the
bills of different users of the financial statement. Techniques
such as, ratio analysis, trend analysis and comparative
analysis are applied to obtain a more advanced understanding
of the financial position of the particular company and the
general business performance.

Objectives:
1. Evaluate Financial Performance: Another applied technique in
analysis of financial statements aids in determination of the
level at which a firm is capable of generating revenues and
managing costs in order to have positive profitability and
operational performance.
2.
3. Assess Financial Position: It provides information on a
company’s strength and weaknesses, and its ability to fulfil
long term obligations as they provide an outlook of the
company’s assets and liabilities and equity.
4. Aid in Decision-Making: The main users of the financial
analysis include investors, creditors and the management in
enhancing their investment, lending and business decisions,
respectively.

5. Identify Strengths and Weaknesses: They assist in finding


sectors where institutions perform well and others that may
be facing challenges hence provide a platform for developing
a sound wake and therapy respectively.

6. Predict Future Performance: Hence, financial statement


analysis provides an understanding of the future performance
as well as cash flows to support the long-term business
strategies.

7. Ensure Compliance: The analysis also gives an assurance


that a company operates in compliance with accounting
standards, the legal regulations and provides credible and
ethical financial reports to both internal and external
stakeholders, thus, improving their trust in the company.
.
Analysis tools of financial statements

Financial statement analysis employs different tools and factors


that help in the interpretation of business’ financial statements.
They act as tools of assessing the company’s performance, to
assess the financial strength as well as to make business
decisions. The most commonly used tools include:The most
commonly used tools include:

Ratio Analysis: Ratio analysis entails coming up with an analysis


on different ratios so as to examine various features of the
company’s performance. Key categories of ratios include:Key
categories of ratios include:

Liquidity Ratios (e. g. , Current Ratio, Quick Ratio): They indicate a


company’s capacity in honouring its short-term financial
commitments.
Profitability Ratios (e. g. , Gross Profit Margin, Return on Equity):
These show how well a firm is in a position to earns profit from its
operations.
Solvency Ratios (e. g. , Debt-to-Equity Ratio): These evaluate the
solvency of a company to pay about debts in long run.
Efficiency Ratios (e. g. , Inventory Turnover Ratio): They establish
how the organizational assets are being managed by the firm.
Trend Analysis: Trend analysis therefore refers to an analysis of
financial data over a period of time in an effort to detect trends. It
facilitates in knowing whether a particular company’s performance
is getting better, worse, or stagnant with time. This tool is very
important in predicting future performance from past data.

Comparative Financial Statements: A comparative balance sheet


provides data relating to the specific period while a comparative
income statement shows data for various periods. This makes it
possible to do comparisons of various periods in a financial cycle
to identify the changes in the revenues, expenses, assets and
liabilities. It shows or reveals one section or another for
development or potential problem in the future.

Common-Size Analysis: In this form of analysis, the values of the


items of the income statement are stated as a percentage of a
selected figure such as total assets or sales. It is convenient to
compare similarly constructed companies or to watch changes in
structure of a singular company over several time points.

Cash Flow Analysis: Cash flow analysis therefore concentrates on


the generation of cash and the overall position of an organisation
regarding cash. Due to the features of preparation and distribution
of the Cash Flow Statement, the latter can help the stakeholders to
evaluate the effectiveness of the operating, investing, and financing
activities of a company and see the amount of cash that is
available to a company to pay for its liabilities.

Tools of Comparative Financial Statement Analysis Comparative


balance sheets and income statements, therefore, show a
company’s financials data in side-by-side columns which permit
easier comparison from one period to the next.

The main tools used for analyzing comparative financial


statements include: This comprised the following phases:

Horizontal Analysis: Horizontal analysis engages the use of


percentage change on the figures presented in financial
statements sourced from different periods, for instance, revenues,
expenses, assets and liabilities. This enables one to monitor trends
of growth or decline over some time. For instance, assuming that
the previous year’s revenue was $100, 000 and the current year is
$120, 000 then the percentage increase is 20%. 2. Year-over-Year
(YoY) Comparison:

In the definition of horizontal analysis it is mentioned that year


over year comparison is a certain type of horizontal analysis in
which balanced statements for the same period of different years
are compared which means that certain balance sheet of Q1 2023
is compared with a certain balance sheet of Q1 2022. It may be of
great benefit to business organizations that encounter variations in
their activities throughout the year, or business trends that occur
annually, like the sales cycle. 3
. Absolute Change Analysis: This tool focuses on the difference
between two numbers on the company’s comparative statements.
It differentiates actual dollar increments from one period to
another, not percentages, from which one can easily spot
considerable swings of specific trends including revenue, costs or
net profit. 4. Percentage of Increase or Decrease: As well as
absolute changes, the changes in percentages for individual items
of the financial statements facilitate the evaluation of the scale of
changes. This tool can be used to identify where there is most
gains or loss in a given period of time.

Common-Size Comparative Statements: In the common-size


comparative statements, financial figures are stated as a
proportion of a selected figure generally the total assets or net
sales. This assists in comparing firms that are of different sizes, or
comparing the company’s performance in a period with another in
the other different scale without being influenced by the absolute
numbers. To get a picture of net profit as a percentage of sales,
you divide net profit to total sales Net profit in this context is
50,000 rupess while total sales stand at 200000 rupress Therefore,
net profit as a percentage of sales is 25%. This is useful in
comparing the profitability at a given period irrespective of the
actual sales There are others that assist users in determining the
trend, financial performance analysis and decision making based
on the past performances.\

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