MBA Financial Management: Comprehensive Ratio Analysis of Beiersdorf

This report presents a comprehensive ratio analysis of Beiersdorf, a multinational personal care and adhesive products company. The analysis covers various aspects of financial performance, including profitability, liquidity, solvency, and efficiency, based on the company's financial statements. The report begins with an introduction to Beiersdorf, followed by a discussion of accounting ratios and ratio analysis. The core of the report involves the calculation and interpretation of key ratios, such as profit margin, return on assets, current ratio, quick ratio, total debt ratio, debt-equity ratio, inventory turnover, and total assets turnover. Each ratio is calculated and analyzed to assess Beiersdorf's financial health. The report concludes with a summary of the findings, offering insights into the company's strengths and weaknesses, and providing recommendations for improvement, such as focusing on profitable products, reducing inventory, and improving asset management. The analysis is conducted to fulfill the requirements of an MBA Financial Management assignment, FIA6002.

Running Head: Ratio Analysis of Beiersdorf
Ratio Analysis of Beiersdorf
Name of the Student
Name of the University
Author Note

1Ratio Analysis of Beiersdorf
Table of Contents
Introduction................................................................................................................................2
Discussion..................................................................................................................................2
Ratio.......................................................................................................................................2
Ratio Analysis........................................................................................................................3
Calculation of the ratios.........................................................................................................4
Conclusion and Recommendation..............................................................................................8
References..................................................................................................................................9
Appendices...............................................................................................................................11

2Ratio Analysis of Beiersdorf
Introduction
Beiersdorf is a multinational company which is engaged with the manufacturing of
personal care products as well as adhesives which are pressure sensitive. It was founded in
the year 1882 by a pharmacist named Paul Beiersdorf and later in the year 1890 it was sold to
Oscar Troplowitz. This company invented the modern skin care products almost 130 years
ago and are engaged in innovating those products on a continuous basis. Their global brands
include Hansaplast, NIVEA and Eucerin which are responsible for making more than 500
million customers feel good about their skin in over 70 countries. They have their operations
across Middle East and North Africa andtheir brand holds the market position of number one.
Beiersdorf is successfully reinforcing their positions by growing strategically in the selected
markets and convincing their customers by providing a range of innovative products on a
daily basis. The success of the company is largely dependent on the intensive research, the
efficient market strategies, technologies of the state of the art and above all the dedicated as
well as the competent employees (Xia, 2018).
Discussion
Ratio
The term accounting ratio is termed as an important sub-set of the financial ratios and
are used for the purpose of measuring the profitability and the efficiency of the company
based on the financial reports of the company. The accounting ratio helps in expressing the
relationship between one data-point of accounting with another data-point and is also termed
as the basis of ratio analysis (Halbouni & Yasin, 2016). An accounting ratio helps in making
a comparison of the financial statements of the business organizations and these financial
statements include balance sheet, income statement and cash flow statement. The
fundamentals of the company can be evaluated with the help of these ratios and at the same

3Ratio Analysis of Beiersdorf
time it also helps to provide an information about the performance of the company over the
last quarter or the last financial year. The accounting tools have been considered as an
effective tool for the purpose of analysis which is used by the management (Subburaj, 2019).
These are also used by the creditors, shareholders and other stakeholders of the company. On
the other hand, the quantitative relationship which is used for the purpose of decision making
is indicated by the accounting ratios. It helps in the formation of a basis for making
comparison between inter-firm and intra-firm comparisons. Furthermore, in order to make the
ratios effective they are often compared with the ratios of the base period or with the standard
ratios or sometimes with the average ratios of the industry. The accounting ratios are
classified in a number of ways in order to get suited with a particular purpose. There are
different kinds of ratios which are used for different kinds of situations. These classifications
include- classification according to the sources which is again classified as- the balance sheet
ratios, the profit and loss account ratios, combined ratios or inter statement ratios. The next
classification includes classification according to nature and this again sub divided into-
liquidity ratios, leverage ratios, turnover ratios and profitability ratios. These ratio helps in the
analysis of the short-term financial position of the business (Kimmel, Weygandt & Kieso,
2018). Therefore, these help the shareholders and the debenture holders as well as the long
term creditors to utilize these ratios for the assessment of their ability to pay dividend and the
interest charges.
Ratio Analysis
The financial statements of the business organizations contain the information about
the operational efficiency, profitability and the liquidity of the business organization and the
ratio analysis has been termed as a quantitative method for the purpose of gaining insight
about the financial information of the company. Therefore, the ratio analysis is the
cornerstone of the fundamental analysis. However, there are various types of ratios which are

4Ratio Analysis of Beiersdorf
used by the outside analysts for the purpose of assessing the companies (Uechi, et al., 2015).
On the other hand, the corporate insiders rely less on these ratios since they cannot access in
the more detailed operational data about the company. The fundamental and quantitative
analysis which are dealt by the analysts and the investors are referred to the ratio analysis and
the evaluation of the financial performance and financial health is done with the help of ratio
analysis after using the current as well as the historical financial statements (Zolfani, Yazdani
& Zavadskas, 2018). At the same time, the data which are retrieved from the financial
statements are used to compare the financial performance of the company over the time and
to assess whether the company is improving or deteriorating to stand with the industry
average. Therefore, the ratio analysis is helpful for making an assessment of the performance
of the companies which operate in the same industry or same sector (Tayeh, Al-Jarrah &
Tarhini, 2015). Thus, the comparison of the companies with their peers or in its industry
averages is a useful application for the ratio analysis and the calculation may give positive or
negative result. However, as the companies in similar industry have similar types of capital
structures along with their investments in the fixed assets the ratios are supposed to be
substantially similar and different ratios indicate any potential issue or other issues related to
underperformance (Alexander, 2018).
Calculation of the ratios
Profitability
The profitability ratios have been described as a class of financial metrics which are
used for making an assessment of the ability of a business organization to generate revenue.
In order to understand the profitability of Beiersdorf profit margin and return on assets are
measured (Ahmed, 2015).

5Ratio Analysis of Beiersdorf
Profit margin has been considered as one of the commonly used profitability ratios
which helps to assess the degree of the business activities for making money. Therefore, it
helps to understand the percentage of sales which has turned into profits. On the other hand,
the return on assets helps to understand the profitability of a business organization relative to
the total assets of the business. It gives an idea to the investors, analysts, managers to
understand the efficiency of the management of the company about its way of using the
assets (Egam, Ilat & Pangerapan, 2017).Here, the calculation shows the profit margin of
20.92 percent during the financial year 2018 and the return on assets has been calculated as
4.25 percent for the year ended 2018.
Profitability Ratios:
Net Income 264
Revenue 1262
Profit Margin (Net Income/ Revenue) 20.92%
Net Income 264
Total Assets 6218
Return on Assets (Net Income/Total Assets) 4.25%
Liquidity:
The ability of a business organization to pay off their debt obligations without raising
any external capital is used with a financial metric. This financial metric has been termed as
the liquidity ratio. It also helps to assess the margin of safety with the help of current ratio
and quick ratio (Garanina & Belova, 2015). Similarly, the liquidity of this company has been
measured with the help of current ratio and quick ratio.
The current ratio has been defined as a liquidity ratio which helps to measure the
ability of a business firm to pay the short term obligations within a year. This ratio helps the
investors as well as the analysts to know about the maximising capability of the current assets

6Ratio Analysis of Beiersdorf
of a business organization. Alternatively, the quick ratio is the indicator of the short-term
liquidity position of the company and measures the ability of a firm to meet its obligations
with the liquid assets (Egam, Ilat & Pangerapan, 2017). Here, the current ratio has been
calculated as 0.733 in the year 2018 and quick ratio has been calculated as 0.732 for the year
2018.
Liquidity Ratios:
Current Assets 1963
Current Liabilities 2678
Current Ratio (Current Assets/ Current Liabilities) 0.73301
Current Assets- Inventory 1961
Current Liabilities 2678
Quick Ratio ( Current Assets- Inventory/ Current Liabilities) 0.73226
Solvency:
The prospective business leaders often use the solvency ratio as a key metric for the
purpose of measuring the ability of the business enterprise to meet its debt obligations.
Furthermore, the solvency ratio indicates whether the company has enough cash to meet its
short term and long term liabilities (Satryo, Rokhmania & Diptyana, 2017). The solvency of
Beiersdorf has been measured with the help of total debt ratio and debt equity ratio.
The total debt ratio has been defined as the ratio of total debt to total assets and it is a
financial ratio which helps to measure the extent of the leverage of the company. It can also
be interpreted as the proportion of the assets of the company which has been financed by
debt. On the other hand, debt equity ratio is an important metric used in the corporate finance
which helps to measure the degree whether the company finances its operations through debt
or with owned funds wholly (Egam, Ilat & Pangerapan, 2017). Here, the total debt ratio has

7Ratio Analysis of Beiersdorf
been calculated as 0.569 in the year 2018 and in the same year the debt equity ratio has been
calculated as 0.979.
Solvency Ratios:
Total Assets- Total Liabilities 3540
Total Assets 6218
Total Debt Ratio (Total Assets- Total Liabilities/ Total
Assets) 0.56931
Total Debt 2678
Total Equity 2735
Debt Equity Ratio (Total Debt/ Total Equity) 0.97916
Efficiency
The efficiency ratio is used for the purpose of analysing the ability of a business
organization to use the assets and liabilities internally. The efficiency ratio helps in the
calculation of turnover of the receivables, the usage and quantity of equity, the repayment of
the liabilities and the normal use of the machinery and the inventory. This ratio helps in the
analysis of the short-term performance of the company which is being measured by the
analysts (Olesen, Petersen & Podinovski, 2015). Here, the efficiency has been evaluated with
the help of inventory turnover ratio and total assets turnover ratio.
The inventory turnover ratio helps to show how effectively the inventory is being
managed with the help of cost of goods sold with average inventory for a time period. This
ratio is also important for measuring the performance in terms of stock purchasing during the
year. Alternatively, the total assets turnover ratio help sin the measurement of the ability of
the company to generate sales from the assets after making a comparison between the net
sales and the average total assets (Egam, Ilat & Pangerapan, 2017). Here, the inventory
turnover ratio has been calculated as a time period of 145 times and total assets turnover ratio
as 0.202 in the year 2018.

8Ratio Analysis of Beiersdorf
Efficiency Ratios:
Cost of Goods sold 290
Inventory 2
Inventory Turnover (in times) 145
Sales 1262
Total Assets 6218
Total Assets Turnover 0.20296
Conclusion and Recommendation
From the above discussion it can be concluded that they have a good profit margin.
However, the return on assets is very poor which indicates inefficiency in the management of
assets. At the same time, they have a poor liquidity ratio which is not meeting the standards.
On the other hand, the solvency ratio is fairly average though 50 percent of the assets are
being financed by external borrowings. Lastly, they have an impressive inventory turnover
ratio but the asset turnover ratio is poor due to inefficient management of assets. Therefore,
investment in this company can become a risk factor for the investors and if at all investments
are made then it should be made in small amounts and there are equal chances of profit as
well as loss.
Upon the analysis, for increasing the probability of organization it is important to
remove the unprofitable products from manufacturing and also further focusing the current
pricing strategy. Furthermore, it is important to reduce the inventory and overall direct cost
which has direct impact upon the gross margin. To improve the liquidity ratio, it is necessary
to take long term debt rather than short term debt. Also, it is necessary to control the
overhead expenses and also to get rid of useless assets so to increase the liquidity of
Beiersdorf. In improving the efficiency ratio, it can be recommended to increase the revenue
and at the same time to decrease the expenses.

9Ratio Analysis of Beiersdorf
References
Ahmed, I. E. (2015). Liquidity, profitability and the dividends payout policy. World Review
of Business Research, 5(2), 73-85.
Alexander, J. (2018). Financial planning & analysis and performance management. John
Wiley & Sons.
Egam, G. E., Ilat, V., & Pangerapan, S. (2017). Pengaruh Return on Asset (ROA), Return on
Equity (ROE), Net Profit Margin (NPM), dan Earning Per Share (EPS) terhadap
Harga Saham Perusahaan yang Tergabung dalam Indeks LQ45 di Bursa Efek
Indonesia Periode Tahun 2013-2015. Jurnal EMBA: Jurnal Riset Ekonomi,
Manajemen, Bisnis dan Akuntansi, 5(1).
Financial Reports. (2020). Beiersdorf. Retrieved 1 March 2020, from
https://www.beiersdorf.com/investors/financial-reports/financial-reports
Garanina, T. A., & Belova, O. A. (2015). Liquidity, cash conversion cycle and financial
performance: case of Russian companies.
Halbouni, S. S., & Yasin, A. (2016). Risk Disclosure: Empirical Investigation of UAE
Companies’ Compliance with International Accounting Standards. International
Journal of Business and Management, 11(8), 134.
Kimmel, P. D., Weygandt, J. J., & Kieso, D. E. (2018). Financial accounting: tools for
business decision making. John Wiley & Sons.
Olesen, O. B., Petersen, N. C., & Podinovski, V. V. (2015). Efficiency analysis with ratio
measures. European Journal of Operational Research, 245(2), 446-462.

10Ratio Analysis of Beiersdorf
Satryo, A. G., Rokhmania, N. A., & Diptyana, P. (2017). The influence of profitability ratio,
market ratio, and solvency ratio on the share prices of companies listed on LQ 45
Index. The Indonesian Accounting Review, 6(1), 55-66.
Subburaj, L. (2019). IMPACT OF ACCOUNTING RATIO ANALYSIS IN MAKING OF
MEANINGFUL BUSINESS DECISIONS. INNOVATIONS IN BUSINESS AND
MANAGEMENT, 193.
Tayeh, M., Al-Jarrah, I. M., & Tarhini, A. (2015). Accounting vs. market-based measures of
firm performance related to information technology investments. International
Review of Social Sciences and Humanities, 9(1), 129-145.
Uechi, L., Akutsu, T., Stanley, H. E., Marcus, A. J., & Kenett, D. Y. (2015). Sector
dominance ratio analysis of financial markets. Physica A: Statistical Mechanics and
its Applications, 421, 488-509.
Xia, Y. (2018). Financial Analysis of Beiersdorf Company.
Zolfani, S. H., Yazdani, M., & Zavadskas, E. K. (2018). An extended stepwise weight
assessment ratio analysis (SWARA) method for improving criteria prioritization
process. Soft Computing, 22(22), 7399-7405.

11Ratio Analysis of Beiersdorf
Appendices
Figure: Balance Sheet of Beiersdorf
Source: Financial Reports, 2020.
Figure: Income Statement of Beiersdorf
Source: Financial Reports, 2020.