Financial Analysis and Business Analytics Project on BMW Group

This report presents a business analytics project focused on the BMW Group, utilizing financial data from 2013-2017. It includes valuation analysis using dividend discount model, residual income valuation, and free cash flow method, alongside ratio analysis for assessing financial performance. The report identifies challenges related to operational efficiency, technological changes, and debt levels. Strategies for improvement are proposed, emphasizing better data analysis, cost efficiency, and improved liquidity management. The analysis provides a comprehensive overview of BMW Group's financial standing and potential areas for strategic enhancement. Desklib offers a platform for students to access similar solved assignments and past papers.

Running head: BUSINESS ANALYTICS PROJECT
Business Analytics Project
Name of the Student:
Name of the University:
Author’s Note:

1BUSINESS ANALYSTICS PROJECT
Executive Summary
The aim of the report is to conduct an analysis on the BMW Group Company where the
financial data for the company from the trend period 2013-2017 was taken into consideration and
relevant analysis was done based on the same. There were various valuation performed for
valuing the intrinsic share price of the company through the application of dividend discount
model, residual income valuation and free cash flow method. Several other quantitative
assessment tools like ratio analysis was also performed for analysing the financial performance
of the company.

2BUSINESS ANALYSTICS PROJECT
Table of Contents
Introduction......................................................................................................................................3
Discussion........................................................................................................................................3
Information System.....................................................................................................................3
Company’s Current Problem.......................................................................................................4
Ratio Analysis..............................................................................................................................4
Valuation of Company.................................................................................................................7
Strategies and Improvement........................................................................................................9
Conclusion.....................................................................................................................................10
References......................................................................................................................................11

3BUSINESS ANALYSTICS PROJECT
Introduction
The company that was selected for the assignment was BMW Company and the financial
analysis of the same has been applied for the financial analysis of the company. The financial
data for the company from the year 2013-2017 was taken into consideration for the purpose of
valuation of the company. The analytical tool that has been applied for the valuation purpose and
other data analysis was Microsoft Excel Tool. There were various valuation performed for
valuing the intrinsic share price of the company through the application of dividend discount
model, residual income valuation and free cash flow method. The analysis of the data including
the credibility and authenticity of the data was taken into consideration while evaluating the
report (Laudon and Laudon 2015).
Discussion
Information System
Information system refers to examining the study of complementary networks of various
types of hardware’s and software’s that the people applies for collecting, filtering, processing
and creating useful database for the company for the purpose of applying the same in the
operations of the company (Wilder and Ozgur 2015). The information’s and data for the report
was collected from the annual report of the company where necessary data and information’s
was collected and applied for the purpose of analysis. Information system are interrelated that
helps in collecting, processing and disseminating the information’s for making important
managerial decisions, coordination and analysis of the company. The data collected and analysed
for the purpose of valuation should be taken into consideration for valuing the company. The

4BUSINESS ANALYSTICS PROJECT
BMW Company applies various information system for making important management financial
decisions and operations of the company (Vidgen, Shaw and Grant 2017).
Company Problem
The current problem of the company is primarily with the operational efficiency and the
utilisation of the assets of the company. Frequent technological changes and up gradation has
been the key challenge for the company. Data analytics involves frequent application of multiple
data and changes that the operations of the company should involve for the purpose of analysis.
The company currently manages the data and other crucial operations of the work with integrated
data and software’s that help them in realizing the needs and application of the same (Dutta and
Bose 2015). While analysing the financial position of the company it was also estimated that, the
liquidity position of the company will be stable but the high amount of debt for the company
would materially increase the financial risk of the company (Schoenherr and Speier‐Pero 2015).
The efficiency of the company is also dependent on the various strategies deployed by the
company. The company also suffers from different economic and environment related problems
in the field of global carbon emissions. Disrupted supply from the suppliers of the company
could be the other key reason for problems faced by the company. However, there are still
various other factors that should be taken into consideration for the purpose of analysis and
evaluation of the company.
Ratio Analysis
Ratio Analysis for the company was done by taking the financials of the company into
consideration for the purpose of evaluation. The ratio analysis for the company was done for a
period of five years by taking the financials of the company into consideration. The net
profitability ratio for the company has fallen for the company in the trend period but the

5BUSINESS ANALYSTICS PROJECT
operating margin and the gross margin for the company has somewhat remained stable for the
company. The asset turnover ratio for the company has also remained volatile for the company.
Return on equity for the company has been volatile where the company used to report the
figures in the range of 15-16% but in the financial year 2017 the same was around 17% which
was much higher in the trend period (Annual Report 2017).
Figure 1: Return on Equity
(Source: BMW GROUP 2018)
The liquidity position of the company was found to be stable for the company but it is
essential that the company has the same within the industry comparison which is around 1.50
times where the liquidity ratio for the company was around 0.98 times (Annual Report 2017).
2013 2014 2015 2016 2017 Avg
13.5%
14.0%
14.5%
15.0%
15.5%
16.0%
16.5%
17.0%
17.5%
Return on Equity
2013 2014 2015 2016 2017
0.88
0.90
0.92
0.94
0.96
0.98
1.00
1.02
1.04
1.06
Liquidity Ratio

6BUSINESS ANALYSTICS PROJECT
Figure 2: Liquidity Ratio
(Source: BMW GROUP 2018)
The accounts payable turnover ratio for the company shows the average time taken by the
company for paying off the liabilities of the company and the same has been decreasing for the
company from around 44 days in the year 2013 to around 41 days in the year 2017 (Annual
Report 2017).
Figure 3: Accounts Payable Ratio
(Source: BMW GROUP 2018)
The accounts receivable turnover ratio shows the average time taken by the company for
collecting the due amount from the debtors of the company. The accounts receivable turnover
ratio for the company has been increasing for the company and which might not be a good
scenario for the company. The collection period was around 31 days in the year 2013 and the
same has been around 36 days in the year 2017 (Annual Report 2017).
2013 2014 2015 2016 2017
7.0
7.5
8.0
8.5
9.0
9.5
10.0
Accounts Payable Turnover

7BUSINESS ANALYSTICS PROJECT
Figure 4: Accounts Receivable Ratio
(Source: BMW GROUP 2018)
Valuation of Company
The valuation of the company was done by taking the financial data for the company
from the year 2013-2017 where various valuation models like Dividend Discount Model and
Free Cash Flow Model was taken into account for the purpose of the valuation of the company.
The forecasting was done for a sum of ten years where relevant data and analysis was taken into
consideration for the purpose of valuing the company. In the case of residual income valuation
the actual earnings of the company was taken into account and the same has been taken into
consideration for the purpose of the valuation of the company (Pearlson, Saunders and Galletta
2016).
Dividend
Valuation
Model
2018 2019
202
0
202
1
202
2
202
3
202
4 2025 2026 2027
Dividends
£23,
629.
32
-£
1,35
0.10
-
£2,8
28.8
2
-
£4,7
26.3
9
-
£7,1
44.2
9
£4,8
41.1
1
£5,0
83.1
6
£
5,33
7.32
£
5,60
4.19
£
5,88
4.40
PV of dividends
at end of 2018
20,5
47
(1,02
1)
(1,8
60)
(2,7
02)
(3,5
52)
2,09
3
1,91
1
1,74
5
1,59
3
1,45
5
PV of divs
during forecast
20,2
08
2013 2014 2015 2016 2017
0.0
10.0
20.0
30.0
40.0
Accounts Receivable
Turnover

8BUSINESS ANALYSTICS PROJECT
period
Terminal value:
Base dividend
for terminal
growth
5,88
4
Terminal
dividend growth
rate
5.00
%
PV of
dividends at end
of 2025
61,7
86
PV of
dividends at end
of 2018
15,2
73
PV of dividends
in arrears
£35,
480.
94
Number of
shares at end of
2018 601
Estimated value
per share
£
59.0
4
The value derived from the residual income valuation of the company was around £
59.04. The key factors that is the terminal growth rate of 5% and the discount rate of 5% was
taken into consideration for the purpose of the valuation of the company. The value derived from
the dividend discount model was around £ 59.04 which has been the same as the residual income
valuation method for the company. The 5% terminal growth rate and the 15% discount rate was
applied while valuing the company and the same has been taken into consideration for the
purpose of valuing the company.
Residual
Income
Valuation
Model
Actual earnings
£
6,62
5.35
£
7,15
8.00
£7,6
30.0
0
£8,1
30.4
2
£8,6
60.3
2
£9,0
77.9
3
£9,5
31.8
2
£10,
008.
41
£10,
508.
83
£11,
034.
28
Expected 8,11 5,56 6,84 8,41 10,3 12,7 13,3 14,0 14,7 15,4

9BUSINESS ANALYSTICS PROJECT
earnings (r * SE) 7 6 2 1 40 10 46 13 14 50
Abnormal
earnings
-£
1,49
1.45
£
1,59
1.79
£
787.
59
-£
280.
82
-
£1,6
79.4
4
-
£3,6
32.5
3
-
£3,8
14.1
5
-£
4,00
4.86
-£
4,20
5.10
-£
4,41
5.36
PV of AE at end
of 2015
-
£1,2
96.9
2
£1,2
03.6
3
£51
7.85
-
£16
0.56
-
£83
4.98
-
£1,5
70.4
4
-
£1,4
33.8
8
-
£1,3
09.2
0
-
£1,1
95.3
5
-
£1,0
91.4
1
Book value of
equity at end of
2015
£54,
112.
00
PV of AE during
forecast period
(7,17
1)
Terminal value:
Base AE for
terminal growth
(4,41
5)
Terminal
growth rate for
AE
5.00
%
PV of perpet
AE at end of
2027
(46,3
61)
PV of perpet
AE at end of
2018
(11,4
60)
Estimated
market value (In
million)
£35,
480.
94
Number of
shares at end of
2018 601
Estimated value
per share
£
59.0
4
Strategies and Improvement
Various strategies and improvement can be made for improving the financial
performance of the company and the operations of the company. Application of better and
managed data analysis for the purpose of operations of the company. The company should also
implement various strategies and factors that should be in contrast to the performance of the
company (Wager, Lee and Glaser 2017). The operations of the business has been growing

10BUSINESS ANALYSTICS PROJECT
rapidly and with the growing business and competition in the industry it is essential for the
company to identify various business and macro-economic conditions that are influencing the
operations of the company. The suppliers, technology, government policies and the financial
performance of the company are some of the key areas where management strategies are
involved for enhanced results and sustainability in the operations of the business.
The strategy decided by the management of BMW Company should on an overall basis
result in operational and financial efficiency of the business. There are several key challenges
that the company faces in terms of rising operating cost and declining net profitability of the
company which may in term impact the overall margin of the company. It is recommended that
both technology and cost efficiency plans should be decided by the company to bring efficiency
in the business. The liquidity of the company on the other hand side should be efficient so that
the company is able to well pay off the current obligations of the company within the stipulated
time. The collection period of the company should also be improved by the company so that the
credit risk of the company gets reduced at financial the performance of the company stays
unaffected.
Conclusion
Still various other factors should be taken into consideration for the purpose of analysis
and evaluation of the company. The analysis of the company were done on the basis of
information of the company and the various ways deployed by the company for managing the
data of the company. The operations of the BMW Company is spread globally and the same
operates under different business conditions and environment thus it is necessary that various
tools and factors are applied. Attaining consistent results and aligned results of the company with

11BUSINESS ANALYSTICS PROJECT
the strategic objective of the company has been the key focus of the company and the same is
recommended.