Profitability ratios are used to measure the performance of a company. The goal of every company is to increase revenue and generate profits. Thus, profitability ratios help generate information about the earnings capacity of a company.
The gross margin ratio of BMW was 20.08 in 2013 which went to 21.15 in 2014 and went down to 19.67 in 2015. This shows a slight variation in the ratios which could be mainly due to a rise in the expenses of the company. Similarly, the operating margin ratio was 10.50 in 2013 which increased to 11.34 in 2014 and again fell to 10.41 in 2015. The return on assets ratio was 3.61% in 2013, rose to 3.36% in 2014 and reached 3.90% in 2015. This shows that the company has been generating good returns on their assets. The return on equity ratio was 14.83% in 2013, which went to 14.63% in 2014 and reached a new high of 15.97% in 2015. Thus, the company is financially stable and has been increasing value on assets as well as for the shareholders on their equity. The above ratios show that the company is financial stable and making good progress as well. It is giving high returns to the shareholders.
The gross margin ratio is calculated by subtracting cost of goods sold from revenue and against dividing the same with revenue. For 2015, the same is 18132/92175 which is 19.67. The operating margin ratio is calculated by dividing the operating profit with the revenue. Here it will be 9678/92175 which is 10.50. The return on assets is calculated by dividing the net profit with average total assets which is 6396/163488*100 which is 3.9% and the return on equity is net profit divided by shareholders equity which is 6396/40100 which is 15.97%.
References
Balance Sheet for group and segments. n.d. <http://annual-report2015.bmwgroup.com/reports/bmwgroup/annual/2015/gb/English/3060/group-financial-statements.html#guv>.
Income Statement for group and segments. n.d. <http://annual-report2015.bmwgroup.com/reports/bmwgroup/annual/2015/gb/English/3060/group-financial-statements.html#guv>.
Profitability Ratio: Definition, formula, analysis and example. n.d. <http://study.com/academy/lesson/profitability-ratio-definition-formula-analysis-example.html>.
Profitability Ratios. n.d. <http://news.morningstar.com/classroom2/course.asp?docId=145093&page=6>.
