Financial analysis

FINANCIAL ANALYSIS OFSCANIA AND VOLVO

By : Kaan Aydin Ataoglu - 14123053

TABLE OF CONTENT

Background of Scania & Volvo

Ratio Analysis with graph and data

Conclusion

SCANIA & VOLVO

• IT ALL BEGAN IN 1891 WITH THE FOUNDATION OF A FACTORY IN SÖDERTÄLJE FOR THE MANUFACTURE OF RAILWAY CARRIAGES. (SWEDISH FOR “WAGON FACTORY LTD IN SÖDERTÄLJE), SHORTENED TO VABIS.

• IN 1936 SCANIA-VABIS INTRODUCED ITS FIRST IN-HOUSE DIESEL ENGINE.

• IN 1949 SCANIA-VABIS LAUNCHED ITS DIRECT-INJECTION DIESEL ENGINE. WHICH KNOWN AS THE “400,000-KILOMETRE ENGINE”.

• IN 2000 11 FACTORIES IN FIVE COUNTRIES JOINED IN THE MANUFACTURE OF SCANIA’S 1-MILLIONTH TRUCK.

• IN 2008 VOLKSWAGEN BECAME THE MAIN OWNER OF SCANIA, WITH 68.6 PERCENT OF THE VOTING RIGHTS AND 37.73 PERCENT OF THE CAPITAL RIGHTS.  

IN 1915, ESTABLISHED, THE SWEDISH BALL BEARING MANUFACTURER.

IN 1924, ASSAR GABRIELSSON AND GUSTAF LARSON, THE TWO FOUNDERS, DECIDED TO START CONSTRUCTION OF A SWEDISH CAR

IN 1940, THE QUEEN ELIZABETH SET SAIL ON HER MAIDEN VOYAGE FROM LIVERPOOL TO NW YORK. VOLVO'S FIRST TERRAIN VEHICLE,

IN 1980, FIRST TIME IN CARS MANUFACTURED IN JAPAN EXCEEDED THE USA, 7.0 MILLION AS OPPOSED TO 6.4 MILLION.

IN 2002, VOLVO RENAMED IT RENAULT TRUCKS . RENAULT  BECAME VOLVO'S BIGGEST SHAREHOLDER WITH A 19.9% STAKE

IN 2007, VOLVO ENGINEERING RESOURCES AND COMPONENTS USED IN VARIOUS FORD, LAND ROVER AND ASTON MARTIN PRODUCTS

IN 2010, VOLVO TRUCKS PRESENTED A NEW RANGE OF HEAVY-DUTY TRUCKS.

Current Ratio= Current Assets Current Liabilities

2013 Scania = 150965 = 0.77 195616

CURRENT RATIO

2010 2011 2012 20130

0.2

0.4

0.6

0.8

1

1.2

1.4

1.61.4

0.92

0.670.77

1.27 1.23 1.241.13

SCANIA VOLVO

SCANIA VOLVO

2010 1.40 1.27

2011 0.92 1.23

2012 0.67 1.24

2013

0.77 1.13

The ratio is mainly used to give an idea of the company's ability to pay back its short-term liabilities (debt and pay ables) with its short-term assets (cash, inventory, receivables).  Normally between 1.5 – 2

If less than 1 (current liabilities > current assets)

QUICK RATIO

2010 2011 2012 20130

0.2

0.4

0.6

0.8

1

1.2

0.9

0.61

0.38

0.53

1.13

1.01

0.860.92

SCANIA VOLVO

SCANIA VOLVO

2010 0.90 1.13

2011 0.61 1.01

2012 0.38 0.86

2013 0.53 0.92

Quick Ratio= Current Assets – Stock Current Liabilities

2013 Scania = 150965 – 47175 = 0.53 195616

An indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet its short-term obligations with its most liquid assets.

Should be normally between 0.7-1 (to be absolutely safe) which indicates that quick assets exceed current liabilities

The higher the quick ratio, the better the company's liquidity position.

GEARING %

SCANIA VOLVO

2010 173.37 104.69

2011 597.50 359.08

2012 667.57 206.52

2013 661.09 129.32 2010 2011 2012 20130

100

200

300

400

500

600

700

800

173.37

597.5667.57 661.09

104.69

359.08

206.52

129.32

SCANIA VOLVO

A low gearing ratio represent a low proportion.

Sell shares, Convert loans, Reduce working capital, Increase profits. Use any methods available to increase profits, which should generate more cash

Gearing = Short term loans& overdraft + Long term Liabilities x 100 Share Holders` funds

Gearing shows a firms exposure to financial risk. A high gearing percentage tells us that the firm has a high level of loans compared to shareholder funds.

High Gearing is over 50% & Low Gearing s between 0% and 50%

So  the firm has to pay a higher interest charge

STOCK TURNOVER RATIO

SCANIA VOLVO

2010 11.92 44.59

2011 14.14 22.19

2012 13.16 15.28

2013 15.54 16.902010 2011 2012 2013

0

5

10

15

20

25

30

35

40

45

50

11.9214.14 13.16

15.54

44.59

22.19

15.28 16.9

SCANIA VOLVO

Stock Turnover Ratio= Cost of Sales Stock Level

A ratio showing how many times a company's inventory

is sold and replaced over a period.

A high ratio implies either strong sales or ineffective buying.

Higher the stock turnover ratio the quicker it is for the stock to reach the customer.

May need to approximate by using sales competitor. (Might find how they doing their business. So they can spurt against to competitor)

GROSS PROFIT MARGIN

SCANIA VOLVO

2010 20.77 7.50

2011 18.72 7.29

2012 18.85 6.08

2013 18.29 6.39

2010 2011 2012 20130

5

10

15

20

25

20.7718.72 18.85 18.29

7.5 7.29 6.08 6.39

SCANIA VOLVO

Gross Profit Margin= Gross Profit Sales( Turnover)

A financial metric used to assess a firm's financial health by revealing the proportion of money left over from revenues after accounting for the cost of goods sold.

More efficient companies will usually see higher profit margins.

NET PROFIT MARGIN ( %)

SCANIA VOLVO

2010 5.73 0.67

2011 6.66 0.32

2012 5.63 -0.30

2013 6.36 0.452010 2011 2012 2013

-1

0

1

2

3

4

5

6

7

8

5.73

6.66

5.63

6.36

0.670.32

-0.3

0.45

SCANIA VOLVO

Net Profit Margin= PBIT  x 100 SALE

It measures how much out of every dollar of sales a company actually keeps in earnings.

A higher profit margin indicates a more profitable company that has better control over its costs compared to its competitors.

A low profit margin can indicate pricing strategy and/or the impact competition has on margins.

RETURN ON CAPITAL EMPLOYED (%)

SCANIA VOLVO

2010 26.52 14.99

2011 13.51 6.50

2012 12.04 -6.48

2013 14.01 10.85 2010 2011 2012 2013

-10

-5

0

5

10

15

20

25

30

26.52

13.5112.04

14.0114.99

6.5

-6.48

10.85

SCANIA VOLVO

ROCE= PBIT  x 100 Total Cap. Employed (Total Assets less. Cur. Liabilities)

 Measures a company's profitability and the efficiency with which its capital is employed.

A higher ROCE indicates more efficient use of capital.

Which means that Scania does a better job of deploying its capital than Volvo.

CONCLUSION

Result of analysis: SCANIA VOLVO

Current Ratio - Quick Ratio - Gearing(%) - ST Ratio - Gross P Margin

-

Net P Margin -ROCE -

Scania is a better company to invest in because, they retain more profit than Volvo and the Return on capital employed ratio shows better value.

REFERENCE LIST

History of Scania:(http://www.scania.co.uk/about-scania/history/)

History of Volvo:http://www.volvogroup.com/group/global/engb/volvo%20group/history/ourhistory/1920/Pages/1920.aspx#sthash.ONlb57Mi.dpuf

Information on ratios:(http://www.investopedia.com/)

Data used for analysis and verification: Scania(http://fame.bvdinfo.com/version20141127/Report.serv?

_CID=63&context=21MLAHV0JZYSBYK&SeqNr=1)

Volvo(http://fame.bvdinfo.com/version20141127/Report.serv?_CID=233&context=21MLAHV0JZYSBYK&SeqNr=0)

THANK YOU FOR YOUR ATTENTION