Financial analysis of BMW and Kraft Foods - Essay Example

?Financial Analysis Table of Contents Table of Contents 2 Introduction 4 Financial Position of BMW Group 5 Financial Position of Kraft Foods 5 5 Ratio Analysis 6 Valuation Ratio 6 Price-Earnings (P/E) Ratio 6 Market-to-Book Ratio 6 Enterprise Value-to-EBITDA 7 Profitability Ratios 8 Operating Margin 8 Net Profit Margin 9 Return on Equity Ratio (ROE) 9 Financial Strength Ratio 10 Current Ratio 10 Book Debt–Equity Ratio 10 Market Debt–Equity Ratio 11 11 Interest Coverage Ratio 11 Comparison of BMW and Kraft Foods with Respective Industry Ratios 12 Conclusion 14 References 15 Appendices 19 Appendix 1: Price Earnings Ratio 19 Appendix 2: Market-to-Book Ratio 20 Appendix 3: Enterprise Value-to-EBITDA Ratio 22 Appendix 4: Operating Margin Ratio 24 Appendix 5: Net Profit Margin Ratio 25 Appendix 6: Return on Equity Ratio 26 Appendix 7: Current Ratio 27 Appendix 8: Book Debt–Equity Ratio 28 Appendix 9: Market Debt–Equity Ratio 29 Appendix 10: Interest Coverage Ratio 30 Introduction The report is developed on the basis of conducting a financial analysis of two major corporations from two different industries which are BMW and Kraft Foods. BMW was previously known as Bayerische Flugzeugwerke AG (BFW), which was established in the year 1916. Later, in 1918, BFW was renamed to Bayerische Motoren Werke Aktiengesellschaft or BMW AG. Presently, it is renowned as one of the biggest vehicle and motorbike producing organisations internationally (BMW Group, 2010). On the other hand, Kraft Foods is one of the biggest food corporations globally. The company produces packaged food products such as snacks, cheese, convenient foods, grocery items and beverages. It is one of the fastest emerging companies whose operations are expanded in 160 countries (Kraft Foods Inc, 2010). The objective of this report is to analyse the financial structure of both companies with respect to corresponding industry where they operate. In order to analyse the financial structure, several key ratios have been analysed in this report which include, valuation ratios, profitability ratios, and financial strength ratios. Financial Position of BMW Group The current economic crisis of 2008 had impacted on the financial performance of BMW Group. Due to bad financial condition, the spending of customers had reduced considerably which impacted on the expenditure on vehicles. As a result, the automobile industry had faced drop in sales volume. BMW Group was also unable to evade the impact of financial crisis and therefore the group income had reduced by 5% in the year 2008 to 53,197 million Euros. As the international economy was recovering from the clutches of economic crisis by the end of the year 2010, BMW Group was able to recover its financial position in the automobile market. The global automobile industry has also become stabilised to certain degree. In 2010, BMW Group had experienced severe increase in sales revenue by 19.3% than 2009 to 60,477 million Euros (BMW Group, 2008; BMW Group, 2010). Financial Position of Kraft Foods Kraft Foods is a financially stable company with revenues of 40.4 billion USD in the year 2009. In the year 2009, the total value of net assets of the company was 25.9 billion USD. Despite bad economic conditions, the revenue of Kraft Foods was slightly affected. In 2007, the net revenue was 35,858 million USD which had increased to 41,932 million USD in 2008 (Kraft Foods Inc, 2010). Ratio Analysis Valuation Ratio Price-Earnings (P/E) Ratio Price-Earnings or P/E Ratio is the ratio of organisation’s share price with earning per share. From the analysis of BMW, it can be observed that the earnings per share of BMW Group had decreased considerably in the time of 2008 to 2009 to 0.49 Euro and 0.31 Euro and increased in 2010 to 4.91 Euro. Historically, the P/E ratio of BMW Group was strong and was always more than the industry average which is around 15-25. In the year 2007, the P/E ratio was below average i.e. 8.5 which had increased to 11.98 in 2010 (BMW Group, 2008; 2010). The price earnings ratio of Kraft Foods was almost 16.73 in the year 2007 and decreased to 15.99 in 2010. The average P/E ratio of consumer goods industry was 16.87 and thus the performance of Kraft Foods is almost at an average level (see Appendix 1) [1] (Microsoft, 2011; [5] EBIT Financial Analyses Center, 2011). Market-to-Book Ratio Market-to-Book ratio is used to compare the book value of an organisation to the market value. This financial ratio helps to identify underrated or overrated securities of an organisation. Book value is the cost at which the asset of a company is showed in the balance sheet and market value denotes the current price at which investors’ purchase or trade share of company. The Market-to- Book ratio of BMW Group denotes that the organisation had potentially undervalued stock, because from 2007–2010 the Market-to-Book ratio was below 1 (see Appendix 2). The Market-to-Book ratio of Kraft Foods was less than 1 in 2007 but it had increased afterwards in 2008 to 1.20. In the year 2010, the Market-to-Book ratio became 1.15 (see Appendix 2). Kraft Foods is a growth firm as it had positive return on assets. There is a chance for Kraft Foods that its assets value can face upward improvement in the market. On the other hand, BMW Group can be considered as a value firm, as the market believes that the asset value of the company is overstated [2] (Microsoft, 2011). Enterprise Value-to-EBITDA Enterprise value-to-EBIDTA, or in other words, enterprise multiple is the other financial ratio which is used to define the value of an organisation. This ratio views the potentiality of an organisation in the industry because, unlike P/E ratio or Market-to-Book ratio, Enterprise Value- to-EBITDA considers the debt of a company. The enterprise multiple of BMW Group was 3.39 in the year 2010 which was comparatively less than consumer goods industry average (Factiva, 2010; BMW Group, 2008; 2010). For example, in the year 2010, the enterprise multiple of consumer foods industry was 9.32 which was 3 times more than BMW Group (see Appendix 3). In 2009, the enterprise multiple of BMW was 6.40 which had reduced by 3.01 in 2010 (Fitch, 2011). The Enterprise Value-to-EBITDA ratio of Kraft Foods was almost 11.65 in 2007. In comparison with the industry ratio i.e. 9.68, the enterprise multiple of Kraft Foods was higher in 2007. In the year 2010, the enterprise multiple ratio of consumer goods industry became 9.32. Kraft Foods’ enterprise multiple ratio was 10.04 in 2010, which denotes the reduced financial potentiality of the company (see Appendix 3) [1] (EBIT Financial Analyses Center, 2011). By analysing the valuation ratio of both organisations, it can be observed that P/E ratio of BMW Group is lower than that of Kraft Foods, i.e. market will be willing to pay more to Kraft Foods on each amount of stock compared to BMW Group. The enterprise value of Kraft Foods is also much higher compared to BMW Group. In the year 2010, the enterprise value of BMW Group was almost 36976.93 million Euros (almost 48404.7 million USD) whereas the enterprise value of Kraft Foods was 82037 million USD on that year. But both the firms have increasing trends on enterprise value. Profitability Ratios Operating Margin Operating margin is the financial ratio which aims at measuring the pricing approach as well as operational competency of an organisation. It is a measurement of judging the percentage of organisation’s turnover left after paying the variable expenses such as raw materials and freight expenses among others. Though the net sales of BMW Group had increased in 2010 compared to previous years, the operating margin had decreased to 1.26% in 2010. In the year 2007, the operating margin was almost 1.30% and 2008 saw high operating margin to be 2.68% (BMW Group 2008; 2010). The average operating margin in consumer goods industry was 8.66% in the year 2010, which indicates that BMW Group was earning low money in every Euro of sales, i.e. by spending 1 Euro, BMW Group was earning 0.13 Euro [2] (EBIT Financial Analyses Center, 2011). The operating margin of Kraft Foods was 11.64% in 2007, which was little less than the margin of consumer goods industry on that period, which was at 12%. In 2009, the operating margin of Kraft Foods had increased to 13.68% which was 6.48% more than industry average (see Appendix 4) [1] (Microsoft, 2011), [3] (EBIT Financial Analyses Center, 2011). Net Profit Margin Net profit margin is one of the major indicators of an organisation’s earnings. It describes how much yield an organisation generates through sales. The net profit margin of BMW Group was 5.55% in the year 2007 but due to bad economic condition in 2008 and 2009, the net profit margin had decreased below 1. As economy revived in 2010, the net profit margin of BMW Group increased to 5.34% i.e. in sales of 1 Euro company earned profit of 0.0534 Euro. The net profit margin of consumer goods industry was 6.66% in 2010 which indicates the financial performance of BMW Group was below the industry level (BMW Group 2008; 2010). The net profit margin of Kraft Foods was 7.58% in 2007 which was below industry average level at 8.52%. The net profit margin had increased in 2009 to 7.79% and in 2010 to 8.36% [1] (Microsoft, 2011); [3] (EBIT Financial Analyses Center, 2011) (see Appendix 5). Return on Equity Ratio (ROE) Return on equity ratio assesses the amount of return with respect to proportion of investor’s equity. It denotes the profitability of organisation, i.e. how much profit an organisation is making by utilising the investment of shareholders. It can be observed that the return on equity of BMW Group had increased in 2010 to 26.10% compared to previous year which was 9.20%. The ROE ratio of Kraft Foods was 9.49% in the year 2007. With respect to industry average of consumer goods industry (i.e. 21.2%) the ROE of Kraft Foods was lower. In the year 2010, the ROE was measured as 11.48% (see Appendix 6) (ICLUB Central Inc, 2011). Financial Strength Ratio Current Ratio Current ratio is a popular financial ratio which is measured for understanding the capability of an organisation to fulfil the short-term liability. From the financial analysis of BMW Group, it can be observed that the current ratio had improved from 2007 to 2010. In the year 2007, the current ratio of BMW Group was below 1 i.e. 0.95 which had become 1.07 by 2010. It indicates that the ability of meeting the debt of BMW Group had increased considerably (BMW Group 2008; 2010). The current ratio of Kraft Foods was higher in 2009 as compared to 2007. In the year 2007, the current ratio of the firm was 0.62, and in 2009 the current ratio had improved to 1.083 [2] (Microsoft, 2011) (see Appendix 7). Book Debt–Equity Ratio Book debt to equity ratio is the other financial ratio which shows the comparative share of investor’s equity and liabilities of an organisation. It is also termed as financial leverage ratio. The book debt-equity ratio shows the level to which organisation depends on debt financing. The book debt-equity ratio of BMW Group was calculated to be lesser than 1 from 2007 to 2010, which denotes the company is less dependent on debt financing and it was easier for the company to pay interest as well as principle amount, even though they had gained more debt funding. The assets of BMW Group are mainly funded by equity rather than debt (BMW Group, 2008; 2010). The book debt-equity ratio of Kraft Foods was above 1 from 2007 to 2010. Therefore, it can be observed that the company is reliant on debt financing compared to equity. In 2007, the book debt-equity ratio of Kraft Foods was 1.49 which had become 1.65 by 2010. The company’s book debt-equity ratio was greater than consumer goods’ industry average of the same time period. In the year 2010, the industry average of book debt-equity ratio of consumer goods industry was almost 0.90 which indicates that in comparison with other companies Kraft Foods is more dependent on debt funding (see Appendix 8) [2] (Microsoft, 2011). Market Debt–Equity Ratio The market debt-equity ratio is measured as the percentage of total liability of an organisation and market capitalisation. It is different from book debt-equity ratio in the sense that it uses the book value of organisation’s debt and equity and the market debt-equity ratio considers the market value of debt and equity. Therefore, market debt-equity ratio is more accurate as it considers the present market circumstances. The market debt-equity ratio of BMW Group was 10.40 in the year 2007, which had increased to 16.15 by 2010. It indicates that the risk of BMW Group had increased the paying capacity of the principal amount and interest to the shareholders (BMW Group, 2008; 2010). On the other hand, the market debt-equity ratio of Kraft Foods was almost 26.53 and had an increasing trend. By 2010, it became 34.01, which specifies that the company had increased its capacity to pay principle and interest to shareholders (see Appendix 9) [2] (Microsoft, 2011). Interest Coverage Ratio Interest coverage ratio is used for defining the organisation’s ability to pay interest expenditures on outstanding liability. The interest coverage ratio of BMW Group is generally higher compared to average industry level. As automobile industry is highly volatile, the optimum level of interest coverage ratio is 3. In the year 2007, the interest coverage ratio was 8.80 which had decreased in 2008 and 2009 to 4.9 and 3.8 respectively. In 2010, the interest coverage ratio had increased to 9.07 which indicates, BMW Group had high capability to pay the interest expenditures (see Appendix 10) in comparison with consumer goods industry average, the interest coverage ratio of BMW AG was lower in 2007 and 2008 but had increased in 2009 and 2010 (BMW Group, 2008; 2010). The interest coverage ratio of Kraft Foods was generally lower when compared to industry average. In 2007, the interest coverage ratio was much higher at 82.96 and from 2008 it became below 5. In the year 2010, the interest coverage ratio was 3.76 which was 0.44 times lower than 2009. The industry average of interest coverage ratio in consumer goods industry was 9.89 in 2010, which denotes that the performance was less than industrial level (see appendix 10) [4] (EBIT Financial Analyses Center, 2011). Comparison of BMW and Kraft Foods with Respective Industry Ratios By comparing both the organisations’ common ratios with current industry ratio (2011) where they operate, it can be observed that the debt-equity ratio of BMW is higher than ratio of automobile industry which indicates that BMW has high ability of paying interests and debts than other firms. On the other hand, the P/E ratio of BMW is lesser than its corresponding automobile industry ratio in 2011. The P/E ratio of Kraft Foods in 2011 is higher compared to food industry level. The ROE ratio of BMW has fluctuating trend. In 2010, it had increased to 26.10 which had again decreased in 2011 to 22.23 but was higher than automobile industry’s level at that time which was at 7.9. The ROE of Kraft Foods had also decreased from 2008 to 13.07 to 11.48 in 2010. In 2011, the ROE of Kraft Foods was 9.1, less than food industry which was at 25.4. The net profit margin of BMW is strong. In 2011, the net profit margin became 7.9% which was higher than automobile industry’s net profit ratio. The Kraft Foods’ net profit margin was less than food industry level. In 2011, the net profit margin of Kraft Foods became 6.1% which was almost 3 times less than food industry level [3] (Microsoft, 2011; Yahoo! Inc, 2011). The following table will describe the comparison of BMW AG and Kraft Foods in present year (2011) with respect to their corresponding industry ratio: Industry vs. Firm Ratio Automobile Industry BMW AG Food Industry Kraft Foods Debt/Equity Ratio 1.28 2.49 0.79 0.79 P/E Ratio 16.5 6.5 17.4 20.2 ROE 7.9 22.23 25.4 9.1 Net Profit Margin 4.5 7.9 9 6.1 Current ratio 1.3 1.1 1 0.9 Interest coverage ratio 7.1 9.2 22.9 3.5 Source: [3] (Microsoft, 2011; Yahoo! Inc, 2011). Conclusion Considering the above analysis, it can be stated that Kraft Foods is a growing company and it focuses on expanding the business and its financial performance is much better than BMW Group. Though automobile and food industry falls under consumer goods product, automobile industry is much responsive to the economic fluctuation. Therefore, the bad economic condition had impacted on the financial performance of BMW Group. The profitability ratios of both the companies depict that Kraft Foods has higher profitability in terms of high operating margin, net profit margin and return on equity. Besides, both the firms had maintained their current ratio above 1. With respect to interest coverage ratio, BMW had higher rank than Kraft Foods which indicates that it has strong financial strength in the industry. On an average, it can be concluded that in comparison to the industry ratios, the financial structures of BMW Group and Kraft Foods are satisfactory, and there are good prospects for the companies to maintain their position in their respective markets. References BMW Group, 2008. BMW Group in Figures. Annual Report 2008. [Online] Available at: http://www.bmwgroup.com/annualreport2008/_downloads/BMW_Group_2008.pdf [Accessed December 22, 2011]. BMW Group, 2010. A Portrait of the Company. Annual Report 2010. [Online] Available at: http://geschaeftsbericht.bmwgroup.com/2010/gb/files/pdf/en/BMW_Group_AR2010.pdf [Accessed December 22, 2011]. [1] EBIT Financial Analyses Center, 2011. Kraft Foods Inc. (KFT) | Enterprise Value to EBITDA (EV/EBITDA). Stock Analysis on Net. [Online] Available at: http://www.stock-analysis-on.net/NYSE/Company/Kraft-Foods-Inc/Valuation/EV-to-EBITDA [Accessed December 22, 2011]. [2] EBIT Financial Analyses Center, 2011. Toyota Motor Corp. (TM) | Profitability Analysis. Stock Analysis on Net. [Online] Available at: http://www.stock-analysis-on.net/NYSE/Company/Toyota-Motor-Corp/Ratios/Profitability#Operating-Profit-Margin [Accessed December 22, 2011]. [3] EBIT Financial Analyses Center, 2011. Kraft Foods Inc. (KFT) | Profitability Analysis. Stock Analysis on Net. [Online] Available at: http://www.stock-analysis-on.net/NYSE/Company/Kraft-Foods-Inc/Ratios/Profitability [Accessed December 22, 2011]. [4] EBIT Financial Analyses Center, 2011. Kraft Foods Inc. (KFT) | Long-term Debt and Solvency Analysis. Stock Analysis on Net. [Online] Available at: http://www.stock-analysis-on.net/NYSE/Company/Kraft-Foods-Inc/Ratios/Long-term-Debt-and-Solvency#Interest-Coverage [Accessed December 22, 2011]. [5] EBIT Financial Analyses Center, 2011. Kraft Foods Inc. (KFT) | Common Stock Valuation Ratios (Price Multiples). Stock Analysis on Net. [Online] Available at: http://www.stock-analysis-on.net/NYSE/Company/Kraft-Foods-Inc/Valuation/Ratios#PE [Accessed December 22, 2011]. Factiva, 2010. Bayerische Motoren Werke AG. Dow Jones Company Report. [Online] Available at: http://www.scribd.com/doc/40488660/Balance-Sheet-of-BMW-LAST-YEARS#outer_page_7 [Accessed December 22, 2011]. Fitch, S., 2011. Rotten Large-Cap Stocks You Should Sell or Short Now: AIG, Ford, Sirius XM. YCharts. [Online] Available at: http://ycharts.com/analysis/story/rotten_largecap_stocks_you_should_sell_or_short_now_aig_ford_sirius_xm [Accessed December 22, 2011]. ICLUB Central Inc, 2010. Industry Averages. Investing. [Online] Available at: http://www.iclub.com/investing/stock_watch_list_industry.asp [Accessed December 22, 2011]. Kraft Foods Inc, 2010. Business. Annual Report Pursuant To Section 13 and 15(d). [Online] Available at: http://www.kraftfoodscompany.com/SiteCollectionDocuments/pdf/KraftFoods_10K_20110228.pdf [Accessed December 22, 2011]. [1] Microsoft, 2011. Income Statement. Kraft Foods Inc (NYSE: KFT). [Online] Available at: http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?lstStatement=Income&symbol=US%3aKFT&stmtView=Ann [Accessed December 22, 2011]. [2] Microsoft, 2011. Balance Sheet. Kraft Foods Inc (NYSE: KFT). [Online] Available at: http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?lstStatement=Balance&symbol=US%3aKFT&stmtView=Ann [Accessed December 22, 2011]. [3] Microsoft, 2011. Financial Condition. Kraft Foods Inc (NYSE: KFT). [Online] Available at: http://moneycentral.msn.com/investor/invsub/results/compare.asp?Page=FinancialCondition&symbol=US%3aKFT [Accessed December 22, 2011]. Yahoo! Inc, 2011. Industry Index. Yahoo Finance. [Online] Available at: http://biz.yahoo.com/p/330conameu.html [Accessed December 22, 2011]. Appendices Appendix 1: Price Earnings Ratio P/E ratio = Market value per share/Earning per share BMW AG Year Market value/share (in Euro) EPS (in Euro) P/E Ratio Industry average 2007 42.35 4.78 8.859832636 16.87 2008 21.61 0.49 44.10204082 12.04 2009 31.8 0.31 102.5806452 22.98 2010 58.85 4.91 11.98574338 17.16 Kraft Foods Year Market Value/Share (in USD) EPS (in USD) P/E ratio Industry average 2007 32.63 1.95 16.73333 16.87 2008 26.85 1.66 16.1747 12.04 2009 27.18 2 13.59 22.98 2010 31.51 1.97 15.99492 17.16 Appendix 2: Market-to-Book Ratio Book to Market Ratio = Book Value of Firm/Market Value of Firm Book Value of Firm = Total Asset (i.e. value at which asset is carried on balance sheet) – Accumulated Depreciation BMW AG Year Total Assets (in million Euro) Depreciation (in million Euro) Book value of firm (in million Euro) 2007 22616 8387 14229 2008 23316 10439 12877 2009 24647 9079 15568 2010 24346 9062 15284 Market Value of Firm = Current stock price ? number of outstanding shares Year Current Stock price (in Euro) (common stock) Number of shares Market value of firm (in million Euro) 2007 42.35 601995000 25494.4 2008 21.61 601995000 13009.1 2009 31.8 601995000 19143.4 2010 58.85 601995000 35427.4 Book-to-Market Ratio Year Book-to-Market Ratio 2007 0.558123 2008 0.989846 2009 0.813231 2010 0.431417 Kraft Foods Year Total Assets (in million USD) Depreciation (in million USD) Book value of firm (in million USD) 2007 67993 13 67980 2008 63173 23 63150 2009 66714 26 66688 2010 95289 211 95078 Market Value of Firm = Current stock price ? number of outstanding shares Year Common Stock Price (in USD) Number of Shares Market value of firm (in million USD) 2007 32.63 8563000 279.41069 2008 26.85 11947100 320.779635 2009 27.18 7666100 208.364598 2010 31.51 7532000 237.33332 Year Market Value of firm (in million USD) Book to market ratio 2007 69324 0.980612775 2008 52541 1.201918502 2009 59606 1.118813542 2010 82037 1.158964857 Appendix 3: Enterprise Value-to-EBITDA Ratio Enterprise Multiple = Enterprise Value/EBITDA Enterprise Value = Market Capitalisation + Long Term Debt + Minority Interest + Preferred Stock - Cash and Cash Equivalents Market Capitalisation = Total market value of outstanding share BMW AG Year Outstanding Share (Subscribed share capital) (in Euro) Market capitalisation (in million Euro) 2007 653531050 653.53105 2008 653828230 653.82823 2009 654660558 654.660558 2010 655158608 655.158608 Year Preferred Stock Stock Price Preferred Stock Value (in million Euro) 2007 52196000 36.3 1894.7148 2008 52196000 13.86 723.43656 2009 52665000 23 1211.295 2010 53163000 38.5 2046.7755 Year Long Term Debt (Financial Liabilities) (in million Euro) Minority Interest (in million Euro) Cash and Cash Equivalents (in million Euro) 2007 21428 8 436 2008 30497 6 3970 2009 34391 6 2195 2010 35833 16 1574 Year Enterprise value (in million Euro) EBITDA (in million Euro) Enterprise value to EBITDA Industry average 2007 23548.25 7898.538 2.981342351 9.68 2008 27910.26 4574.942 6.100681668 7.26 2009 34067.96 5321.505 6.40193997 10.83 2010 36976.93 10885.86 3.396785748 9.32 Kraft Foods Year Enterprise Value (in million USD) EBITDA (in million USD) Enterprise multiple Industry average 2007 69324 5947 11.6569699 9.68 2008 52541 5716 9.191917425 7.26 2009 59606 6312 9.443282636 10.83 2010 82037 8166 10.04616703 9.32 Appendix 4: Operating Margin Ratio Operating margin = Operating Income/Net Sales BMW AG Year Operating Income (in million Euro) Net Sales (in million Euro) Operating Margin (in %) Industry average 2007 730 56018 1.303152558 12 2008 1428 53197 2.6843619 11.59 2009 808 50681 1.594285827 7.20 2010 766 60477 1.266597219 8.66 Kraft Foods Year Net sales (in million USD) Operating Income (in million USD) Operating Margin Ratio (in %) Industry average 2007 35858 4176 11.64594 12 2008 13328 3576 26.83073 11.59 2009 38754 5183 13.3741 7.20 2010 49207 5415 11.00453 8.66 Appendix 5: Net Profit Margin Ratio Net profit margin = net profit/Turnover ? 100 Year Net Profit (in million Euro) Turnover (in million Euro) Net profit margin Industry average 2007 3134 56018 5.594630297 8.52% 2008 330 53197 0.620335733 8.36% 2009 210 50681 0.414356465 4.92% 2010 3234 60477 5.347487475 6.66% Year Net Profit (in million USD) Turnover (in million USD) Net profit margin Industry average 2007 2721 35858 7.588264822 8.52% 2008 2884 40492 7.122394547 8.36% 2009 3021 38754 7.795324354 4.92% 2010 4114 49207 8.360599102 6.66% Appendix 6: Return on Equity Ratio BMW AG Year Return on Equity 2007 18.10% 2008 - 2009 9.20% 2010 26.10% Kraft Foods Year Return on Equity 2007 9.49% 2008 13.07% 2009 11.67% 2010 11.48% Appendix 7: Current Ratio Current ratio = current assets/current liabilities BMW AG Year Current Assets (in million Euro) Current Liabilities (in million Euro) Current Ratio 2007 32378 33784 0.958382666 2008 38670 39287 0.984295059 2009 39944 36919 1.08193613 2010 43151 40134 1.07517317 Kraft Foods Year Current Assets (in million USD) Current Liabilities (in million USD) Current Ratio 2007 10737 17086 0.628409224 2008 11461 11044 1.037758059 2009 12454 11491 1.083804717 2010 16221 15660 1.035823755 Appendix 8: Book Debt–Equity Ratio Book Debt–Equity Ratio = Debt/Total Shareholder’s Equity BMW AG Year Total Liabilities (Debt) (in million Euro) Total Shareholder’s Equity (in million Euro) Book Debt Equity Ratio Industry average 2007 6801 21733 0.312934247 0.67 2008 7974 20275 0.393292232 0.77 2009 8347 19902 0.419405085 0.88 2010 10584 23074 0.458698102 0.90 Kraft Foods Year Total Liabilities (in million USD) Total Equity (in million USD) Book Debt Equity Ratio Industry average 2007 40698 27295 1.491042315 0.67 2008 40878 22295 1.83350527 0.77 2009 40838 25876 1.578219199 0.88 2010 59455 35834 1.659178434 0.90 Appendix 9: Market Debt–Equity Ratio Market Debt–Equity Ratio = Total Debt/Equity Market Value Equity Market value = Market Capitalisation BMW AG Year Total Liabilities (Debt) (in million Euro) Equity Market Value (in million Euro) Market debt equity ratio 2007 6801 653.53105 10.40654457 2008 7974 653.82823 12.19586374 2009 8347 654.660558 12.75011897 2010 10584 655.158608 16.15486673 Kraft Foods Year Equity Market Value (in million USD) Total Liabilities (in million USD) Market debt equity ratio 2007 1533.78 40698 26.53444431 2008 1469.3 40878 27.82141156 2009 1477.88 40838 27.6328254 2010 1748.07 59455 34.01179587 Appendix 10: Interest Coverage Ratio Interest coverage ratio = EBIT/Interest Expense BMW AG Year EBIT (in million Euro) Interest expense (in million Euro) Interest Coverage ratio Industry average 2007 7898.538 897 8.805505017 17.62 2008 4574.942 930 4.919292473 17.83 2009 3902.437 1014 3.848557199 8.02 2010 8769.165 966 9.077810559 9.89 Kraft Foods Year EBIT (in million USD) Interest expense (in million USD) Interest Coverage ratio Industry average 2007 5061 61 82.96721311 17.62 2008 4730 1272 3.718553459 17.83 2009 5398 1260 4.284126984 8.02 2010 6742 1790 3.766480447 9.89 N.B.: Industry averages in above appendices denote the consumer goods industry average. 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