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Earnings per Share, Dividend, and Current Year Performance of Volkswagen and Mercedes-Benz - Case Study Example

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This paper "Earnings per Share, Dividend, and Current Year Performance of Volkswagen and Mercedes-Benz" focuses on the fact that Volkswagen is the largest manufacturer of cars in Europe having 62 production plants in fifteen European countries besides having 7 production plants in other continents. …
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Earnings per Share, Dividend, and Current Year Performance of Volkswagen and Mercedes-Benz
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Download file to see previous pages For the third quarter, the Volkswagen company posted a net profit of €7.146 billion which is three times higher than the profit figure in the same quarter of the last year. The astounding company results are attributed to its investment in new products, manufacturing operations in the emerging markets like China. The company plans to invest heavily in developing markets simultaneously consolidating its position in developed regions such as Europe and the Americas.
It will be interesting to analyze the company’s financials from stakeholder’s point of view as the company’s progress in last few years has been exemplary and how the stakeholders can see the Key financials that can influence their decision. The fiscal year 2010 was an important year for the Volkswagen group when it began implementing its "Strategy 2018" by which the company wants to take its sales to 10 million vehicles. Its gross profit target before tax by that time is 8 per cent. Expanding the brand and the product selectively are the core elements and part of the overall strategy (Volkswagen 2011).
Operating Income of Volkswagen. From a shareholder's point of view, operating income is quite meaningful as it informs how the company is faring in its operations and whether it is worth stay with the company. During the financial crisis of 2008, the company's operations were impacted substantially and the operating income reduced by almost 23 per cent. Operating expense had a major impact in bringing down the operating income. The company had a major setback in the year 2009 when an international crisis was at its pinnacle affecting its sales considerably. The revenues from the developed markets were down substantially which were partially offset by the reasonably good performance of emerging markets. The gross profit of the company was just sufficient to meet the operating income. Surprisingly, 2010 came with a big bang for the company registering almost 20 per cent jump in total revenues. Operating income was an all-time high and so the net income when compared with the previous year’s performance. The current year’s performance shows the phenomenal growth of the company’s revenue and operating income.
Gross Margin and Solvency Ratios. Gross margin of 17 per cent and EBITDA margin of over 10 per cent augurs well with the company. More than that the gross profit growth of the company is found to be almost 36 per cent, which is commendable in the recessionary market conditions. On solvency, the Current Ratio of 1.2 and a quick ratio of 0.9 signifies prudent financial management in difficult market situations (Annual report 2010).   ...Download file to see next pagesRead More
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