AB Volvo within the last three years (2014, 2013, and 2012) - Research Paper Example

In order to evaluate the potential of investing in a business, the first step is to evaluate the profitability of the business by determine how the business has performed based on its recent history. The analysis will involve digging into financial reports for AB Volvo within the last three years (2014, 2013, and 2012). The financial factors to consider in the analysis will determine the business’s current net worth, its sales and expense trends and identify the company’s strengths and weaknesses.

The company’s budgets and tax returns since 2012 An analysis of the company’s balance sheet to determine a list of current assets, liabilities and net worth An analysis of the current accounts receivables Analyzing the cash flow projections Analyzing the profit and loss statements The analysis will also consider an evaluation of ratios that are key to making investment decisions. The ratios will evaluate the performance activity, liquidity, financing, and activity within AB Volvo: Performance Activity Book Value Per Common Share Cash Return On Assets Vertical Analysis Dividend Payout Ratio Earnings Per Share Gross Profit Margin Price/Earnings Ratio Profit Margin Return on Assets Return on Equity Activity Asset turnover Average collection period Inventory turnover Financing Debt ratio Debt/equity ratio Liquidity ratios Working capital Interest coverage Working capital Industry Comparison: Competitors are in two different industries: Trucks and buses (Daimler, Iveco, MAN, Navistar, Paccar, Scania, and Sinotruk) Construction equipment and Volvo Penta (Brunswick, Caterpillar, CNH, Cummins, Deere, Hitachi, Komatsu and Terex) Compare the industrial weighted average to the growth projections of Volvo in relation to these two industries.

This determines the company’s competitiveness and its ability to remain profitable.