Volkswagen Group Financial Analysis 2015

...

Financial analysis

Financial statements analysis

Concerning the financial aspect of the VW group financial report, it will begin with the vertical & horizontal analysis of the financial statements of VW group for the years 2013 & 2014.

The vertical and horizontal analysis of the financial statement is the first approach in order to examine firstly which accounts and, consequently, which aspects of operation are the more vital for the structure and profitability of the group (vertical analysis) and secondly if there has been a substantial change for those accounts during the last two years (horizontal analysis).

Although for the scope of this analysis vertical and horizontal examination was necessary only for the VW group, in order to gain a better understanding of the industry horizontal and vertical analysis was conducted for both competitors and it is included in the Appendix. It is of no use to us to present the original statements, instead of percentages that we actually used, since VW group statements are presented in euro currency, Toyota Group in yen and Ford in dollars, and thus are not comparable.

Vertical analysis

Assets

2014

2013

Assets

Noncurrent assets

Intangible assets

17,07%

18,27%

PPE

13,15%

13,07%

Lease assets

7,85%

6,86%

Investment property

0,14%

0,13%

Equity announced investments

2,81%

2,45%

Other equity investments

1,05%

1,22%

Financial services receivables

16,48%

15,79%

Other financial assets

1,85%

2,17%

Other receivables

0,47%

0,45%

Tax receivables

0,13%

0,20%

Deferred tax assets

1,67%

1,73%

62,67%

62,33%

Current assets

Inventories

8,96%

8,83%

Trade receivables

3,27%

3,43%

Financial services receivables

12,64%

11,84%

Other financial assets

2,19%

2,03%

Other receivables

1,45%

1,55%

Tax receivables

0,29%

0,22%

Marketable securities

3,09%

2,62%

Cash, cash equivalents & time deposits

5,44%

7,15%

37,33%

37,67%

Total assets

100,00%

100,00%

Table 1 Vertical analysis of VW Group Balance Sheet – Assets 2013 – 2014

It is evident that that non-current assets of the company are twice the current assets of the group meaning that the company has invested highly in PPE and has lower circulation rate of cash in regard to other industries. In fact by examining the financial statements of the main competitors it becomes apparent that high investments in non-current assets and not in current assets is dictated by the nature of the industry that requires heavy production units.

Intangible assets

Intangible assets account for 17% to 18% of total asset of the group. A closer examination of the account through the annual report of the company revealed that intangible assets account mainly for Brand name, Goodwill & Capitalized development cost regarding research & development. It is worth mentioning at this point that none of the other competitors examined has any reference of intangible assets of that nature. Having said that, it is imperative to examine further.

Goodwill & Brand name

According to the group’s annual report, goodwill & brand name are tested for impairment once a year using management future five year planning to identify the value. It is of great interest that no outside examination is mentioned meaning that most probably the impairment test is being conducted by the company itself. In view of recent revelations regarding the CO2 emissions models it is expected of the group an external evaluation of the brand name and goodwill as well as further explanations in the case of no impairment shown in the annual report as was the case