Cost and Management

Accounting

FINANCIAL, COST AND M ANAGEMENT ANALYSIS OF

BOSCH LTD.
CIA 1 | ASSIGNMENT 1

BY
NADAMALA SAI KIRAN REDDY- 1820380
SAI HRITHIK P S - 1820381
4 BBA C
INTRODUCTION:

FINANCIAL ANALYSIS:
Financial analysis is the process of evaluating businesses, projects, budgets, and
other finance-related transactions to determine their performance and suitability.
Typically, financial analysis is used to analyse whether an entity is stable,
solvent, liquid, or profitable enough to warrant a monetary investment.

COST ANALYSIS:
It is the act of breaking down a cost summary into its constituents and studying
and reporting on each factor. It is the comparison of costs (for a given period)
for the purpose of disclosing and reporting on conditions subject to
improvement.

MANAGEMENT ACCOUNTING:
Managerial accounting is the practice of identifying, measuring, analysing,
interpreting, and communicating financial information to managers for the
pursuit of an organization's goals. It varies from financial accounting because the
intended purpose of managerial accounting is to assist users internal to the
company in making well-informed business decisions.

RATIO ANALYSIS:
Ratio analysis is the comparison of line items in the financial statements of a
business. Ratio analysis is used to evaluate a number of issues with an entity,
such as its liquidity, efficiency of operations, and profitability. This type of
analysis is particularly useful to analysts outside of a business, since their
primary source of information about an organization is its financial
statements.
ANALYSIS OF BOSCH:

Robert Bosch GmbH, or Bosch, is a German multinational engineering and

technology company headquartered in Gerlingen, near Stuttgart, Germany. The
company was founded by Robert Bosch in Stuttgart in 1886. Bosch is 92%
owned by Robert Bosch Stiftung.
Bosch's core operating areas are spread across four business sectors: mobility
(hardware and software), consumer goods (including household appliances and
power tools), industrial technology (including drive and control) and energy and
building technology.
The Mobility Solutions business sector accounts for 61 percent of total sales. Its
main areas of activity are injection technology and powertrain peripherals for
internal-combustion engines, powertrain electrification, etc.
In the 2018 business year, the Industrial Technology business sector generated
roughly 9 percent of total Bosch Group sales. The sector includes the Drive and
Control Technology division, whose portfolio includes customized drive, control,
and linear motion for factory automation, plant construction and engineering, and
mobile machinery.
The Consumer Goods business sector contributed some 23 percent of total Bosch
Group sales in 2018. Its Power Tools division is a supplier of power tools, power-
tool accessories, and measuring technology.
In 2018, the Energy and Building Technology business sector generated 7 percent
of total Bosch Group sales. Its Building Technologies division has two areas of
business: the global product business for security and communications, and the
regional integrator business.

Logo:
FINANCIAL ANALYSIS:

BOSCH LTD Income Statement 2017-18

No. of Months Year Ending 12 Mar-17* 12 Mar-18* % Change

Net Sales Rs m 104,352 116,901 12.0%

Other income Rs m 6,174 5,118 -17.1%

Total Revenues Rs m 110,526 122,019 10.4%

Gross profit Rs m 19,604 20,932 6.8%

Depreciation Rs m 4,562 4,672 2.4%

Interest Rs m 272 33 -87.9%

Profit before tax Rs m 20,944 21,345 1.9%

Tax Rs m 6,503 6,698 3.0%

Profit after tax Rs m 14,441 13,708 -5.1%

Gross profit margin % 18.8 17.9

Effective tax rate % 31.0 31.4

Net profit margin % 13.1 11.2

BOSCH LTD Income Statement Analysis-

▪ Operating income during the year rose 12.0% on a year-on-year (YoY)
basis. That symbolises sustainable growth in the company’s revenue.
▪ The company's operating profit increased by 6.8% year-on-year during
the fiscal. Operating profit margins witnessed a fall and stood at 17.9% in
FY18 as against 18.8% in FY17. Though the operating income
 experienced a raise, the profits did not. This shows that the company has
to cut of its expenses in certain departments and should focus on cost
minimization. Efficient techniques of production have to be adopted.
▪ Depreciation charges increased by 2.4% and finance costs decreased by
87.9% YoY, respectively. The reason for this might be the operating age
of the assets. Since Bosch is an established company, the techniques
adopted and the machines used are something that exists since many
years.
▪ Other income declined by 17.1% YoY.
▪ Net profit for the year declined by 5.1% YoY. Decline in net profits
indicates that the company is not functioning up to its maximum potential.
▪ Net profit margins during the year declined from 13.1% in FY17 to 11.2%
in FY18.

BOSCH LTD Balance Sheet as on March 2018

No. of Mths Year Ending 12 Mar-17* 12 Mar-18* % Change

Networth Rs m 87,906 99,726 13.4

Current Liabilities Rs m 26,300 35,191 33.8

Long-term Debt Rs m 0 0 0.0

Total Liabilities Rs m 117,908 139,187 18.0

Current assets Rs m 58,995 73,347 24.3

Fixed Assets Rs m 16,426 16,307 -0.7

Total Assets Rs m 117,908 139,187 18.0

BOSCH LTD Balance Sheet Analysis:
▪ The company's current liabilities during FY18 stood at Rs 35 billion as
compared to Rs 26 billion in FY17, thereby witnessing an increase of
33.8%.
▪ Current assets rose 24% and stood at Rs 73 billion, while fixed assets fell
1% and stood at Rs 16 billion in FY18.
▪ Overall, the total assets and liabilities for FY18 stood at Rs 139 billion as
against Rs 118 billion during FY17, thereby witnessing a growth of 18%.

BOSCH LTD Cash Flow Statement 2017-18

No. of
12 12
months
%
Particulars
Change
Mar- Mar-
Year Ending
17 18

Cash Flow from Operating

Rs m 14,567 17,287 18.7%
Activities

Cash Flow from Investing

Rs m 12,460 -11,703 -
Activities

Cash Flow from Financing

Rs m -26,697 -3,246 -
Activities

Net Cash Flow Rs m 330 2,338 608.5%

Current Valuations for BOSCH LTD:

▪ The trailing twelve-month earnings per share (EPS) of the company

stands at Rs 449.1, an decline from the EPS of Rs 473.2 recorded last
year.
▪ The price to earnings (P/E) ratio, at the current price of Rs 19,746.3,
stands at 38.5 times its trailing twelve months earnings.
▪ The price to book value (P/BV) ratio at current price levels stands at 6.5
times, while the price to sales ratio stands at 5.5 times.
▪ The company's price to cash flow (P/CF) ratio stood at 32.8 times its end-
of-year operating cash flow earnings.

Per Share Data/Valuations

No. of Mths Year Ending 12 Mar-17* 12 Mar-18*

Sales per share (Unadj.) Rs 3,419.1 3,830.3

TTM Earnings per share Rs 473.2 449.1

Diluted earnings per share Rs 473.2 449.1

Price to Cash Flow x 31.7 32.8

TTM P/E ratio x 38.5 38.5

Price / Book Value ratio x 7.6 6.5

Market Cap Rs m 602,657 602,657

Dividends per share (Unadj.) Rs 165.0 100.0

 RATIO ANALYSIS FOR BOSCH LTD:

• Solvency Ratios

Current Ratio: The company's current ratio improved and stood at 2.1x during
FY18, from 2.2x during FY17. The current ratio measures the company's ability
to pay short-term and long-term obligations.

Interest Coverage Ratio: The company's interest coverage ratio deteriorated and
stood at 647.8x during FY18, from 78.0x during FY17. The interest coverage
ratio of a company states how easily a company can pay its interest expense on
outstanding debt. A higher ratio is preferable.

• Profitability Ratios

Return on Equity (ROE): The ROE for the company declined and down at
13.7% during FY18, from 16.4% during FY18. The ROE measures the ability of
a firm to generate profits from its shareholders capital in the company.

Return on Capital Employed (ROCE): The ROCE for the company declined
and down at 20.5% during FY18, from 24.1% during FY17. The ROCE measures
the ability of a firm to generate profits from its total capital (shareholder capital
plus debt capital) employed in the company.

Return on Assets (ROA): The ROA of the company declined and down at 9.9%
during FY18, from 12.5% during FY17. The ROA measures how efficiently the
company uses its assets to generate earnings.

Key Ratio Analysis

No. of Months Year Ending 12 Mar-17* 12 Mar-18*

Current ratio x 2.2 2.1

Debtors’ Days Days 41 50

 Interest coverage x 78.0 647.8

Debt to equity ratio x 0.0 0.0

Return on assets % 12.5 9.9

Return on equity % 16.4 13.7

Return on capital employed % 24.1 20.5

SWOT ANALYSIS OF BOSCH-

STRENGTHS OF BOSCH – INTERNAL STRATEGIC FACTORS

• Highly skilled workforce through successful training and learning programs.

Bosch is investing huge resources in training and development of its employees
resulting in a workforce that is not only highly skilled but also motivated to
achieve more.
• Strong Brand Portfolio – Over the years Bosch has invested in building a strong
brand portfolio.
• Strong distribution network – Over the years Bosch has built a reliable
distribution network that can reach majority of its potential market.
• Successful track record of developing new products – product innovation.

WEAKNESS OF BOSCH – INTERNAL STRATEGIC FACTORS

• Not highly successful at integrating firms with different work culture. As

mentioned earlier even though Bosch is successful at integrating small companies
it has its share of failure to merge firms that have different work culture.
• The marketing of the products left a lot to be desired. Even though the product is
a success in terms of sale but its positioning and unique selling proposition is not
clearly defined which can lead to the attacks in this segment from the competitors.
• The profitability ratio and Net Contribution % of Bosch are below the industry
average.
 OPPORTUNITIES FOR BOSCH – EXTERNAL STRATEGIC FACTORS

• Government green drive also opens an opportunity for procurement of Bosch

products by the state as well as federal government contractors.
• Stable free cash flow provides opportunities to invest in adjacent product
segments. With more cash in bank the company can invest in new technologies
as well as in new products segments. This should open a window of opportunity
for Bosch in other product categories.
• Lower inflation rate – The low inflation rate bring more stability in the market,
enable credit at lower interest rate to the customers of Bosch.

THREATS BOSCH FACING - EXTERNAL STRATEGIC FACTORS

• Changing consumer buying behaviour from online channel could be a threat to

the existing physical infrastructure driven supply chain model.
• Growing strengths of local distributors also presents a threat in some markets as
the competition is paying higher margins to the local distributors.
• No regular supply of innovative products

COMPETITIVE ADVANTAGE OF BOSCH –

Diversified offerings: The operating business deals in core products such as

brakes, controls, electronics, electrical drives, starter motors & steering systems;
fuel systems, generators, industrial products, such as drives and controls,
packaging technology and consumer goods; and household appliances, power
tools, security systems, thermos-technology and building products.

Strong Network of Associate companies: Co-creation of the offerings with the

help of the associates in different countries is what helping the company in being
Glo-cal while at the same time being competitively ahead of its competitors. It
has 133,974 associates in Germany, 102680 in Europe (excluding Germany),
42627 in America and 110000 in Asia and other countries.

DISTRIBUTION STRATEGY IN BOSCH –

The Company is the global supplier of technology & services and generates 53
% of its sales from Europe market. The company operates with more than 440
subsidiaries and regional companies in 62+ countries.
Bosch distributes its products through a network of own sales team, distributors,
resellers, e-commerce sites and associates.

COMPETITIVE ANALYSIS OF BOSCH –

The diversified group with more than 389000 associates (226856 in Mobility
Solutions, 38117 in industrial technology, 76131 in Consumer Goods, 30293 in
Energy & building Technology and 17884 in other activities) is the market
leader in the products segments it operates into especially mobility solutions.

It competes with companies such as Gabriel, Tyco, Pelco and many others on the
basis of innovative solutions, reaches in the market, distribution network, quality
of products, precision & price.

MARKET ANALYSIS OF BOSCH –

The market in which Bosch operates is overcrowded with counterfeit products

manufacturers after sales spare marketers, small suppliers/ manufacturers and
grey markets which affect the players operating in the industry.

The performance of the companies operating in the electrical equipment industry

depends on the various factors such as infrastructure available, network, labour
cost, government regulations, supplier availability and bargaining power.

Customer analysis in the Marketing strategy of Bosch- Since the company

operates in diversified products segments, therefore, its customer groups consist
of retail as well as B2B customer group.

Retail customers are in the age group of 20-45 years and are from upper/upper
middle income class group majority of which purchases Consumer goods while
the B2B customer group consist of automobile companies, wholesalers,
distributors, resellers.