Bombardier - Financial Analysis

1414 Words Apr 16th, 2013 6 Pages
Bombardier Financial Analysis

Liquidity 1) Current Ratio 2) Working Capital

Leverage 1) Debt/Equity Ratio 2) Financial Leverage

Operational Efficiency

1) Inventory Turnover Ratio 2) Receivables Turnover Ratio 3) Fixed Asset Turnover Ratio

Liquidity
Bombardier has maintained a Current Ratio of close to 100% over the past 10 years with the highest being in F’05 (121%) and the lowest in F’08 (95%). This is typical for the industry in which Bombardier operates. Current Ratio has been increasing since F’08 as Bombardier has focused on improving its cash from operating activities.

Historically, Bombardier has efficiently used its cash resources, taking into consideration working cap requirements,
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Bombardier’s ten year average leverage ratio (10.47) is lower than that of Boeings’ (12.61) but is higher than that of Airbus’ (6.06).

Operational Efficiency
Inventory Turnover Ratio was highest in F’08 (3.97) but has trended south since then. It was recorded at 1.85 in F’12 which is the lowest number over the past ten years. This decline can be attributed to overall reduction in sales, mainly in the transportation segment. The ten year average Inventory Turnover Ratio is at 3.15 which aligns with the historical level. Given that Inventory Turnover is an important factor to Bombardier’s success, a reverse of recent trend can be expected going forward.

Bombardier’s average Inventory Turnover Ratio in the last decade is lowest among its competitors (Boeing 5.09, Airbus 4.04 vs Bombardier 3.15). Receivables Turnover Ratio has averaged 9.66 in the last decade, with the high in F’03 (11.34) and low in F’07 (8.53). Bombardier’s average is higher than that of Airbus’ (7.78) but lower than that of Boeing’s (11.77). It is important to note that Bombardier’s ratio improved significantly from 9.04 in F’11 to 11.00 in F’12 due to better collection of receivables. The trend is not alarming and illustrates Bombardier is effectively managing its assets.

Bombardier’s Fixed Asset Turnover Ratio has

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