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IFRM

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22 views9 pages

IFRM

mn

Uploaded by

Aalok Ghosh
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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INTERNATIONAL FINANCE AND

RISK MANAGEMENT
SESSION 2020-22
FINANCIAL RISKS – A CASE STUDY FOR AUTOMOTIVE
INDUSTRY
SUBMITTED BY:
PRERNA AGRAWAL
DIVYA SURANA
SUBMITTED TO :- ANURAG SINGH BAGHEL
DR. ABHISHEK PRATAP SINGH SACHAN AMAN SHUKLA
PRANSHU SHARMA
AALOK GHOSH
FINANCIAL RISK

It is the possibility of losing money on an investment or business venture. Some


more common and distinct financial risks include :
 Market risk
 Credit risk
 Liquidity risk
 Operational risk
INTRODUCTION
Financial risks – from operational risk to bankruptcy risk, are important
distress for companies of every sector or industry. This case study is based on
the “Evaluation of firm financial performance and competitiveness: evidences
for automotive industry”.
Here we try to measure the financial risk for the most important eight
companies that activate in automotive industry i.e. Toyota, Volkswagen,
General Motors (GM), Ford, Honda, Nissan, Volvo, and Tata (3 from Japan, 2
from USA, 1 from Germany, 1 from Sweden, and 1 from India).
In order to evaluate financial risk, we use discriminate analysis, which
integrate five of the most important financial indicators: current ratio, return
on investment, debt to equity, total assets turnover, working capital to total
assets. Based on these results the rank will be very different beside the Global
Fortune 500 rank that evaluates company only by the level of revenue.
According to “Alman & Hotchkiss”, The most common reasons for a
company financial risk and distress are management inadequacies and
incompetence because the ultimate cause of failure is often represented by the
lack of cask or running out of liquidities.
AUTOMOTIVE INDUSTRY

 The automotive industry comprises a wide range of companies and organizations


involved in the design, development, manufacturing, marketing, and selling of
motor vehicles. It is one of the world's largest industries by revenue. This study is
based on the field of financial performance in automotive industry
SWOT ANALYSIS
STRENGTHS WEAKNESSES

 Evolving Industry  Cars recalled


 Continuous Production, Innovation & Technical  Bargaining power of consumers
advancement.  Growth rate of automotive industry
 Growth shifting to Asian Markets.
 Increasing demand of value for money vehicles &
luxury vehicles.
 Manufacturing facilities in Asian nations to control
cost.
OPPORTUNITIES THREATS

 Introducing fuel-efficient Vehicles  Intense Competition


 Strategic Alliances  Volatility in the fuel prices
 Changing Lifestyles & Customer Groups.  Sluggish Economy
 Market Expansion  High Fixed cost & Investment in R & D
COMPARATIVE ANALYSIS
We choose for the case study eight of the most important carmakers in the world,
such as: Toyota, Volkswagen, General Motors (GM), Ford, Honda, Nissan, Volvo,
and Tata (3 from Japan, 2 from USA, 1 from Germany, 1 from Sweden, and 1 from
India)
FRS
Industry Toyota Volkswa GM Ford Honda Nissan Volvo Tata
Average gen
2.0790 1.3191 2.4982 1.8905 2.2868 1.6362 2.4444 1.7614 2.7956
Current ratio – CR
Industry Toyota Volkswa GM Ford Honda Nissan Volvo Tata
Average gen
1.26 0.92 1.58 0.95 2.09 1.17 1.38 1.07 0.91
Return on Investment – ROI
Industry Toyota Volkswa GM Ford Honda Nissan Volvo Tata
Average gen
0.04 0.03 0.07 0.04 0.03 0.02 0.03 0.03 0.1
Debt to equity – DTE
Industry Toyota Volkswa GM Ford Honda Nissan Volvo Tata
Average gen
3.70 1.92 2.99 3.13 10.99 1.67 2.51 2.95 3.44
Total Assets Turnover – TAT
Industry Toyota Volkswa GM Ford Honda Nissan Volvo Tata
Average gen
0.84 0.71 0.61 1.02 0.70 0.71 0.89 0.87 1.21
Working capital to Total Assets – WCA
Industry Toyota Volkswa GM Ford Honda Nissan Volvo Tata
Average gen
0.08 -0.03 0.13 -0.02 0.035 0.06 0.16 0.03 -0.05
CONCLUSION

Sometimes by taking financial risks companies can gain more profit or revenues,
transforming these risks into financial opportunities. In order to satisfy the needs of
all stakeholders CEOs have to identify financial opportunities, with lower costs,
opportunities that will eliminate some of financial risks. More than that, it has to be
estimated or calculated the optimal level of every form of financial capital
(shareholders equity, long term debt or current liabilities), on one hand, and the
optimal structure of assents (fixed, current) and working capital, on the other hand.
THANK YOU

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