Assessment of Solvency of a Company in the Automotive Sector

Abstract

The aim of this thesis is to make the assessment of solvency of Volkswagen Group by using common-size analysis, solvency ratio analysis, pyramidal decomposition and sensitivity analysis from 2010 to 2014.This thesis is divided into five parts. Chapter 1 is introduction.In chapter 2, we will introduce three basic financial statements: balance sheet, income statement and cash flow statement. And introduce the financial analysis methods which we will use in the next chapter. The first part is the common size analysis. We will use it to check the financial statement of a company. About common size analysis, it has vertical common size analysis and horizontal common size analysis. We will describe what it means and how we can use it in the company. The second part of financial analysis methods is solvency ratios analysis. Solvency ratios are very important for a company. We also write the definition and formula about pyramidal decomposition and sensitivity analysis. And we will introduce the return on equity, because when we make the sensitivity analysis, we will use it.In chapter 3, we will describe the main financial characteristics of Volkswagen Group. First, we introduce the history and structure of the company, it help us to understand the development of the company. Second part is the financial position. It is the company’s ability in the market. And it can help us to know if Volkswagen Group has financial trouble. At last, we use common size analysis of Volkswagen Group from 2010 to 2014. In chapter 4, we use solvency ratio analysis. We will use debt to assets ratio, debt to equity ratio, interest coverage and financial leverage to find out the solvency of this company. We also will use pyramidal decomposition in this chapter, we decompose debt to equity ratio into 12 parts. And we use sensitivity analysis of Volkswagen Group. It analyzes which factor will effect the indicator when we have different factors and it’s effect degree. When we calculate all the ratios and analysis the methods in this chapter we can know whether the company have financial risks or not and how to manege the company by using these methods.Chapter 5 is conclusion, in this part, we will compare the analysis we made from 2010 to 2014 and summary all of them. All the methods can help us to know the solvency and the development of Volkswagen Group.

The aim of this thesis is to make the assessment of solvency of Volkswagen Group by using common-size analysis, solvency ratio analysis, pyramidal decomposition and sensitivity analysis from 2010 to 2014.This thesis is divided into five parts. Chapter 1 is introduction.In chapter 2, we will introduce three basic financial statements: balance sheet, income statement and cash flow statement. And introduce the financial analysis methods which we will use in the next chapter. The first part is the common size analysis. We will use it to check the financial statement of a company. About common size analysis, it has vertical common size analysis and horizontal common size analysis. We will describe what it means and how we can use it in the company. The second part of financial analysis methods is solvency ratios analysis. Solvency ratios are very important for a company. We also write the definition and formula about pyramidal decomposition and sensitivity analysis. And we will introduce the return on equity, because when we make the sensitivity analysis, we will use it.In chapter 3, we will describe the main financial characteristics of Volkswagen Group. First, we introduce the history and structure of the company, it help us to understand the development of the company. Second part is the financial position. It is the company’s ability in the market. And it can help us to know if Volkswagen Group has financial trouble. At last, we use common size analysis of Volkswagen Group from 2010 to 2014. In chapter 4, we use solvency ratio analysis. We will use debt to assets ratio, debt to equity ratio, interest coverage and financial leverage to find out the solvency of this company. We also will use pyramidal decomposition in this chapter, we decompose debt to equity ratio into 12 parts. And we use sensitivity analysis of Volkswagen Group. It analyzes which factor will effect the indicator when we have different factors and it’s effect degree. When we calculate all the ratios and analysis the methods in this chapter we can know whether the company have financial risks or not and how to manege the company by using these methods.Chapter 5 is conclusion, in this part, we will compare the analysis we made from 2010 to 2014 and summary all of them. All the methods can help us to know the solvency and the development of Volkswagen Group.