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The Connection Between Valuation and Financial Statement Analysis in the Automotive Industry

This report by Lauren Walaszczyk explores the crucial link between valuation and financial statement analysis, specifically within the automotive industry. It emphasizes the importance of understanding the business environment and identifies key industry players. The analysis highlights significant barriers to entry, noting that success in this sector often demands groundbreaking technology and innovative approaches. By assessing financial statements, stakeholders can better gauge a company's performance and its potential for growth in the competitive automotive landscape.

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The Connection Between Valuation and Financial Statement Analysis in the Automotive Industry

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Presentation Transcript

  1. MOD 1:

    Link Between Valuation and Financial Statement Analysis Lauren Walaszczyk

  2. Step 1:

    Understanding the Business and Business Environment
  3. Automotive Industry Top Industry Companies
  4. Barriers to Entry Extremely difficult Needs to be completely new technology and innovation Already many mature companies Substitution Substitutes for all types of vehicles Increases competitiveness Standards and Regulation Safety requirements Tariffs Air quality controls
  5. Considerations of the Industry Demands for new models each year and innovation Gas prices Environmental concerns Switching from bigger to smaller cars Per capita disposable income Material and equipment costs
  6. Risks Liquidity Interest Rate Credit Risk
  7. Bail Out Industry crisis from 2008-2010 Big three: GM, Ford, and Chrysler Weakened by the recession and rising gas prices Downturn effected both foreign and domestic sales Government issued emergency pay out loans GM and Chrysler still went into bankruptcy Completely changed product demand Industry as a whole has been bouncing back
  8. Brief Overview Nissan Motor Company founded in 1934 Multinational Japanese company Expanded globally during the 1950s and sold first car in the U.S. in 1958 1999 entered into an alliance with Renault S.A. of France
  9. Nissan Power 88 To achieve global market share and operating profit of 8% Six Tactics Strengthen brand power Enhance sales power Enhancing quality Zero emission leadership Business expansion Cost leadership
  10. Technology/Product Development Sold 4,914,000 vehicles during 2012 Cars, electric cars, hybrids, & sports cars SUVs, Vans, & trucks Boats Provide financials services Technological development in safety, environment, dynamic performance, and life on board

  11. SWOT Analysis

  12. Internal Factors Strengths Positive financials Environmental Management Strong alliance Strong internal controls Nissan Power 88 plan helped reduce costs by 5% Innovation and research and development Weaknesses Product recalls Not as up to date on the hybrid
  13. External Factors Opportunities 10 new models, electric car Won Environment awards leading to brand recognition around the world Able to emerge into ASEAN market Able to reach the “Green” people Depreciating Yen exchange rate Threats Not able to get into the European market with the high competition New competition: Tesla Sales dependent on disposable income, volatility of gas prices, demand for innovation Rising raw material costs Appreciating Yen exchange rate
  14. Life Cycle Stage Cash flow typeMature Operating Positive Investing Negative Financing Negative

  15. Questions?

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