Introduction
The assignment aims to reflect the organizational performance of PSA Groupe through analyzing the financial ratios and Annual Reports of the company during the years of operations. The assignment examines the stakeholders’ theory to investigate the profitability and productivity of PSA Groupe during the current and previous financial years. The study outlooks the stock price variation of PSA Groupe during ten years period and analysis the growth and opportunity of the share price of the company. The performance evaluation of the company is done to ensure the reliability and viability of the company in the context of investors. This study also highlights the objectives, activities, and future goals of the company and provides a comprehensive comparison with other automobile competitors in the market.
Task 1: Examination of Annual Report and Analysis of the financial ratios of PSA Groupe
Analysis of financial ratios during the year 2011 to 2016
The profitability ratio of PSA Groupe includes: (refer to appendix 1)
The profitability ratio of PSA Groupe reflects the amount and percentages of profit incorporated by the company during the five years period and analysis nay variances between the financial data of the ratios. The net profit ratio of the company indicates an increase from 32.06% during the year financial year 2011 to 46.24% during the financial year 2016. As opined by Akhavan et al. (2015, p. 174) this financial data highlights that the net profit and revenues of the company from the operations increased from the year 2011 to 2016.
The assets yield ratio of PSA Groupe reflects an increase in the percentage from 0.19 to 0.26 during the year 2011 to 2016. The ratio indicates the return or income from the assets of the company during a given period of time. An increase in the ratio highlights increases in the income from such assets of the company. (Groupepsa.com 2016)
The income from assets of the company shows an increase from 6.10 during the financial year 2011 to 11.89 during the year 2016. As stated by Bay et al. (2015) this indicates that the ratio increased consistently over the years. The increases in the income from the assets reflect an increase in the value and acquisition of the assets of the company during the operational period.\
The financial debt ratio of PSA Groupe highlights a reduction from 1.73 to 1.67 during the year 2011 to 2012. The ratio increased constantly from 1.67 during the year 2012 to 2.01 during the financial year 2016. As referred by Cucchiella and Rosa (2015, p. 558) the data indicates that the debt and loans of the company raised from the year 2012 to the year 2016 in order to increase the acquisition of assets during the period.
The return or income from equity of the company showed an increase from 10.74% to 23.30% during the period 2011 to 2016. The return from equity states that the amount of income generated from equity share capital of the company during the years. As opined by Dehnavi et al. (2015, p. 138) the higher the ratio the higher the higher will be the level of profitability and productivity of the company as the company is more dependent on equity capital than that of debt capital during the years of operations. (Groupepsa.com 2016)
The interest ratio of PSA Groupe highlights a comparative increase from 35.43% during the financial year 2011 to 271.16% during the current financial year 2016. The financial information indicates that the ability and viability of the company to pay the outstanding amount of interest liabilities increased during the financial years 2011 to 2016.
The income from investment of the company indicates an increase in the ratio from 9.69 in the year 2011 to 21.58 in the year 2016. As stated by Dewachter et al. (2015, p. 312) this states that the investment made by the company is productive and efficient to obtain higher returns from such investment proposals.
Evaluation of liquidity ratio of PSA Groupe: (refer to appendix 2)
The liquidity ratio of the company states the ability of the company to conduct day-to-day expenditures from operations of the company during the financial years. The current ratio of PSA Groupe reduced drastically from 0.66 to 0.09 during the year 2011 to 2013. As opined by Hernández et al. (2016, p. 965) this indicates the cash reserves and liquidity of the company is unstable during these years of operations.
The quick ratio of the company also indicates a reduction in the ratio as compared to the current ratio, because the quick ratio is related to the current ratio of the company. Quick ratio is a highly liquid ratio of the company and it can be easily converted into cash as quickly as possible by the company. As opined by Tuzkaya and Yolver (2015, p. 38) the reduction of the ratio indicates that the stability and liquidity condition of the company is at risk.
The equity to debt ratio of PSA Groupe reflects an increase in the ratio from 0.08 to 0.16 during the year 2011 to 2013. The ratio also increased from 0.01% to 0.08% during the financial year 2014 to 2016. This ratio shows the amount of debt incurred by the company as compared to total equity of the company during the period of operations. As stated by Uechi et al. (2015, p. 498) the lower the ratio the lower will be the total amount of debt by the company and vice versa. A reduction in the debt ratio of the company indicates an increase in the profitability and efficiency of the company during the financial years. (Groupepsa.com 2016)
Examination of efficiency ratios for PSA Groupe: (refer to appendix 3)
The efficiency ratio reflects the efficiency in the performance of the company during the period of operations. As referred by Yoder et al. (2015, p. 648) the higher the efficiency ratios the higher will be the efficiency evaluation of the company. The turnover from fixed assets of the company highlights an increase from 0.23 during the year 2011 to 0.29 in the financial year 2016. The ratio indicates the amount of income generated from the assets of the company during a period of time and the higher the ratio the higher is the returns or revenues from the assets.
The turnover from assets ratio reflects the returns and revenues from total assets acquired by the company during a specified period of time. The assets revenue ratio increased from 0.19% to 0.26% during the financial years 2011 to 2016.
Examination of Annual Report of PSA Groupe for the year 2011 to 2016
The revenues of PSA Groupe increased from $1736 Million in the year 2011 to $2561 Million during the financial year 2016. This evaluates that the revenues from sales for the company increased substantially from the financial year 20111 to the current financial year 2016. The income from operations of the company also showed a relative increase from $763 Million during the year 2011 to $1374 Million in the financial year 2016. As opined by Brigham and Ehrhard (2013) this states that the production and supply of the products so produced or manufactured by the company increased substantially during these years.
The net income of the company during the year 2011 to 2016 also showed an increase from $824 Million to $1454 Million. It is because of the increase in sales and demands of the products so manufactured by the company. (Groupepsa.com 2016)
The total shares of PSA Groupe increased from 171 Million during the year 2016 to $174 Million in 2016. This indicates the paid up capital of the company increased constantly during the period of 2011 to 2016. The price of shares decreased as compared to the increase in the number of shares by $31.20 during the year 2011 to $29.10. As stated by Pratt (2016) this is due to the reduction in the value of shares of the company in the stock market and reduction in the value of total assets of the company in the market as compared to other competitors.
Analysis of the balance statement of PSA Groupe states that the total current assets of the company during the period from 2011 to 2016 reduced from 1.56% to 1.81%. The long-term assets of the company increased from 13.48% during the year 2011 to 14.04% in the year 2012. The assets also showed a fall from 14.045 in the year 2012 to 8.01% in the year 2016 of the company.
The current liabilities of PSA Groupe highlight a reduction from 7.21% during the year 2011 to 7.09% in the year 2016. As opined by Dehnavi et al. (2015, p. 136) this reflects that the liabilities of the company is reduced because of the reduction in credits of the company.
The shareholder’s equity of the company increased from 92.04% to 96.56% during the year 2011 to 2012. The ratio also showed a reduction from 96.56% during the year 2012 to 83.01% in the financial year 2016. (Groupepsa.com 2016)
Dividend policy of the company
The dividend payout amount of the company increased from $3.65 during the year 2011 to $7.30 in the year 2016. The dividend pay ratio of PSA Groupe evaluates a decreased from 115.1% during the financial year 2011 to 107.2% in the year 2016. The ratio evaluates that dividend payment of the company to its shareholders reduced due to reduction in the revenues and profits and increase in the reserves of the company during the financial years. (Psa.co.za 2016)
The returns to the shareholders reduced during the financial years 2011 to 2016, but the long term perspective of the company is productive and well maintained. As referred by Tuzkaya and Yolver (2015) this increases the credibility and reliability of the company to its shareholders in the market.
Comparative analysis of PSA Groupe and Volkswagen
(Refer to appendix 4)
The sales revenues of PSA Groupe are less than Volkswagen by $163383 Million and the total assets of PSA Groupe are more than $40275 MIllion from Volkswagen. The total liabilities of PSA Groupe are also more by $40275.9 Million from Volkswagen. Whereas the net cash income of PSA Groupe is more than over $11986 MIllion from Volkswagen.
The sales revenues and income from sales of PSA Groupe is less than Volkswagen but the total assets and net cash flows of PSA Groupe is more than Volkswagen. The financial reliability and stability of PSA Groupe is more than that of Volkswagen. The long period liabilities of PSA Groupe is more than Volkswagen by $4134.5 Million, this reflects that PSA Groupe incurred more debt finance from that of Volkswagen during the financial year 2016.
Information to the stakeholders
The financial ratios of PSA Group is stable than other competitors in the market and its cash flows are adequate than the cash flows of Volkswagen. The potentiality of PSA Groupe is more in the future period as the main objective and focus of the company are to extend sales and operations to other countries in the world and to expand its manufacturing process and supply in the financial year 2017 to 2018. The investment in the stocks of PSA Groupe is reliable as the expected returns from such shares are more as compared to other automobile manufacturer operates in Europe. The investment portfolio in the stocks of PSA Group is more profitable and productive than other competitors in the market as the company’s main focus is to create quantity-based and safe cars in the market.
Task 2: Recommendation for purchase and sell of shares of PSA Groupe
(Refer to appendix 5)
The share price of the company in the stock market is $17.97 in recent year. The share price of the company before the year 2008 is $35.86 and the share price in the year 2008 is highest to $37.48. The share price of the company during the year 2008 to 2009 is lowest to $8.21 due to recession and depression the world market. The price of the share rose to $17.01 during the year 2011 and then again falls to $3.82 during the financial year 2013. The price of the stock again rose to $16.84 in the year 2016. The share price of PSA Groupe is stable in the current period of time and the return of investment from the stock is higher than the previous years. The share price data indicates that the investors can invest in the stock of the company as the value of the company in the market is more stable and reliable in rent financial years.
Task 3: Performance analysis and Investigation of the manufacturing process for PSA Groupe
The main objective of Groupe PSC is to use the latest technologies for the production process to increase the quality of work and mitigate any errors. The company uses the latest and most effective technologies to reduce the operational and manufacturing cost and increase the productivity and organizational performance of the company. The goal of the company is to high-quality cars to its customers and to provide quality services to the customers. The future objective of Groupe PSA is to reduce the cost for manufacturing vehicles by $700 during the financial period 2018. The company also takes necessary care to reduce the pollution level and to indulge in more eco-friendly technologies in society. (Groupe-psa.com 2016)
The future plans of the company are to develop and integrate best plant and manufacturing units to produce high-quality vehicles with minimum cost. The management of Groupe PSA depends on a coordinated approach within the organization to increase the performance and profitability of the company for future perspectives. The company introduced an R&D program to increase the expenditures and the company’s budget to develop new and latest product lines to increase competition in the automobile market. (Groupe-psa.com 2016)
Groupe PSA also focuses on developing an effective inventory management system to increase the reliability of the suppliers. As opined by Uechi et al. (2015, p. 498) this is done to evaluate the credit ratings and performance of the suppliers in the market. The company also focuses on developing efficient and effective distribution and supply chain management to increase the supply of vehicles within Europe and other countries in the world.
In the context of the Toyota Production Framework (TPS) the philosophies are as follows:
- Long Term ideology: The long-term ideology of the company is to provide more value to consumers, develop the quality of the product, and to provide assurance on reliability to products so developed by the company. The overview of this point is to create short-term objectives and future goals of the company. This also includes the generation of value to consumers and increasing the knowledge and skills.
- Right procedure to promote good result: The objective of this point to make effective process and procedures to increase productivity and reduce cost in the manufacturing process. In case of Groupe PSA the company also follows same strategy to increase growth and minimise costs.
- Evaluate the work: The main overview of this strategy is to mitigate time lag and wastage of time to increase performance and to eliminate abnormal wastage.
- Effective quality and time management: The overview of the strategy is to maximize the quality of the products so produced by minimizing the time to production. In the context of Groupe PSA, the company focuses on building an effective framework to reduce production costs and to increase the quality of the product.
- Improvement and satisfaction of employees: The strategy focuses on creating good working conditions in the manufacturing plant to increase the level of satisfaction. This also includes the enhancement of the skills and knowledge of the employees of the company. In the context of Groupe PSA, the management focuses on providing satisfaction to its employees by providing monetary as well as nonmonetary benefits to its workers.
- Efficient controlling: The main objective of this strategy is to create effective and efficient controlling strategies to reduce mistakes and risks in the manufacturing process. In the context of Groupe PSA, the company relies on the latest technologies to reduce and mitigate risk and flaws in the manufacturing process.
- Technology orientation: Toyota uses the latest and most cost-effective technologies in the production process to reduce human errors, manufacturing costs and maintenance of quality in the manufacturing processes. In the context of Group PSA the company also focuses on using latest technologies to reduce risk and increase the quality of the vehicles.
- Teamwork: The main focus of the strategy is to develop an efficient and productive team to generate organizational goals. This leads to an increase in the development and productivity of the company through effective teamwork and team management systems.
- Focus on the suppliers: The suppliers are the primary participant of the manufacturing process for the delivery of raw materials to the company. The company evaluates the possible suppliers and maintains a performance evaluation of each supplier in the market to increase the delivery process of materials.
- Organizational policy: Toyota provides a high-quality organization policy for manufacturing, processing, and selling of products in the market to enhance the efficiency level and productivity of the company in the market. In the context of Groupe PSA, it also follows the same strategy to enhance profitability and satisfaction levels from the products in the market.
- Effective decision-making policies: Toyota’s main policy is to regulate the managerial decision to organizational goals of the company. This is done to increase the organizational goals and objectives of the business for the organization.
In recent years due to climate changes and the problem of global warming, society is focusing on eco-friendly and electric run vehicles. Many countries in the world made it mandatory to run electric vehicles in the years 2018 and 2019 to reduce global warming. In the context of Groupe PSA, the company focuses on developing efficient electric-run vehicles to reduce climate changes in society. The future goal of the company is to abandon the contemporary gas run vehicles to electric run vehicles to minimize the level of pollution in society. The company also increases the expenditures and budgets for the development and research of efficient electric-run vehicles and developed the latest manufacturing units to produce such vehicles from the financial years 2018 and 2019. (Groupe-psa.com 2016)
Conclusion
The assignment reflects the financial performance and profitability of Groupe PSA during the five years financial period. This also evaluates various financial ratios to examine the level of efficiency and productivity of the company. The assignment focuses on providing information regarding the stock process of Groupe PSA to analyze the investment decisions for the investors. This also examines the variances of financial information in the Annual report of the company and analyses the credibility and reliability of the company in the market. The study also companies the financial data of Groupe PSA and Volkswagen to investigate and compare the performance of both companies in the market. This also compares the organizational performance of Groupe PSA and Toyota relating to the strategies and policies used by birth automobile companies to increase productivity in the market. The study also relates to scrutinizing the future objectives and goals of Groupe PSA to reduce air pollution in society.
References
Journals
Akhavan, P., Barak, S., Maghsoudlou, H., and Antuchevičienė, J. (2015) FQSPM-SWOT for strategic alliance planning and partner selection; a case study in a holding car manufacturer company Technological and Economic Development of Economy, 21(2), pp. 165-185.
Bay, L. J., Chan, S. H., and Walczyk, T. (2015). Isotope ratio analysis of carbon and nitrogen by elemental analyzer continuous flow isotope ratio mass spectrometry (EA-CF-IRMS) without the use of a reference gas Journal of Analytical Atomic Spectrometry, 30(1), pp. 310-314.
Cucchiella, F., and Rosa, P. (2015) End-of-Life of used photovoltaic modules: A financial analysis Renewable and Sustainable Energy Reviews, 47, pp. 552-561
Cucchiella, F., D’Adamo, I., and Gastaldi, M. (2015) financial analysis for investment and policy decisions in the renewable energy sector Clean Technologies and Environmental Policy, 17(4), pp. 887-904.
Dehnavi, A., Aghdam, I. N., Pradhan, B., and Varzandeh, M. H. M. (2015) A new hybrid model using step-wise weight assessment ratio analysis (SWARA) technique and adaptive neuro-fuzzy inference system (ANFIS), 135, pp. 122-148.
Dewachter, H., Iania, L., Lyrio, M., and de Sola Perea, M. (2015) A macro-financial analysis of the euro area sovereign bond market Journal of Banking & Finance, 50, pp. 308-325.
Hernández-Cánovas, G., Mínguez-Vera, A., and Sánchez-Vidal, J. (2016) Ownership structure and debt as corporate governance mechanisms: an empirical analysis for Spanish SMEs. Journal of Business Economics and Management, 17(6), pp. 960-976.
Tuzkaya, U. R., and Yolver, E. (2015) R&D project selection by integrated grey analytic network process and grey relational analysis: an implementation for home appliances company. Journal of Aeronautics and Space Technologies, 8(2), pp. 35-41.
Uechi, L., Akutsu, T., Stanley, H. E., Marcus, A. J., and Kenett, D. Y. (2015) Sector dominance ratio analysis of financial markets Physica A: Statistical Mechanics and its Applications, 421, pp. 488-509.
Yoder, J. R., Alexander, C., Ivanic, R., Rosch, S., Tyner, W., and Wu, S. Y. (2015) Risk versus reward, financial analysis of alternative contract specifications for the miscanthus lignocellulosic supply chain BioEnergy Research, 8(2), pp. 644-656.
Books
Brigham, E.F. and Ehrhardt, M.C., (2013). Financial management: Theory & practice. 14th Ed. Boston: Cengage Learning.
Pratt, J., (2016) Financial accounting in an economic context. 10th Ed New Jersey: John Wiley & Sons
Websites
Groupepsa.com (2016) Annual reports of Groupe PSA Available at https://www.groupe-psa.com/en/finance [Accessed on 22.9.2016]
Groupe-psa.com (2016) Industrial performance Available at https://www.groupe-psa.com/en/automoti…rformance/ [Accessed on 25.9.2016]
Hl.co.uk (2016) Share price of Groupe PSA Available at http://www.hl.co.uk/shares/shares-sea…t-sa-eur-6 [Accessed on 23.9.2016]
Appendices
Appendix 1
| Ratios | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 |
| Net Margin % | 32.06 | 36.66 | 42.63 | 41.37 | 44.21 | 46.24 |
| Asset turnover ratio | 0.19 | 0.21 | 0.21 | 0.22 | 0.24 | 0.26 |
| Return on Assets % | 6.10 | 7.56 | 9.05 | 9.22 | 10.75 | 11.89 |
| Financial leverage ratio | 1.73 | 1.67 | 1.89 | 1.90 | 1.91 | 2.01 |
| Return on Equity % | 10.74 | 12.84 | 16.11 | 17.49 | 20.50 | 23.30 |
| Interest Coverage ratio | 35.43 | 47.95 | 165.11 | 170.58 | 347.90 | 271.16 |
| Return on investment % | 9.69 | 11.81 | 14.05 | 16.12 | 19.47 | 21.58 |
Appendix 2
| Ratios | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 |
| Current ratio | 0.66 | 0.09 | 0.09 | 0.76 | 0.40 | 0.62 |
| Quick ratio | 0.66 | 0.09 | 0.09 | 0.76 | 0.40 | 0.062 |
| Debt to equity ratio | 0.08 | 0.09 | 0.16 | 0.01 | 0.06 | 0.08 |
Appendix 3
| Ratios | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 |
| Fixed Assets Turnover ratio | 0.23 | 0.25 | 0.25 | 0.26 | 0.28 | 0.29 |
| Asset turnover ratio | 0.19 | 0.21 | 0.21 | 0.22 | 0.24 | 0.26 |
Appendix 4
| Companies | Groupe PSA | Volkswagen |
| Sales Revenues | $53884 Million | $217267 Million |
| Total Assets | $45153 Million | $4877.1 Million |
| Total Liabilities | $45153 Million | $4877.1 Million |
| Net cash Flows | $11986 Millions | $0.0 Million |
| Long term liabilities | $4267 Million | $132.5 Million |
Appendix 5
| Years | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 |
| Share Price | 33.90 | 37.95 | 8.77 | 16.71 | 10.77 | 5.17 | 3.66 | 10.65 | 18.20 | 16.84 |
