An analyst is evaluating the profi tability of Daimler AG (Xetra: DAI) over a recentfi ve-year period. He gathers the following revenue data and calculates the followingprofi tability ratios from information in Daimler’s annual reports:2009 2008 2007 2006 2005Revenues (€ millions) 78,924 98,469 101,569 99,222 95,209Gross profi t margin 16.92% 21.89% 23.62% 20.60% 19.48%Operating profi t (EBIT) margin a–1.92% 2.77% 8.58% 5.03% 3.02%Pretax margin –2.91% 2.84% 9.04% 4.94% 2.55%Net profi t margin –3.35% 1.73% 4.78% 3.19% 2.37%aEBIT (Earnings before interest and taxes) is the operating profi t metric used by Daimler.Daimler’s revenue declined from 2007 to 2008 and from 2008 to 2009. Further,Daimler’s 2009 revenues were the lowest of the fi ve years. Management’s discussion ofthe decline in revenue and EBIT in the 2009 Annual Report notes the following:Th e main reason for the decline [in EBIT] was a signifi cant drop in revenuedue to markedly lower unit sales in all vehicle segments as a result of the globaleconomic downturn. Cost savings achieved through permanent and temporary cost reductions and effi ciency improvements realized through ongoing optimization programs could only partially compensate for the drop in revenue.1 . Compare gross profi t margins and operating profi t margins over the 2005 to 2009period.2 . Explain the decline in operating profi t margin in 2009.3 . Explain why the pretax margin might have decreased to a greater extent than theoperating profi t margin in 2009.4 . Compare net profi t margins and pretax margins over 2007 to 2009
An analyst is evaluating the profi tability of Daimler AG (Xetra: DAI) over a recent
fi ve-year period. He gathers the following revenue data and calculates the following
profi tability ratios from information in Daimler’s annual reports:
2009 2008 2007 2006 2005
Revenues (€ millions) 78,924 98,469 101,569 99,222 95,209
Gross profi t margin 16.92% 21.89% 23.62% 20.60% 19.48%
Operating profi t (EBIT) margin a
–1.92% 2.77% 8.58% 5.03% 3.02%
Pretax margin –2.91% 2.84% 9.04% 4.94% 2.55%
Net profi t margin –3.35% 1.73% 4.78% 3.19% 2.37%
a
EBIT (Earnings before interest and taxes) is the operating profi t metric used by Daimler.
Daimler’s revenue declined from 2007 to 2008 and from 2008 to 2009. Further,
Daimler’s 2009 revenues were the lowest of the fi ve years. Management’s discussion of
the decline in revenue and EBIT in the 2009 Annual Report notes the following:
Th e main reason for the decline [in EBIT] was a signifi cant drop in revenue
due to markedly lower unit sales in all vehicle segments as a result of the global
economic downturn. Cost savings achieved through permanent and temporary cost reductions and effi ciency improvements realized through ongoing optimization programs could only partially compensate for the drop in revenue.
1 . Compare gross profi t margins and operating profi t margins over the 2005 to 2009
period.
2 . Explain the decline in operating profi t margin in 2009.
3 . Explain why the pretax margin might have decreased to a greater extent than the
operating profi t margin in 2009.
4 . Compare net profi t margins and pretax margins over 2007 to 2009
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