Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
In this report, the financial performance and the marketing strategies of Nokia is
analyzed based on the various financial ratios. The financial report of the past five
years from 2009 - 2005 is studied considering the change in the marketing strategies
implemented in 2005 and the global recession which has been hitting the market
lately..The marketing strategy of Nokia is studied in the light of PESTLE, SWOT and
BCG matrix.
bringing together the financial information of the company which is in the form of a
cash flow statement, profit and loss account and balance sheets and carrying out the
necessary calculations to determine the financial position of the company. The sales
volume, and profitability generated from the shareholders' investment, the
company's ability to pay its debtors and the company's position compared to its
competitors help not only the management but also the investors in determining
whether to invest in the company's share or not. [1]
The financial statement of Nokia is analyzed in the light of the various financial
ratios such as Profitability, Activity, Solvency, Financial structure and Stock Market
Measures. These ratios interpret the various items found in the company's balance
sheet and income statements. This process not only reviews the past results of Nokia
but also helps in evaluating the current situation of the company.
The financial performance graph exhibited by Nokia in the past five years has been a
fluctuating one.(cont)
PROFITABILITY ANALYSIS:
Profitability analysis is an analysis that enables a company to evaluate the market
segments. It allows them to report the sales and profit data of a company using the
different customised characteristics and key figures. This analysis can be categorised
on the basis of products, customers, orders or any combination of these. Using these
profitability calculations, the business profits made in one year can be compared with
the other years and also the profitability of different business can be compared.
The aim of this system is to provide the various departments within the organisation
namely marketing, product management and corporate planning departments with
the necessary information to support the internal accounting and decision making
process. It measures the management's capacity to generate profits on sales and total
investment in the business. In the case of Nokia.................(profitability analysis of
nokia)
1.1GROSS MARGIN:
The gross margin of a company is the percent of total sales revenue that the
company retains after incurring the direct costs associated with producing the goods
and services sold by the company. The higher the percentage, the more the company
retains on each Euro of sales. This shows the percentage of control that the
management has over cost. [2]
YEAR
2009
2008
2007
2006
2005
Gross Profit
13264
17373
17277
13379
11982
Turnover
40984
50710
51058
41121
34191
Gross margin (%)
32.36
34.26
33.84
32.54
35.04
(All the figures mentioned above are in EUR millions)
As we can see from the table above, the gross margin % had a raising trend in the
2006 -08 , where it increased from 32.54% to 34.26%. But however, in the year 2009
the profits have come down from 50710Eur m - 40984Eur m resulting in a decrease
of 1.90% in the gross margin.
Turnover
Net Margin (%)
2009
962
40984
2.35
2008
4970
50710
9.8
2007
8268
51058
16.19
2006
5723
41121
13.91
2005
4971
34191
14.53
(All the figures in the table above are in Euro m)
As the figures show, there has been a significant fall in the net profit % from the year
2008 -2009; the net profit % in the year 2008 was 9.8% which then decreased to
2.34% in the year 2009. However, the years 2005 - 2007 have been good with the
profit % being 14.53, 13.19 and 16.19 respectively. This shows that the operating
expenses of \nokia have increased and the cost of must be controlled. The cost have
increased drastically resulting in a decrease in the net profits.
2007
53.9
2006
35.5
2005
27.1
(All the figures in the table have been taken from
the nokia's official wesite) [5]
The return on equity % showed steady growth in the years 2005 and 2006 and then
reached the peak value in 2007 with a ROE % of 53.9 but the ROE has decreased to a
great extend in the years 2008 and 2009. As a result of the decrease in the profits
after tax, the profits of the tax in year 2008 were 3889 Eur m which decreased to 260
Eur m in 2009.
2009
6.7
2008
27.2
2007
54.8
2006
46.1
2005
36.5
ACTIVITY ANALYSIS:
Activity analysis measures the company's efficient utilization of resources. The
greater the efficiency in the use of its assets to generate sales, the higher is the
potential profitability. Hence, the analysis compares the level of sales with the
investments in selected assets. The activity analyses that are considered here to study
about Nokia are:
Turnover of Assets
Turnover of Fixed Assets
Stock Turnover
Days of Stock Held
Turnover of assets is the efficient use of assets for the profitable operation of the
business. It is a consistent reliable indicator of managerial skills in generating sales
volume on a base of the total assets employed by the company.
1.35
2006
41121
22617
1.81
2005
34191
22452
1.52
(All the figures in the table above are in Euro m)
2.2 TURNOVER OF FIXED ASSETS:
The turnover of fixed assets is the measure of a company's ability to generate net
sales from fixed-asset investments - specifically with regard to property, plant and
equipment etc. The higher the fixed-asset turnover ratio the more effective the
company has been using the investment in fixed assets to generate revenues.
2009
40984
12125
3.38
2008
50710
15112
3.35
2007
51058
8305
6.14
2006
41121
4031
10.20
2005
34191
3347
1021.54
2007
33781
2215
15.25
2006
27742
1611
17.22
2005
22209
1486.5
14.94
(All the figures in the table above are in Euro m)
2.4 DAYS OF STOCK HELD:
The number of days the stock is held is the ratio that measures the average number
of days' stock held by an organization.
Cost of sales
Days of Stock Held
2009
2199
27720
28.95
2008
2704.5
33337
29.61
2007
2215
33781
23.93
2006
1611
27742
21.195
2005
1486.5
22209
24.43
(All the figures in the table above are in Euro m)
SOLVENCY ANALYSIS:
Solvency ratios is the ratio that measures the relationship between debts and owners
equity and examine the proportion of debt the company is using i.e.; to measure a
company's ability to meet long-term obligations. It measures the size of a
company's after-tax income, excluding non-cash depreciation expenses, as compared
to the firm's total debt obligations. It provides a measurement of how likely a
company will be able to continue meeting its debt obligations. Acceptable solvency
ratios will vary from industry to industry, but as a general rule of thumb, a solvency
ratio of greater than 20% is considered financially healthy. Generally speaking, the
lower a company's solvency ratio, the greater the probability that the company will
default on its debt obligations. The different solvency ratios are:
Current Ratio
Quick Assets
Debtors Collection Period
Creditors Payment Period
Speed of cash flow
1.82
2005
18951
9670
1.96
Nokia Corp.'s current ratio deteriorated from 2007 to 2008 but then improved from
2008 to 2009 but however the ratios still remain below the 2007 levels.
2009
23613
1865
15188
1.43
2008
24470
2533
20355
1.07
2007
29294
2876
18976
1.39
2006
18586
1554
10161
1.67
2005
18951
1668
9670
1.78
The Nokia Corp.'s quick ratio deteriorated from 2007 to 2008 but then improved
from 2008 to 2009.
2009
7981
40984
71.08
2008
9444
50710
67.97
2007
11200
51058
80.06
2006
5888
41121
52.26
2005
5346
34191
57.07
2006
41121
5888
96.52
2005
34191
5346
79.02
FINANCIAL STRUCTURE: (not edited)
Financial Structure is the framework of the various types of financings employed by a
firm to acquire and support resources necessary for its operations. Commonly, it
comprises of stockholders' (shareholders'), investments (equity capital), long-term
loans (loan capital), short-term loans (such as overdraft), and short-term liabilities
(such as trade credit) as reflected on the right-hand side of the firm's balance sheet.
Capital structure, in comparison, does not include short-term liabilities. [7]
Debt
Equity
Capital Gearing
2009
20989
35738
0.59
2008
23072
39582
0.58
2007
20261
37599
0.54
2006
10557
22617
0.47
2005
9938
22452
0.44
(All the figures in the table above are in Euro m)
4.2 INTEREST COVER: (not edited)
Interest cover is a measure of the adequacy of a company's profits relative to interest
payments on its debt. The lower the interest cover, the greater the risk that profit
(before interest) will become insufficient to cover interest payments. It is:
EBIT net interest paid
A value of more than 2 is normally considered reasonably safe, but companies with
very volatile earnings may require an even higher level, whereas companies that have
very stable earnings, such as utilities, may well be very safe at a lower level. Similarly,
cyclical companies at the bottom of their cycle may well have a low interest cover but
investors who are confident of recovery may not be overly concerned by the apparent
risk.
13264
1661
7.99
2008
17373
2302
7.54
2007
17277
2565
6.73
2006
13379
92
145.42
2005
11982
205
58.45
(All the figures in the table above are in Euro m)
16.98
1.85
9.18
2006
17.08
1.06
16.11
2005
11.96
0.83
14.41
(All the share prices mentioned above has been
calculated taking the date as 31st Mar for every
five years)
5.2 EARNINGS PER SHARE:
It is the portion of a company's profit allocated to each outstanding share of common
stock. Earnings per share serve as an indicator of a company's profitability.
2009
0.24
2008
1.07
2007
1.85
2006
1.06
2005
0.83
5.3 DIVIDEND YIELD
Dividend yield = Dividend per share
Market value per share
(2009 = 0.40/8.88 = 0.045)
Year
Dividend Per Share
Market Value Per Share
Dividend Yield
200.9
0.40
8.88
0.045
2008
0.40
20.04
0.0199
2007
0.53
16.98
0.031
2006
0.43
17.08
0.025
2005
0.37
11.96
0.031