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Fraud Examination

In: Business and Management

Submitted By knlbrown3353
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As Bayer approached its first quarter in April 2010, chief executive officer Dr. Marijin Dekkers explained that “Bayer operating performance was back on track, compared with the crisis year 2009”. Bayer Group had sales of $35.1 billion. Clearly, 2010 was a successful year for Bayer in terms of business expansion and growth. The group examined Bayer financial statements to determine if the picture presented by Dekker is reflected in the financial performance of the firm by examining financial ratios using information from the Income statement and balance sheet. Financial ratios help to identify some of the financial strength and weakness of firms. The ratios give us two ways on making meaningful comparisons of the financial data. First, we examined the ratios across time ( for example, five years) to identify trends and we can compare the firm’s ratio with those of other firms. This financial analysis will allows us to see if Bayer is as good as management claims it to be.
Analysis of Financial Ratios

Bayer’s sales increased by 12.6% from 2009 to 2010, after dropping 5.3% from 2008 to 2009. However, Bayer’s gross profit margin remained stable, increasing from 47.20% in 2006, 49.50% in 2007, 50.00% in 2008, 51.44% in 2009 and 51.50% in 2010. On the other hand, Bayer net profit margin decreased over the same period, falling from 10.77% in 2008 to 9.64% in 2009 to 7.78% in 2010. The decrease in 2010 is more significant than the previous years, this is caused by 17.1% increased of operating costs 17.1%, partially due to an increase in Research & Development and partially due to “expenses related to significant legal risks” (Bayer AG 2011). Starting 2013, Bayer will make 800m per cuts to handle this increase. Bayer’s interest coverage ratio has remained steadily above five over the last five years. The company’s operating income covered its…...

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