Working capital trade-offs of. Porsche AG, Daimler AG, and BMW Coursework

Working capital trade-offs of. Porsche AG, Daimler AG, and BMW - Coursework Example This section would be discussing the working capital trade-offs of three luxury car manufacturing companies Porsche AG, Daimler AG, and BMW. Porsche AG is a German luxury car company which was established in the year 1931. The company generated â‚ ¬10,928 million in the year 2011 as revenue. The working capital of the company was estimated to be around â‚ ¬65.8 billion in 2011, which was derived from the receivable from the customers, increasing leasing and renting charges of assets, etc (Volkswagen AG, 2011). Porsche AG met its working capital requirement through credit from banks when they were in Volkswagen Group (Porsche Automobil Holding SE, 2013). However, now the net liquidity position has improved with a 15 percent rise in sales and about 21 percent rise in the return on equity. So it can be said that Porsche no more has to rely on bank credits for working capital, but the company in 2011 negotiated with banking syndicate for extending a credit of â‚ ¬2.5 billion. This reveals that Porsche AG has to trade profitability for liquidity because the working capital requirement for running operational function is more important than investing the working capital. The company was running short of cash or cash equivalents due to which they had to keep provisions for credit from banks (Porsche SE, 2011). Daimler AG another luxury car company which has many luxury car brands under its business, such as Mercedes-Benz, Maybach, Mitscubishi Fuso, and many more. The company was established in 1998 in Stuttgart, Germany. Revenue generated by Daimler AG in 2011 was â‚ ¬106.54 billion, and it was able to earn a profit of â‚ ¬5.667 billion in 2011, during the ongoing economic slowdown. The liquidity amounted to â‚ ¬11.9 billion in 2011, while the same was â‚ ¬13 billion in 2010. The decreasing liquidity is due to the extensive cash outflow for the pension plan assets, and also for the acquisition of the share of Tognum AG. Daimler AG is defensive in this regard, as it chooses to maintain liquidity and control credit risk exposure (Daimler, 2011). The company traded liquidity for profitability and for this Daimler AG also raised funds to finance the cash requirements of the company (Daimler, 2011). BMW is a German automobile company which was established in 1916. BMW stands for Ba yerische Motoren Werke AG. BMW is also the parent company of the most luxurious car called Rolls Royce and it also produces Mini marquee. The revenue earned by the company in 2011 was â‚ ¬68.82 billion and the operating income was about â‚ ¬8.006 billion. The net profit of the company increased in 2011 by â‚ ¬4,907 billion, which lead to increased cash inflow of the company by â‚ ¬1,664 billion. However, the changing working capital has decreased the cash flow from the operating functions by â‚ ¬1,212 million. This is because of increase in stock and introduction of new models of cars. So the working capital trade-off of BMW revealed that liquidity was traded for profitability. The company minimized the amount of working capital in order to invest them for launching new models of cars, after