Yizhou Lu

Financial Accounting 210

http://www.daimler.com/Projects/c2c/channel/documents/2287152_

Daimler_Annual_Report_2012.pdf

About Daimler

Location of home office:

Stuttgart, Germany

Ending date of latest fiscal year:

Dec.31st

Chief executive

officer:

Dr. Dieter Zetsche

About Daimler

Products: Mercedes-Benz Cars, Daimler

Trucks, Mercedes-Benz Vans, Daimler

Buses and Daimler Financial Services

Main geographic area of activity: Asia,

North America, Europe and Pacific.

Audit Report

General Points: All statements reflect real

situation of Daimler in the year of 2012. All

values are fair and true.

Name of the company’s

independent auditor:

KPMG AG,

Wirtschaftsprufungsgesellschaft,

Berlin

Stock Market Information

Most recent price of the company’s stock:

€ 49.41 (6/2/2013)

Twelve month trading range of the

company’s stock:

€ 32.86 - 50.37 (until 6/2/2013)

Dividend per share: € 2.20

Opinion: Hold (overall increasing during

year 2012)

• Multi Step

• Major increase in net income caused by an

increase in sales and reduction in other

expenses.

2012 2011

Revenue 114,297 106,540

Gross Profit 25,513 25,517

Net Income 6,495 6,029 In million euros

Equity and liabilities

in millons of euros

2012 2011

Equity 45410 41337

Provisions 16557 19137

Financing liabilities 76251 62167

Trade payables 8832 9515

Other financial liabilities 8391 9693

Other liabilities 7437 6283

Total equity and liabilities 162978 148132

Assets

in millons of euros

2012 2011

Intangible assets 8885 8259

Property, plant and

equipment 20599 19180

Equipment on operating

leases and receivables

from financial services 75118 68738

Investments 4646 4661

Inventories 17720 17081

Trade receivables 7543 7849

Cash and cash equivalents 10996 9576

Marketable debt securities 5598 2281

Other financial assets 5960 4964

Other assets 5913 5903

Total assets 162978 148132

• Significant increase of assets and drop of liabilities from 2011 to 2012.

• Increase of equity.

• Sign of increasing number of investors and growing future potentials.

in millons of euros

2012 2011 Net cash from

operating

activities -1100 -696 Net cash used in

investing

activities -8864 -6537 Net cash from

financing

activities 11506 5842

• Net cash from operating activities is much lower than

net income.

• Heavy dependence on large amount of financial

activities.

• Growing investments.

• Most financial activities include loans (increased

financial liabilities).

• Cash has decreased in two years.

Topics in the notes 1. Significant accounting policies

2. Accounting estimates and assessments

3. Significant acquisitions and dispositions of interests in companies

and other assets and liabilities

4. Revenue

5. Functional cost

6. Other operating income and expense

7. Other financial income and expense

8. Interest income and expense

9. Income taxes

10. Intangible assets

11. Property plant and equipment

12. Equipment on operating leases

13. Investments accounted for using the equity method

14. Receivables from financial services

15. Marketable debt securities

Topics in the notes 16. Other financial assets

17. Other assets

18. Inventories

19. Trade receivables

20. Equity

21. Share-based payments

22. Pensions and similar obligations

23. Provisions for other risks

24. Financial liabilities

25. Other financial liabilities

26. Other liabilities

27. Consolidated statement of cash

flows

28. Legal proceedings

29. Guarantees and other

financial commitments

30. Financial instruments

31. Risk managements

32. Segment reporting

33. Capital management

34. Earnings per share

35. Related party relationships

36. Remuneration of the

members of the board of

Management and the

Supervisory Board

37. Principal accountant fees

38. Subsequent events

39. Additional information

Accounting Policies

Revenue Recognition

Revenue from sales of vehicles, service parts and other related products

is recognized when the risks and rewards of ownership of the goods are

transferred to the customer, the amount of revenue can be estimated

reliably and collectability is reasonably assured. Revenue is recognized

net of sales reductions such as cash discounts and sales incentives

granted.

Cash

Interest and taxes paid as well as interest and dividends received are

classified as cash provided by/used for operating activities. Dividends

paid are shown in cash provided by/used for financing activities.

Accounting Policies

Inventories

Inventories are measured at the lower of cost and net realizable value. The net realizable value is the estimated selling price less any remaining costs to sell. The cost of inventories is generally based on the specific identification method and includes costs incurred in acquiring the inventories and bringing them to their existing location and condition. Costs for large numbers of inventories that are interchangeable are allocated under the average cost formula. In the case of manufactured inventories and work in progress, cost also includes production overheads based on normal capacity.

Property and equipment

Property, plant and equipment are measured at acquisition or manufacturing costs less accumulated depreciation. If necessary, accumulated impairment losses are recognized. Depreciation expense is recognized using the straight-line method. The residual value of the asset is considered.

Accounting Policies

Accounts receivable

Retail receivables include loans and finance leases to end users of the Group’s products

who purchased their vehicle either from a dealer or directly from Daimler. Wholesale

receivables represent loans for floor financing programs for vehicles sold by the Group’s

automotive businesses to dealers or loans for assets purchased by dealers from third

parties, primarily used vehicles traded in by dealers’ customer or real estate such as

dealer showrooms. Other receivables mainly represent non-automotive assets from

contracts of the financial services business with third parties

Investments

Available-for-sale financial assets are measured at fair value, with unrealized gains or

losses being recognized in other comprehensive income/loss. If an available-for-sale

financial asset is impaired, the difference between its cost (net of any principal payment

and amortization) and its current fair value (less any impairment loss previously

recognized in the statement of income) is reclassified from other comprehensive

income/loss to the statement of income.

Financial Analysis

Liquidity Ratios

Working Capital

2011: 61-55= 6 billion euros

2012: 67-59= 8 billion euros

Current Ratio

2011: 61/55= 1.11

2012: 67/59= 1.14

Increase of liquidity due to an increase in cash

equivalents

Financial Analysis

Liquidity Ratios

Receivable turnover

2011: 106,540/7849 = 13.6

2012: 114,297/7543 = 15.2

Reducing uncollectible from 2011 to 2012.

Average days’ sales uncollected

2011: 365/13.6 = 26.8

2012: 365/15.2 = 24.0

Shorter period of collecting payments

Financial Analysis

Liquidity Ratios Inventory turnover

2011: 106,540/17,081 = 6.24

2012: 114,297/17,720 = 6.45

Remaining same sales rate

Average days’ inventory on hand

2011: 365/6.24 = 58.5

2012: 365/6.45 = 56.6

Operating cycle

2011: 26.8+58.5=85.3

2012: 24.0+56.6=80.6

Financial Analysis

Profitability Ratios

Profit margin

2011: 6029/106540=0.057

2012: 6495/114297=0.057

Remaining same rate of earning from revenue

Asset turnover

2011: 106540/148132= 0.72

2012: 114297/162978=0.70

Slowing rate of asset renewal

Financial Analysis

Profitability Ratios

Return on assets

2011: 6029/148132= 0.041

2012: 6595/162978= 0.040

Remaining profitability of assets

Return on equity

2011: 6029/41337= 0.15

2012: 6495/45410= 0.14

Reducing profitability of equity

Financial Analysis

Market Strength Ratios

Earning per share

2011: 5.32 2012: 5.71

Increasing market confidence

Dividend yield

2011: 2.20/5.32= 0.41

2012: 2.20/5.71= 0.38

Reducing dividends from earnings

Financial Analysis

Solvency Ratio

Debt to equity

2011: 41337/(148132-41337)=0.387

2012: 45410/(162978-45410)=0.386

Remaining major debtors’ control

Financing gap

2011: 26.8+58.5-365/(106,540/9515)=52.7

2012: 24.0+56.6-365/(114,297/8832)=52.4

Industry Situation & Company

Plans

Demand for heavy duty trucks decreased

significantly in 2011 and 2012. Global

markets shrank in 2012.

Even though the company has been relying

on long term loans to maintain a sustainable

condition, Daimler is focusing on spending

more on repaying those debts and gaining

profits from sales of passenger vehicles.

Sales is increased by 9% in 2012.

Executive Summary

Under a declining global market of both passenger

and business vehicles, Daimler still successfully

increased sales and reacted to the change of market

properly by shifting production focuses in 2012.

Stock prices increased in all quarters in 2012,

reflecting increasing sales and market confidence.

From previous years of declining company

situation, year 2012 could be a sign of the bouncing

of the company. It could be a proper time to invest.

Doing what is right out of conviction. Our success as a premium manufacturer is also based on maintaining a culture of integrity that encompasses shared values and a shared concept of ethical behavior.

“Integrity gets us moving: Right of way for respect, openness and fairness,”