Prague, University of Economics and Business Faculty of Business Administration
Bachelor's Field of Study: Corporate Finance and Management
Bachelor’s Thesis
Financial Analysis of SIXT SE between 2016 - 2020
Huan Bui Le Gia WS 2021/2022
Declaration of Authenticity:
I hereby declare that the Bachelor ́s Thesis presented here in is my own work, or fully and specifically acknowledged wherever adapted from other sources. This work has not been
published or submitted elsewhere for the requirement of a degree programme.
Prague, December 14th, 2021 Signature
Acknowledgments:
I am extremely grateful to my supervisor doc. Ing. et Ing. Ondřej Machek MBA Ph.D. for his support, continuous feedback and valuable advices during my bachelor’s thesis.
Title of the Bachelor’s Thesis:
Financial Analysis of SIXT SE between 2016 - 2020
Abstract:
This bachelor’s thesis is inspired by the topic of financial analysis of SIXT SE, a German mobility services provider, for the purposes of understanding the financial situation between 2016 – 2020 and giving recommendations for the company management. The theoretical parts provide the essential knowledge about financial analysis in terms of definition, goals, sources and methods for approaching different dimension of corporate finance. The practical parts are the application of those methodologies to the case of SIXT SE based on the information collected from the company financial statements and external relevant sources. The outcome of this thesis dedicates a fluctuation of SIXT SE throughout the reported period in terms of financial health, especially the last year of 2020, due to strategic planning changes and the external factors of Covid-19. The reorganisation, along with the development of the integrated application, created different performed positions of components in all financial statements, particularly other income and investing cashflow in the first 04 years. Meanwhile, the situation in 2020 required the company to be more liquid by disposing large amount of rental vehicles to convert to cash and similarities. As a result, the company is recommended to approach flexible and sustainable practises to manage its financial sources for an optimising and meaningful business in the future.
Keywords: financial analysis; financial statements; mobility industry; car rental; ride-hailing;
car-sharing.
Table of Contents
1 INTRODUCTION ... 1
2 THEORETICAL PART ... 2
2.1 Characteristics of financial analysis ... 2
2.2 Users of financial analysis ... 3
2.2.1 Managers ... 3
2.2.2 Employees ... 3
2.2.3 Owner/Shareholders ... 3
2.2.4 Creditors and financial institutions ... 3
2.2.5 Business partners/Customers ... 4
2.2.6 Government and its bodies ... 4
2.2.7 General public and potential investors ... 4
2.2.8 Competitors ... 4
2.3 The sources of information for financial analysis ... 5
2.4 Financial statements used for financial analysis ... 6
2.4.1 Balance sheet ... 7
2.4.2 Income Statement ... 7
2.4.3 Statement of Cash Flow ... 8
3 ANALYSIS TOOLS AND TECHNIQUES ... 9
3.1 Common size analysis ... 9
3.1.1 Horizontal analysis ... 9
3.1.2 Vertical analysis ... 10
3.2 Ratio analysis ... 10
3.2.1 Liquidity ... 11
3.2.2 Profitability ... 13
3.2.3 Solvency ... 15
3.2.4 Activity ... 16
3.2.5 Valuation ... 17
3.2.6 Industry ... 17
3.3 DuPont System ... 18
3.4 Golden Balance Rules ... 19
3.4.1 Golden rule for financing ... 19
3.4.2 Golden rule for risk settlement ... 20
3.4.3 Golden pari rule ... 20
3.4.4 Golden ratio rule ... 20
3.5 Analysis of the working capital ... 21
3.6 Bankruptcy and credibility ... 21
3.6.1 Altman Z-score ... 22
3.6.2 Kralicek quick test ... 23
3.7 SWOT Analysis ... 23
3.7.1 Strengths ... 24
3.7.2 Weaknesses ... 24
3.7.3 Opportunities ... 24
3.7.4 Threats ... 24
4 PRACTICAL PART ... 26
4.1 Characteristics of the company ... 26
4.1.1 Basic data ... 27
4.1.2 Lines of business ... 27
4.1.3 Ownership Structure ... 28
4.1.4 Corporate Governance ... 29
4.2 Evaluation of the macroeconomic situation in 2016 – 2020 ... 31
4.3 Basic overview of SIXT SE financial situation ... 34
4.4 Common-size analysis ... 36
4.4.1 Balance Sheet ... 36
4.4.2 Income statement ... 44
4.4.3 Cash-flow statement ... 48
4.5 Ratios Analysis ... 53
4.5.1 Liquidity ... 54
4.5.2 Profitability ... 55
4.5.3 Solvency ... 56
4.5.4 Activity ... 57
4.5.5 Valuation ... 58
4.5.6 Industry ... 59
4.6 DuPont System ... 61
4.7 Golden balance rules ... 63
4.7.1 Golden rule for financing ... 63
4.7.2 Golden rule for risk settlement ... 64
4.7.3 Golden pari rule ... 65
4.7.4 Golden ratio rule ... 66
4.8 Analysis of working capital ... 67
4.9 Bankruptcy and Credibility ... 69
4.9.1 Altman Z-Score ... 69
4.9.2 Kralicek quick test ... 70
5 SWOT ANALYSIS ... 71
5.1 Strength ... 72
5.2 Weaknesses ... 73
5.3 Opportunities ... 74
5.4 Threats ... 75
6 RECOMMENDATIONS ... 76
7 CONCLUSION ... 77
8 REFERENCES ... 79
8.1 Citations ... 79
8.2 Figures and tables ... 83
8.2.1 Figures ... 83
8.2.2 Tables ... 83
9 APPENDIX ... 85
Acronyms:
• COGS: Cost of goods sold
• COP26: the 2021 United Nations Climate Change Conference
• EBIT: Earnings before Interests and Taxes
• FED: Federal Reserve
• GAAP: Generally Accepted Accounting Principle
• IFRS: International Financial Reporting Standards
• IMF: International Monetary Fund
• ISSB: The International Sustainability Standards Board
• P&L: Profit & Loss
• PAT: Profit after taxes
• SE: Societas Europaea
• SEC: U.S Securities and Exchange Commission
• SMEs: Small and medium-sized enterprises
• UNWTO: World Tourism Organisation
• VUCA: Volatility, uncertainty, complexity and ambiguity
1 Introduction
2020 was one of the most unexpectedly fluctuating years in the modern world. Due to the contagious disease of COVID-19, the global economy experienced a biggest depression since the financial crisis in 2008 which led to the change in every field of the economy and business activities, from the way the customer making decisions, the means of marketing to the working environment of millions of employees. Along with that, such services-related industries as hospitality, mobility were no doubt seriously affected by the situation as people were emotionally encouraged or legally required to limit the travel to eliminate the spread of the virus. While there was no money from the daily operations, business entities had to deal with other problems to keep them survive in the market with a proficient level of positive cashflow.
There was no exception with the mobility industry. By the downside of economy, the industry was affected and this part is mentioned in the next sections of the thesis. SIXT SE, the family- owned German company, is one of the giant mobility services providers not only in the market of Europe, but also in worldwide. Starting from a small car rental service with 03 vehicles in 1912, SIXT has developed and continuously extended the operations to more than 100 countries worldwide by its own corporations and franchisees partnership. The year of 2020 recorded huge decreases of the business in terms of both revenue and expenses. In the last 04 years, the company management decided to follow the new strategic plan with the concentration on implementing technological advancements into the business operations and customer experience. The strategical M&A transactions of its joint ventures or the leasing business unit along with the integrated platform of ONE introduced in 2019 were the largest move which marked the transition of the new way to do the business of Sixt family.
Follow that, the company is facing the change not only in the daily operation but also the practises to manage its sources, especial financial indicators to adapt the new situation of the business. The amount of money spent for several accounts will not be at that amount anymore in the couples of years in replacement of the others. It potentially led to a change in the proportion of operational and resources-related indicators as well. Therefore, it is vital and necessary to determine and understand both the opportunities and the potential threats, which occur to the company to administrate the business in good conditions. From then, management bodies can drive the company to accomplish further goals and objectives in the new periods.
2 Theoretical part
Reading and understanding all financial statements is an effective way to help to understand the financial situation of a company. In that process, it is important to understand the definitions, terminologies and principles of methodologies before making analyses. In these following sections, the author mentions and clarifies such general knowledge, information and empirical literature related to the topic.
2.1 Characteristics of financial analysis
Theoretically, there is a few definitions in terms of financial analysis. Financial analysis (or financial statements analysis), according to John Myer (1941), “is largely a study of relationships among the various financial factors in a business, as disclosed by a single set of statements and a study of the trends of the factors, as shown in series of statements”. In the working range of this paper, the author defines the analysis of financial statements as the use of a number of methodologies to analyse the logic and the flow behind statistical figures presented in the financial papers.
These practises can provide such valuable and honest information about the actual situation of the company (Hanif & Mukherjee, 2020). For instance, a positive net income declared in the P&L statement by itself does not always reflect the actual situation. Despite the recorded high profit, an enterprise goes bankruptcy in the next year due to the poor-management of the cashflow.
Hanif & Mukherjee (2020) also provided several purposes of financial analysis and, it serves the activities of management, strategic planning and investing. It helps managers to determine the efficiency, weakness, and growth of the business at an overall or divisional level. Hence, strategy planners can determine the current position of the market to enhance the comparative advantages by inter-company comparison. Moreover, the potential or current investors can determine the worthiness and earning possibility of the company based on the resulting outcomes of analysis.
Nevertheless, like other things of the business, some aspects of the financial analysis are considered due to the inherent limitations of the financial statements (Hanif & Mukherjee, 2020). The absence of a few factors in the financial statements leads to potential shortage sources for the further analysis. Such unaccountable information as the loyalty or skills of workers, which are unable to be recorded, could pose difficulties for users when it comes to analyse.
2.2 Users of financial analysis
The figure in financial statement covers a wide range of operation in the company and have a wide effect to different stakeholders. According to Hanif & Mukherjee (2020) users of financial statements can be divided into two groups, based on the nature: internal users and external users. The internal group includes managers, employees, owners/shareholders.
Meanwhile, such external users as creditors and financial institutions, business partners / customers; government and its bodies or competitors highly demand for the information in financial statements as well.
2.2.1 Managers
The high-level management bodies are responsible not only for the daily operations of the business but how to operate in the most efficient way and keeping the business with the company strategy as well. Therefore, managers need to use these information and analysis to reveal any strength, weaknesses or opportunities for approaching and making appropriate decisions (Bragg, Steven & Roehl-Anderson, 2011).
2.2.2 Employees
As employees are also an important part of the organisation, it is necessary for them to know the situation of their companies, not only for knowing whether their employer is capable of paying compensation and benefits but supporting them in their pathway of career.
2.2.3 Owner/Shareholders
The owners of enterprises have a high demand for using this analysis to understand their business situation in terms of profitability, liquidity and hence survive (Jahirul Hoque &
Begum, 2006). With these resulting figures from financial statements, owners can propose any strategic and organisational decisions and then keep the business in the right track.
Understanding financial statements also help owners to evaluate the performance of management people and determine whether their responsibilities are satisfying.
2.2.4 Creditors and financial institutions
These debt-related ratios in financial analysis helps creditors determine the possibility of taking and credit when it comes to both short- and long-term financial offers. For short-term creditors, such liquidity ratios within one year and how company manage its working capital are interested to clarify the possibility of doing business and subsequently pay debt in period
of credibility. For the latter financial offers, they are more interested in such long-term indicators as solvency and survival to determine the capabilities of the business in several years (Jahirul Hoque & Begum, 2006).
2.2.5 Business partners/Customers
The business partners, normally suppliers, use those analysis to set the credit standard of trade payables for the company. It helps them determine whether their partners deserve to have a high credibility, or they should keep their invoice on credit (Hanif & Mukherjee, 2020).
Customers, especially B2B customers and in a supply chain, must ensure that their production not be interrupted due to the low possibility of their partners. Therefore, these information helps them prevent the interruption in the production (Hanif & Mukherjee, 2020).
2.2.6 Government and its bodies
Theses financial information analysed is a fundamental source of data for the governments and its bodies for evaluating and managing the economy. Consequently, these practises are highly relied on the financial figures from companies for imposing a range of policies, which is related to goods, labours or the other similarities in the economy and society (Hanif &
Mukherjee, 2020).
2.2.7 General public and potential investors
For any individuals and groups that seeking for investing opportunity or simply information, the information provides them noticeable trends, and growth in any sectors or in general (Hanif & Mukherjee, 2020). When the company scale achieves a determined rate with that business sources, investors attraction is considered for the business expansion. In that progress, investors need financial information to understand the firms before making any investment decisions. Therefore, these analyses play a vital role to help them determine the quantum and manage their investment (Hanif & Mukherjee, 2020).
2.2.8 Competitors
The rival companies use the financial information for different purposes, both competing and managing the operations. On the one hand, analysing situation of their rival can help them determine the strategy and business practises applied to enhance its competitiveness. On the other hand, those information and practises can be exchanged as a reference for making benchmarks, adjustment and operations enhance.
2.3 The sources of information for financial analysis
The practise of analysing is no doubt only occurred when users have an amount of information, otherwise, there is no possibility to understand the financial situation. The analysis require a wide range of information, which are highly recommended to be relevant for the purposes of the analysts and from both sides of internal and external sources.
According to Štangová & Víghová (2016), “The most important information source is considered the financial statement of the company.” The cited authors believed that the current quantitative figures are the main and dominant criteria for evaluating the growth and development of a business. Hence, “The picture of the company and its financial situation, is created on the base of its profitability, stability and growth”. A variety of components play a role as a baseline for information including financial statements, text part of the notes, accounting principles and accounting methods, additional information on the financial statements and other information. (Štangová & Víghová, 2016). There should be a comprehensive connection between these parts and a meet on related conventions and principles.
In addition, such information about management, stock performance, bodies compensation or similarities are also provided by the company in annual reports or public released on websites or by proxy statement. This information can help people to better understand the business and management activities of the enterprises. Hence, users could access the interim reports, which are prepared and published quarterly, semi-annually or periodically depending on companies to get financial information at a higher level of details. Large-size companies normally provide these reports throughout the years to keep information updated to their shareholders and make announcement of any changes during the year.
Making analysis from the internal available sources is important but not enough for fully understanding the picture as those figures only reflect the performance of a particular business. As companies operate and compete each other in an industry or markets, it is essential to make comparison between entities as well (Robinson, Henry, Pirie & Broihahn, 2015). Throughout the process, the conductors are recommended to get information of the economy, industry analysis, trade publications or statistics published by governance organisations. While the indicators of economy can clarify the subsequent performance in a general situation, information within industry reflect how well company is operating compared to its rivals. This information, along with the company’s financial sources, contributes to the higher effectiveness of the analysis.
2.4 Financial statements used for financial analysis
In general, financial statements “provide a summary of accounts of a business enterprise”
(Myer, 1979) and “document the movement of cash, and goods & services into and out of the enterprise” (Ittelson, 2009) at a specific point of time or in a period. In practises, the three main financial statements are Balance Sheet, Profit and Loss Statement and Cash Flow Statement. Each statement reflects specific functions related to assets and liabilities structures, operational performance and the cash flow performance, respectively. These statements are not performing separately but interrelated to each other in terms of several range and components and they are discussed more detail in the next sub-sections.
When the business includes a variety of entities and they are related to each other as parent company and subsidiaries, the group is obliged to report under consolidated financial statements. It broadly covers both apparent and substantial issues related to acquisition, goodwill and merge accounting or foreign currency exchange, segmental reporting, related party transactions (Taylor, 1996). The consolidation, or the action of reporting under one single economic entity is performed following the legal instruction of IFRS 10.
There is a variety of accounting standards applied at a regional or national level. However, the two most used standards of financial statements reporting are IFRS and GAAP. IFRS are issued by the IFRS Foundation and the International Accounting Standards Board (IASB).
According to Ben, Ammi & Levy (2018), IFRS are used by many multinational corporations and are replacing a number of local accounting standards thanks to the comparable across different boundaries. Meanwhile, the Generally Accepted Accounting Principle (GAAP) is legally recognized by the U.S Securities and Exchange Commission (SEC). American corporations are obliged to submit financial statements to SEC quarterly with the form 10-Q and annually with form 10-K. In practises, while GAAP is the standards applied in the America, IFRS are used in over 110 countries (Ben, Ammi & Levy, 2018).
As any kind of business recording practise, the appearance of financial statements serves for a number of objectives. One of the most essential one is to provide analysts the assessment to make reports and subsequently analyse the position at a point of time and the developing progress throughout a particular period (Hanif & Mukherjee, 2020). All financial information is presented in those papers including numerical data, following commentary and discussions.
Hence, information reported and provided is used for determining such legal obligations as income taxes or other similarities which are calculated by the figures presented in the financial statements.
2.4.1 Balance sheet
Balance Sheet is the record of assets, liabilities and owners’ equity reflecting the financial position of a company, with a prominent level of account classification given in a specific period. In general, the balance sheet displays what company is owning, which is owed and the capital of the company. The structure of the balance sheet is required to follow the balance equation of:
Total Assets = Toal Liabilities + Owners’ Equity
On the one side, the assets are tangible and intangible properties are owned by the company such as buildings, equipment, inventory, cash, etc in different terms of time. Therefore, the assets are divided into two groups based on the liquidity, whether they are used within 01 year or more than 01 year, namely current assets and non-current assets. Such accounts as building, equipment are typical for long-term assets, while trade receivables or cash and bank balances are popular when it comes to current assets. On the other side of the balance sheet,
“liabilities are economic obligations of the enterprise, such as money that the corporation owes to lenders, suppliers, employees, etc.” (Ittelson, 2009). Like assets, there are two groups of liabilities based on liquidity, namely current liabilities and non-current liabilities.
Meanwhile, the accounts belonging to equity are represented in the same side with the liabilities and represent for the money owned and added to the business by their shareholders.
The amount increases when company gains earnings during the period or issues new equity.
In opposition, it can decrease due to the business loss, payments for dividend or the repurchase of its shares.
There is a difference between the way of balance sheet reporting in terms of standards of accounting. According to the IFRS, companies' staffs can use historical cost model or a revaluation model. Meanwhile, there is only one permission of using historical cost model when report under GAAP. Mainly, balance sheet is used for reporting and understanding the position at a single point of time thanks to the variety of the recorded accounting information in the statement. By this information, users can understand the financial position and from then have a better management for the business.
2.4.2 Income Statement
Statement of profit and loss (or Income statement) evaluates the financial performance of an enterprise throughout a period, normally quarterly and annual. Such detail figures about the business operation results and related similarities in a specific period are displayed in the
statement, including revenues from operation; other revenue; operational expenses; other expenses; earnings before depreciation and amortisation; earnings before income taxes; net income; etc. There are two types of preparation for the income statement, which are total-cost and cost-of-sales format. While the first format is structured by the kinds of cost, the later one is based on the functional areas where the costs are allocated (Nothhelfer, 2017).
The main objective of the P&L Statement is to show the earning result and the capacity of doing business of the company through the figures of revenues, expenses, and profit. Hence, it helps readers study the company’s performance based on historical data, recognise the connection with other statements and any distinction between operational and non-operation activities (Hanif & Mukherjee, 2020). However, the output of the income statement suffers with several limitations due to the recognition practises of revenue and closing stock (Hanif &
Mukherjee, 2020). There is some manipulation of the revenue recognition which leads to an incorrect understanding about the actual position of the company. Hence, the earning capacity may not be reflected truly due to the untrue recognition of the closing stocks.
2.4.3 Statement of Cash Flow
The cash flow statement indicates the inflows and outflows of cash from a variety of activities including operating, investing and financing. Companies can report cash flow statement either with the direct or the indirect method. These approaches are similar but with a slight difference when it comes to the operational section. While the direct approach discloses the cash-in by source, the indirect one by use (Robinson, Henry, Pirie & Broihahn, 2015). It is believed that the information from the cash flow statement is more helpful in terms of accomplishing succeed for the company as it reflects the actual characteristics of each transaction (Hanif & Mukherjee, 2020).
On the one hand, the information in cash flow statement helps readers determine not only the liquidity of the flow, but the flexibility to react to circumstances and ability to generate cash in the future as well. Hence, it supports the statements of the profit in the P&L statement and clarify the change of assets and liabilities in a period, which is not mentioned in the balance sheet. On the other hand, the component of cash of a business entity is easily influenced by factors (such as bargain power). Along with that, cash flow is unable to reflect the status of accrued income and expenses. The liquidity of the finance is as important as the profitability, especially in turbulence time such as the pandemic of Covid-19. The company may get into trouble with a negative cash flow recorded during more than a year and suffers negative effect on three main activities as well.
3 Analysis tools and techniques
Chatfield & Vangermeersch (2014) stated that analysis “presumably dates back to the origins of the financial statements” and the main activity is to “interpret them, one way or another, to draw out the information they desired”. To achieve that information, it is important to understand which tools and techniques are appropriate to each expectation.
In this bachelor’s thesis, the author applies a variety of methods consisting of common size analysis, ratio analysis, DuPont system analysis, golden balance rules, analysis of working capital, bankruptcy and credibility and SWOT analysis. Meanwhile, all of methodologies, except for the SWOT analysis, are performed based on the recorded numerical figures of financial statements. The last tool is used based on verbal information to ensure and sophisticate the recommendations after analysing.
3.1 Common size analysis
Common size analysis is the methodology of analysing the financial statements under the percentage comparison forms of selected figured between financial periods (Fuhrmann, 2020). All three primary statements of several periods can be converted into common-size forms. For the balance sheet, the users can understand and determine the most efficient structures of assets and liabilities for that company in each industry (Fuhrmann, 2020).
3.1.1 Horizontal analysis
Horizontal analysis dedicates the percentage change of those figures over time in two different forms: simple percentage change and trend percentage (Mautz & Angell, 2006). The former form is the comparison between the amounts of current-year and previous-year and the determination whether it positively or negatively change through years. Meanwhile, the trend percentages show the percentage of a base year (normally 100 percent), following the formula:
Percentage change = (Current year – Previous year) / Previous year
The resulting figures from horizontal analysis can be delivered either by percentage point or nominal value and express useful information for the users (Shala, Prebreza & Ramosaj, 2021). However, there is potential complicated situation in terms of calculation when one of the components is missing, equals to zero or two components’ value are mathematically inverse to each other (Weygant, Keiso & Kimmel, 2008).
3.1.2 Vertical analysis
Vertical analysis points out the relationship between figures in a single statement within the same financial period and then determine the change of those relations among the time (Mautz & Angell, 2006). In this methodology, the common-sized balance sheets concentrate on the composition between assets and liabilities, while the common-size P&L statements focus on the relationship between expenses and sales items.
Vertical analysis = (Value of a specific item / Value of the base) x 100%
Following the formular, vertical analysis dedicates how much an item proportionally accounted in comparison with a significant base. In balance sheet and income statement, such subtotal values as total assets, total liabilities, total equity, revenues or other similarities are considered as a base for the calculation to help users understand the significance of items in each paper. Meanwhile, the base selection of the cash flow statement depends on the characteristics of the money flow.
3.2 Ratio analysis
Mathematically, ratio is the dedication of a relationship between two quantities. As there is a wide range of figures of different financial statement, there are also numerous interrelations between numbers and readers can use them for determining different kinds of company’s problems. There are two steps of a ratio analysis including the easily done of calculation and the challenging task of interpretation (Hanif & Mukherjee, 2020). By understanding of these ratio meaning, users can determine the financial information in different dimensions of the possibility of profit, liquidity, activity and the capital structure (Hanif & Mukherjee, 2020).
Proceeding the analysis of ratios, users are seeking the historical information of the performance in terms of profitability and operational activities. Based on that, short-term prediction can be created to expect the performance of the company in the future. For external users, these percentage-figures help any person to understand the situation without any specialized knowledge and help them make comparison with other enterprises or with other periods of time.
Nevertheless, as those calculation is only from figures, which is displayed at a specific point of time. Therefore, the meaning of those ratios does not reflect the change as a process but only the occurrence of that change (Davidson, 2020). Hence, as discussed in the previous sections, the information from financial statements has several limitations itself. Therefore, the interpretation can also suffer those limitation and leads to a weakness of the analysis
(Hanif & Mukherjee, 2020). Finally, there is an impossibility to compare ratios not in the same measurement unit of currency or ratios within a company but over different time periods with different scale of operations (La, 2020).
The classification of ratios could be based on the interest of those main stakeholder groups of shareholders, lenders, investors and managers, which are liquidity, solvency, activity and profitability respectively (Hanif & Mukherjee, 2020).
− Liquidity: Current Ratio and Quick Ratio
− Profitability: Gross Profit Ratio, Operating Ratio, Operating Profit Ratio, Net Profit Ratio and Return on Investment
− Solvency: Debt to Equity Ratio, Total Asset to Debt Ratio, Proprietary Ratio and Interest Coverage Ratio
− Activity: Stock Turnover Ratio, Debtors Turn Over Ratio, Creditors Turnover Ratios and Working Capital Turnover Ratio
There are several ways to categorise ratios based on the dimensions of purposes. In this paper, by combining different classifications from different persons, the authors create categories, including:
− Valuation: Price-to-earnings ratio (P/E), Price-to-book ratio (P/B)
− Industry: Free cash flow; Average sales per transaction
3.2.1 Liquidity
Liquidity is the dimensions whether the company is capable of meeting short-time financial requirements and paying short-time payables in a period (Mautz & Angell, 2006). To achieve the long-term goal of profitability and growth, companies should able capable to pay their financial obligations in the normal 01-year basis time and how to maintain the liquidity is a vital consideration of all enterprises.
It is believed that there are more challenge and difficulties for SMEs than larger corporations to achieve these objectives as small companies have a lower assessment to the financial market for capitalisation and credibility (Mautz & Angell, 2006) and this statement is also supported by the conclusions of Bogdan, Baresa & Ivanovic (2012), which is “the large companies (according to market capitalization) are more liquid than companies with lower market capitalisation”.
The three most common measure of liquidity namely working capital, the current ratio and the quick ratio. The part of working capital analysis is dedicated separately in this paper. Such quantitative ratios as the current ratio and the quick ratio help users determine the liquidity of company relating to the scale of its operation (Davidson, 2020).
Current ratio
Current ratio = Current asset / Current liabilities
The single figure of ratio is the reflection of the relationship between current asset and current liabilities. Current assets include cash, cash equivalents and other assets to be considered as a cash or it should be sold with a year. Otherwise, such any kind of obligation which is required to pay in one year are current liabilities.
Current ratio is one of the cost common indicators to estimate the liquidity of an enterprise.
The trend of the ratio can reflect the pressure on the financial obligations, the less the ratios is, the more tress the company has (Mautz & Angell, 2006). Normally, it could be said that a company is financially healthy when the figure exceeds 1. However, there could be some difference from industry to industry.
Quick ratio
Quick ratio, also known as the acid test, dedicates the amount of current assets that quickly being converted to cash in short period of time to pay short-term obligation (Brealey, Myers
& Allen, 2016). Therefore, the quick ratio is developed from the current ratio with a deduction of inventories, which cannot be actively managed by the company as it also depends on the possibilities of selling activities. Nevertheless, this calculation is appropriate only to manufacturing companies, for which the inventories a large part of current assets accounted and not suitable for services companies, as they have such a minor inventories amount. Therefore, the author uses another way to determine the quick ratio in this paper, which is showed in the below formula:
Quick ratio = (Cash + Marketable Securities + Account Receivables) / Current Liabilities
Nevertheless, “a company can have serious cash flow problems with positive liquidity ratios and increasing profits” despite having positive liquidity (Petriashvili, 2018). It is recommended to also use information from cash flow statement as it “provide additional information or sometimes better insight on the financial strength or weakness of a company.”
3.2.2 Profitability
It is no doubt that maximising profits is one of the most important aims of any business and profitability dedicate the overall performance of a company with an evaluation. It is a positive signal for management sectors when the firm can gain profit from business activities. It can be divided into two main groups, namely Margin and Returns (Goel, 2015):
− Margin: ratios dedicate the ability of translating from sales to profit
− Returns: ratios dedicate the efficiency of performance in terms of gaining returns
Gross Profit Ratio
The ratio of gross profit indicates the efficiency of a firm in terms of using business operations related sources to gain profits. The higher value of the ratio, the better situation the company has. In general, a company should have an adequate and stable gross profit ratio, not only for paying operating expenses but prevent the COGS and price policy from fluctuation (Goel, 2015).
Gross Profit Ratio = Gross profit / Sales (Gross Profit = Sales – COGS)
Net Profit Ratio
The Net Profit Margin dedicates the final picture of profitability as the net income is used to be divided by Sales. A low net profit ratio means the company is lack of safety and suffer a higher risk of receiving a loss in the business. In contrast, the higher value of margin, the more positive sales contribute into the profit of the company (Goel, 2015).
Net Profit Ratio = PAT / Sales
Operating Ratio
Operating Ratio is the measure of how good a company can cover its expenses by dividing the total amount of operating expenses by Sales. Unlike the other profitability ratios, operating margin is expected to be as low as possible.
Operating Ratio = Total operating expenses / Sales
Operating Profit Ratio
Operating Profit Ratio indicates how possibly a company earn profitability after paying all operating, distribution and administrative expenses. Using EBIT to calculate is an advantage of this formular as the resulting ratio could deliver a better consideration excluding non-core items. Therefore, users can not only better understand the operating capacity but the long-term prosperity of the company as well (Goel, 2015).
Operating Profit Ratio = (EBIT / Operating Profit) / Sales
Return on Equity
ROE = PAT / Equity
The ratio of Return on Equity (ROE) calculates how many profits earned on the money invested to the company by the shareholders, or shareholder’s equity. A company with a high ROE is attractive as it reflects the possibility and the efficiency of the company performance (Goel, 2015).
Return on Assets
ROA = PAT / Total Assets
Return on assets “measures the income available to debt and equity investors per dollar of the firm’s total assets” (Brealey, Myers and Allen, 2016). The higher value of ROA, the more optimistic situation of the company is as it proves the returns gaining possibility of the business based on its assets.
Return on Capital Employed
Return on Capital Employed (ROCE) is a measure of the profit-generating ability from its funds employed, which shows how many Euro in returns from an initial Euro invested to the company capital (Goel, 2015). This indicator is calculated by two influential figures of operating profit and capital employed, indicated by the following formular:
ROCE = EBIT / Capital Employed
(Capital Employed = Net worth + Preference share capital + Long-term loans)
3.2.3 Solvency
Solvency is used to monitor the ability to pay debts of a company in the future. Meanwhile the liquidity measures its ability to pay obligations in short-time, solvency usually reflect whether enterprise can meet long-term financial liabilities (Hanif & Mukherjee, 2020). The important indicators of solvency include Debt-Equity Ratio; Total Assets to Debt Ratio;
Proprietary Ratio and Interest Coverage Ratio.
Debt Ratio
Total Debt Ratio = Total Liabilities / Total Assets
Debt ratio is used to monitor the leverage extent of the company and determine the amount of assets to be funded through the long-term obligations as opposed to equity (Goel, 2015). The debt ratio of a company should be under 1, or preferably around 0,6.
Debt-Equity Ratio
Debt-Equity Ratio = Long-term Liabilities / Equity
The Debt-Equity Ratio is also known as the financial leverage ratio. A company with a high financial leverage means that they are debt-friendly by aggressively taking abilities to boost its business performance. In contrast, a company with a low debt-equity ratio is not taking benefits from the probably increased profits dedicated by the financial leverage (Goel, 2015).
External stakeholders of the company may refer a low financial leverage as their profitability gained could be protect in case of any business regression. Hence, enterprise with high debt- equity may not be attractive to the additional capitalisation sources (Goel, 2015).
Equity Ratio
Equity Ratio = Shareholder’s Fund / Total Asset
Equity ratio is a good measurement to determine whether the company relies on its own or foreign capital. When the ratio value is low, it means there are more external sources of capital than its owned ones, which can lead to a higher risk for the company solvency.
Interest Coverage Ratio
Interest Coverage Ratio = EBIT / Interest Expense
The ratio of interest coverage helps users determine the capability of the company in terms of paying interests. It is calculated by the division of interest expense of the EBIT to dedicate how good a company can cover their annual interests (Goel, 2015). A high interest coverage indicates a greater ensures for the creditors and this figure exposes the risk when it comes to a fluctuation in earning (Goel, 2015).
3.2.4 Activity
The activities ratios show how efficient the company managed its sources of business to generate the revenue at the most possible level. Therefore, these are also known as the asset utilisation ratios or operating efficiency ratios. In term of affected dimensions, the ratios work for both short-term sources (working capital) and long-term assets as the efficiency has a direct impact to the liquid situation of the company (Robinson, Henry, Pirie & Broihahn, 2015).
Assets Turnover Ratio
The measure of assets turnover determines the utility of using assets to generate sales of the company. The higher value of ATR, the better ability of creating revenues on its assets (Goel, 2015). As the operational activities of SIXT are mainly based on the assets (rental vehicles), it is vital to evaluate the assets turnover ratio to determine whether these tangible assets of the company are creating revenue. The ratio is calculated by:
ATR = Sales / Total assets
Receivables Turnover Ratio
Receivables are the amount of money by which the company has not received but already delivered services or products. The ratio of receivables turnover is the proportion of the revenue on the total amount of receivables in the same period, calculated by the following formula:
Receivables Turnover = Revenue / Receivables
When customers of the company pay their invoice in short time, the number of receivables will be low which leads to a high value of the receivables turnover ratio. According to Brealey, Myers and Allen (2016), a high receivables turnover dedicates a high efficiency in terms of credit management which allows company to cover other late duty and a strict receivables policies imposed which concentrates more on its reliable customers.
3.2.5 Valuation
According to Robinson, Henry, Pirie & Broihahn (2015), the ratios of valuation have been applied to the decision of investment. There are several valuation measurements such as price to earnings, price to book value, price to cash-flow and price to sales. In this paper, author use the first two ratios for discussing the valuation of SIXT as the following reasons:
Price-to-earnings ratio (P/E multiple)
The Price-to-earning is the ratio to determine the willingness of making an investment from public based on their relationship between the market price and the earnings attributed to the value of each share. As these calculating elements could be different from year to year, it is recommended to use this ratio for short-time investment, and defined as the following formular (Goel, 2015):
Price to earning = Market price per equity share / Earnings per equity share In other explain, this ratio reflects how much money investors pay for each euro of its revenue. Applying this calculation, users are able to predict the future earnings based on the price of share or expect the stock with a positive performance (Goel, 2015).
Price-to-book ratio (P/B)
Price-to-book ratio, or usually called P/B, is used to make comparison between the stock’s market value and its book value. It is a proper indicator for determining how much of the investment is being paid for the net assets of an enterprise (Goel, 2015).
Price to book value = Market price per equity share / Book value per equity share According to Robinson, Henry, Pirie & Broihahn (2015), the future possibility of generating profit of a company to be higher than the return rate is dedicated when the value of the ratio exceeds one and vice versa.
3.2.6 Industry
Free Cash Flow
Free cash flow is an important concept for measuring how much money is available for the company after paying all of the outlaying requirements. According to White, Sondhi and Fried (2002), there is no unique definition in terms of the components of the calculation despite the quietly popular use in the worldwide practises. In this paper, the author uses the
conventional formular consisting of components, which can be founded in the statement of cash flow, following:
Free Cash Flow = Operating Cash Flow – Capital Expenditure
This basic determination of the free cash flow is defined by the deduction of the CAPEX by the Operating Cash Flow. Whereas the CAPEX is generally the amount of money paid for acquiring, maintaining and enhancing fixed assets as property, equipment or similarities.
Whereas the capital expenditures are costs used for maintaining the present activities and subsequently analysts can determine whether the company has enough cash for the discretionary use such as growth-oriented capital expenditure and acquisitions, debt reduction and payments to stockholders (White, Sondhi and Fried, 2002). The freer cash hold, the healthier financial situation the company has.
Average sales per transaction
To understand the possibility of creating revenue of the services, the author adds the average sales per transaction, which is the amount of revenue generated by each renting transactions.
By the other words, this figure indicates how much money the customers are willing to pay for the each use of services when they rent a car from the company. The collected information is the performance of companies in the market of Germany, which is not only from SIXT, but from other competitors to have a benchmark in the industry as well.
3.3 DuPont System
DuPont System is a tool to determine whether the return on investment and the return on asset is being affected by any cause by breaking these indicators into three components of profit margin, asset turnover and return on assets (Davidson, 2020). According to Phillips (2015), this model was invented by a corporation named DuPont in 1920s.
ROE = (Net Income/Total Assets) x (Total Assets/Equity) ROE = ROA x financial leverage
The division of net income and total assets is ROA and the division of total assets and equity is the financial leverage. Whereas, the higher amount of liabilities owed, the lower proportional amount of equity the company owns which led to a higher financial leverage.
Therefore, a high ROE is not always reflected that the company is in a good situation as the result is not only from the profitability gained but the prominent level of liabilities as well.
When the value is high because of financial leverage, the company may put the risk by taking financial obligation for running the business (Davidson, 2020).
ROA = (Net Income/Sales) x (Sales/Total Assets) ROA = profit margin x asset turnover
Furthermore, the return on assets is broken into further products of profit margin and asset turnover. While the former is the division of the net income and sales, the latter is the proportion of total assets on the total revenues. The profit margin indicates how good a company controls the expenses based on sales figure. The higher value of the ratio is, the better cost management of the company. Meanwhile, asset turnover shows the ability to create revenue based on their assets. These breakdown components are likely different from industry to industry when a company can have a large amount of sales but with low profit margin as a supermarket and vice versa as a hospitalities-related services providers (Brealey, Myers and Allen, 2016).
Combining these two break down, a formular is dedicated as follows:
ROE = profit margin x asset turnover x financial leverage
3.4 Golden Balance Rules
Golden balance rules are sets of recommended principles for the purposes of long-term sustainable and balance development in terms of financial health of the company. It is also known as the Matching Principle in some publication and consists mainly 04 rules, which are:
Golden rule for financing; Golden rule for risk settlement; Golden pari rule; Golden ratio rule
3.4.1 Golden rule for financing
The first rule of its set is the financing rule focusing on the relationship between types of assets and capital (both domestic and foreign capital). According to Padberg (2011), the duration of capital employed should not be longer than the duration of capital to be funded. In other words, the mentioned author states that the long-term assets should be financed by the long-term capitals and similar to the short-term assets with the short-term capitals. The reason behind this rule is that the financial obligation should only become due when the capital has been released again in order to help companies avoid being lack of cash to pay liabilities in a short time (Pape, 2018). The principles are formulised by two calculations, which are a bit different in terms of the compared value (Schäfer, 2006):
Long-term golden rule: (Long-term assets / Long-term capital) ≤ 1
Whereas the long-term capital is the combination between the total equity and the long-term liabilities. When the value of this ratio is smaller than or maximum equal to 01, the company has enough amount of capital to finance its assets in the lengthy period.
Short-term golden rule: (Short-term assets / Short-term liabilities) ≥ 1
Meanwhile, to be stable and avoid the shortage of money paid for short-term obligation, the ratio of short-term golden rule is recommended to at least equal to or exceed 01.
3.4.2 Golden rule for risk settlement
The golden rule for risk settlement (also known as golden rule for risk compensation) states that the proportion between internal and external resources should be optimized. There are two principles with two different values of ratios between these components, which are the 1:1 principle and the 1:2 principle (Schäfer, 2006). In this paper, the author uses the second one to apply for analysing the company based on its characteristics as a services provider:
(External capital / Internal capital) ≤ 2
Therefore, the ratio of total liabilities on total equity should achieve less than or at maximum equal to 02, otherwise it can have a negative impact on the leverage effect and put the company into the indebtedness situation (Pape, 2018).
3.4.3 Golden pari rule
According to Golden pari rule, the company should source its long-term assets by the internal capital of equity. By this action, enterprise could save money from paying interest expenses or other related cost when acquire an asset by any kind of credibility (Konecný, 2013).
Nevertheless, companies should not be so reserved when consider this rule as it may miss an opportunity and importantly earnings flows.
3.4.4 Golden ratio rule
Golden ratio rule concludes that the rate of investment growth should not be higher than the rate of sales growth. The former rate is the proportion of fixed assets at the end of the actual period to fixed assets at the end of the last previous period. Meanwhile, sales growth is calculated by the proportion of sales for goods, own products and services reached by the actual period being divided by these kinds of sales reached by the last previous period
3.5 Analysis of the working capital
According to Brealey, Myers and Allen (2016), “short-term, or current, assets and liabilities are collectively known as working capital” and it contains 04 main types of current assets, namely inventories, account receivables, cash balances and short-time securities. The breakdown of working capital differs from companies which are operating in different industries. For instance, an oil company may have a large part of account receivables accounted in the current assets while a retail companies make up its working capital with inventories.
There are two points of views on the working capital, which are traditional and modern view.
The traditional perspectives view working capital as a positive indicator for the company, therefore, the higher value of working capital, the better financial condition. Meanwhile, there is a difference from the view of modern thinking. Some of the current assets such as cash, unsalable inventory or uncollectible trade receivables are not contributing to make returns.
Therefore, their concentration is for the current liabilities that could be funded by the on operations of the enterprise (Sagner, 2014). Analysis of working capital is used to understand the condition of actual working capital operated in activities. The working capital plays a vital role, especially after the 2008 monetary crisis, not only for the profitability in terms of reducing costs but for the survival of an enterprise as well, (Sagner, 2014). It is important for the management to understand this situation, particularly when the cycle of the economy is unfavourable and the financing sources are scared.
Along with that, net working capital is mathematically the difference between 02 components of the balance sheet: current asset and current liabilities and dedicated under the measurement of currency (Sagner, 2014). On the other words, working capital the amount the company uses to pay their up-to-date business operation. A sufficient working capital is vital to the operation of the business as it ensures the performance and discipline for a variety of activities. In contrast, a lack of working capital potentially leads to a liquidity problem and the shortage of input resources as materials, electricity or other administrative objects.
Net working capital = Current Assets – Current Liabilities
3.6 Bankruptcy and credibility
Along with the consideration of profitability, an enterprise should also be attractive in terms of raising financial sources to fund for investments of the business. Therefore, there should be a tool to clarify the ability of gaining debt and help creditors and investors understand the
financial condition of the company. These terms of the credibility and the worthiness can be calculated by the models of bankruptcy. Generally, it is considered that these models are one of the core methodologies in the range of financial analysis.
By the calculation of the bankruptcy models, figures dedicated how financially potential risk a company can take could be determined. However, the results and the meaning of these figures could differ from geographical regions and functional departments. Nevertheless, this risk could be generally calculated by different models.
3.6.1 Altman Z-score
The model of Altman Z-score, which was developed and first introduced in 1968 by the American professor Edward Altman, is one of the frequently used tools in terms of determining bankruptcy. With the initial study about a variety of financial proportions, he established the 05 most affected ratios to forecast the bankrupt ability and reflected them through the formular with numerical variables (Altman, 1968).
However, the original models were considered less reliable when being applied to service companies as it was designed for manufacturing firms only (Maich, 2002). In 1993, Altman revised the models to 04 variables (with an asset-related ratios deduction). By using the 1993 revised Z-score, Hanson (2003) found no meaningful relationship between the size of assets and the possibility to bankrupt of an enterprise. Therefore, in this paper, author uses the revised Z-scored model for analysing the credibility of the company. The formular is below:
Z = 6,56X1 + 3,26X2 + 6,72X3 + 1,05X4
Where: X1 = Working Capital / Total Assets, X2 = Retained Earnings / Total Assets, X3 = Earnings before Interest and Taxes / Total Assets, X4 = Net worth or Book value Equity/Total Liabilities
Table 1. Atman Z-Score
Value of Z-Score Zone of Discrimination
Z’ > 2,6 Safe Zone
1,10 < Z’ < 2,6 Grey Zone
Z’ < 1,10 Financial distress zone
The table 1 dedicates at which value of Z-score the bankrupt situation of an enterprise is.
When the score exceeds 2,9, it could say that the company was standing at a strength position.
When Z’ is between 1,23 and 2,9, there is warning for the company as they could suffer a potential risk of credibility. Otherwise, the company is stuck with the financial problem with the under 1,23 Z-score
3.6.2 Kralicek quick test
The Kralicek’s Quick Test is a modern methodology, which was developed and first introduced in 1991 by an Austrian economist named Peter Kralicek. Initially, the tool was quite used in the German speaking territories of Germany, Austria and Switzerland (Didenko, Meziels, & Voronova, 2012) and then became popular in Eastern Europe countries as well (Novotna, Svoboda, 2010).
Table 2. Kralicek's Quick Test
Indicator Excellent Very Good Good Not Good Weak
1 2 3 4 5
Equity / Assets > 30% > 20% > 10% > 0% Negative (Liabilities – Cash) /
CF < 3 years < 5 years < 12 years > 12 years > 30 years Return on assets > 15% > 12% > 8% > 0% Negative
Operating Cash
Flow / Sales > 10% > 8% > 5% > 0% Negative
The table 2 shows in which range of indicators’ value is the company financial status (Böhmdorfer, Kralicek, G., & Kralicek, P., 2013). In terms of the credibility health, it is divided into five level of scale, with excellent is the healthiest and weak is the least healthy. In terms of indicators, 04 ratios of financial leverage, duration of debt, return on assets and cash flow percentage on sales are implemented to the model.
The conclusive figure is calculated by extracting these 04 separated numbers into scale from 01 to 05, then determine the margin of the total results. The company is graded with good, average and weak results when the value range calculated from 1-2, 3 and 4-5 respectively.
3.7 SWOT Analysis
SWOT Analysis (or SWOT Matrix) is multidimensional tool used to identify four elements of strengths (S), weaknesses (W), opportunities (O) and threats (T) in order for business entities to plan their projects and competition. These elements definitions also differ from dimensions depending on the purposes of the analyst. For instance, the definition used by marketers are mentioned by Kotler, Philip and Gary Armstrong (2011). Strengths include “internal capabilities, resources and positive situational factors”, weaknesses are “internal limitations and negative situational factors”, opportunities are “favourable factors or positive trend in
the external environment” while threats refer to “unfavourable external factors of trend may present challenge to the company’s performance”.
This paper presents the SWOT analysis in a more specialised dimension of financial analysis and management. Based on the conventional definition, the author manages to apply the methodology for the purpose of understanding the financial health of SIXT SE. These elements are described in the following sub-sections.
3.7.1 Strengths
Strengths, as above mentioned, are factors that origin from the internal capabilities which are particularly considered as important elements that influence the company development and its competitiveness (Speth, 2015). In the dimension of corporate finance, they could be determined by such calculations from the company financial information as assets-related ratios, the optimistic use of assets or working capital of the company.
3.7.2 Weaknesses
Weaknesses are factors that be opposite to the strengths, which reflect the inefficiency and unproductivity of the financial use of the business. These elements also refer to internal sources and negatively affect the firm position in the marketplace (Speth, 2015). It is vital for managers to clarify the weak elements to enhance these issues and make the work be more sustainable.
3.7.3 Opportunities
Opportunities are supportive financial factors from the external environment such as financial market or similarities, which help companies manage the financial sources better . They could become a competitive advantage of the company if they were exploited with a right way (Speth, 2015).
3.7.4 Threats
Threats are the opposite elements of opportunities, which is negative effect of any financial situation from the external environment. As it is impossible for business managers to control the unexpected circumstances, they should detect these external threats as soon as possible to prevent and reduce any negative impact to the operation (Speth, 2015).
With this method, business organizations can determine on at which factors they are good and
business become receive more advantages and competitiveness in the market while detect and enhance the weaknesses and threats prevent the operations from risky situations and collapses.
On the one hand, the analysis of SWOT is considered to be one the most useful methods in terms of identifying the company’s capabilities, potential development of the market and its environment and the market trends (Elavarasan et al, 2020). By applying and determining factors from the methodology, organisations as business entities are able to strategically plan and subsequently create an actively responsive plan under a specific measurement (Phadermrod et al, 2019). On the other hand, the conventional SWOT is obviously not avoided by the debate about its efficiency when it comes to reality. Pickton & Wright (1998) argued that the mechanic process of SWOT is too simplified which can lead to a strategic planning with more errors and expected a more sophisticated analysis from elements. While Helms & Nixon (2010) were considered that the application of SWOT could only be useful in a short-time period due to the constantly change of both internal and external environment.
Furthermore, such internal sources could be changed when the business management implements a new strategy.
4 Practical part
Understand the basics of financial analysis is important but not practical without application to a real case. Therefore, the author uses the example of an enterprise operating in the mobility services industry to convert the academic knowledge into actual situation. By the considering of markets and different services providers, the author selects SIXT SE for the performance analysis in the period of 2016-2020.
4.1 Characteristics of the company
SIXT SE (SIXGF) is an international mobility service provider with the headquarter based in Pullach, Bavaria, Germany. The family-company was established by Martin Sixt in Munich in 1912 and then was first publicly traded since 1986 on the German Stock Exchange. The company is operating in four categories of mobility service, consisting of vehicle rental (under brand of SIXT rent), ride-hailing (SIXT ride), car-sharing (SIXT share) and car-leasing (SIXT+).
SIXT is active and one of the leaders of the mobility services industry worldwide but with two main regional market namely Europe and the US, which are operated directly by SIXT.
Meanwhile, the business in other regions are operated by SIXT partners through the franchise system. The services of SIXT are available in different 250 cities worldwide with more than 200.000 vehicles from 1,500 partners.
In 2019, SIXT SE launched the so-called integrated ONE mobility platform for enhancing the customer experience through mobile application and the operational management by its own- developed technology. All the business categories are accessible to the app for all users of SIXT services from customers, partners (drivers of taxi services) and the staffs. With the implementation, the company is experiencing a transformation in terms of experiencing customers services and its operation from traditional to digital ways.
SIXT runs its own subsidiaries for the business in most of European countries and US rental market. In the market of Germany, SIXT was accounted for more than 40% of the market and its revenue held the majority of the group rental fleet (SIXT SE, 2020). In the rest of Europe, the proportion of SIXT was above 10% with France to be the largest market in the western part. In the North America region, USA was the second largest single market of the company thanks to the huge demand for rental vehicles.
