Financing

Topics: Balance sheet, Generally Accepted Accounting Principles, Debt Pages: 3 (576 words) Published: September 18, 2013
Toyota Motor Financing Activities

Debt to Equity (Total Liabilities / Total Equity)

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This ratio measures the financial leverage of a company by indicating what proportion of debt and equity a company is using to finance its assets. A lower number suggests there is both a lower risk involved for creditors and strong, long-term, financial security for a company.

Based on the debt ratio of Toyota, as of 2009, the debt ratio is much higher than of other financial year. The year to year debt ratio shows a declining trend, this may indicates that Toyota is trying to reduce its leverage hence their solvency risk.

Debt to Total Assets (Total Liabilities / Total Assets)

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This ratio measures what proportion of debt a company is carrying relative to its assets. A ratio value greater than one indicates a company has more debt than assets. Naturally, companies and creditors prefer a lower number.

Based on the ratios above, as of 2009, Toyota has higher ratio. The chart shows declining trend, this shows Toyota the ability of them to finance their obligation is getting better, lower ratio indicates that Toyota is able to obtain additional debt financing in the next financial year, in which they did in the current year 2013.

Long Term Liabilities to Working Capital (Long Term Liabilities / (Current Assets - Current Liabilities)

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This ratio measures the degree to which a company's long-term debt has been used to replenish working capital versus fixed asset acquisition.

The long-term liabilities to working capital ratio trend for Toyota shows that they used their debt to finance their business activities as relatively efficient.

Current Ratio (Current Assets / Current Liabilities)

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This ratio reflects the number of times short-term assets cover short-term liabilities and is a fairly accurate indication of a company's ability to service its current obligations. A higher number is preferred...
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