Financial Ratio Analysis: Honda Motor Company
AJ Davidson
Professor Arvi
Finance 311: 9:30-10:45
10/28/14
Financial Ratio Analysis: Honda Motor Company
This is a financial analysis of Honda Motor Company from the year 2011-2014. I will be reviewing and analyzing the company standardized balance sheet, standardized income statement, Ratio analysis, and their standings among competitors. I will define and compare the information in order to report my findings in an accurate way.
When looking at the ratio analysis for the company the return on assets which measures profit per dollar of assets has fluctuated over the last three years. In 2011 it was at its highest ROA of 4.62% fell drastically to 1.8% and 2012 then recovered and is now sitting at 4% again this year (3.67% to be exact). The return on equity which is how much profit shareholders generate for every dollar of equity was actually at its highest point in 2011 with an ROE 0f 12.2% then dropped off the next two years and has just recently came back up to 10.5% this year. This shows that the previous two years may have been a rough patch for the company as far as overall sales. Something that stands out about Honda is that the ROE exceeds the ROA in all three years of operation which reflects the company’s use of financial leverage. When looking at the Total Debt ratio for Honda the debt ratio has slightly increased every year since 2011. This is also shown by the current ratio of the company which rose from 1.31 to 1.32 from FY 2011-2012 but then has decreased the previous two years and is now 1.22. Then I attempted to look at the company’s return on investment which is also known as return on capital which has increased from .48 to .50 from 2011-2014. Though only a slight increase this is still seen as a positive for shareholders. The profit margin has increased this year showing that the company is continuing to accrue more and more for every dollar in sales that the company makes. However the profit margin was at its highest in 2011. This is an
Professor Arvi
Finance 311: 9:30-10:45
10/28/14
Financial Ratio Analysis: Honda Motor Company
This is a financial analysis of Honda Motor Company from the year 2011-2014. I will be reviewing and analyzing the company standardized balance sheet, standardized income statement, Ratio analysis, and their standings among competitors. I will define and compare the information in order to report my findings in an accurate way.
When looking at the ratio analysis for the company the return on assets which measures profit per dollar of assets has fluctuated over the last three years. In 2011 it was at its highest ROA of 4.62% fell drastically to 1.8% and 2012 then recovered and is now sitting at 4% again this year (3.67% to be exact). The return on equity which is how much profit shareholders generate for every dollar of equity was actually at its highest point in 2011 with an ROE 0f 12.2% then dropped off the next two years and has just recently came back up to 10.5% this year. This shows that the previous two years may have been a rough patch for the company as far as overall sales. Something that stands out about Honda is that the ROE exceeds the ROA in all three years of operation which reflects the company’s use of financial leverage. When looking at the Total Debt ratio for Honda the debt ratio has slightly increased every year since 2011. This is also shown by the current ratio of the company which rose from 1.31 to 1.32 from FY 2011-2012 but then has decreased the previous two years and is now 1.22. Then I attempted to look at the company’s return on investment which is also known as return on capital which has increased from .48 to .50 from 2011-2014. Though only a slight increase this is still seen as a positive for shareholders. The profit margin has increased this year showing that the company is continuing to accrue more and more for every dollar in sales that the company makes. However the profit margin was at its highest in 2011. This is an