Toyoto and Honda Financial Statement Analysis

Topics: Balance sheet, Generally Accepted Accounting Principles, Inventory Pages: 16 (4761 words) Published: May 29, 2012
| | |Financial Statement Analysis Project | | | | | |Honda Motor Co., ltd | |Toyota Motor Corporation | | | | | | | | |

Part I. Introduction
Toyota and Honda: The Auto-Manufacture Giants: Industry and Surrounding Environment Both Toyota and Honda are two well-known international Japanese automobile companies. The automobile industry is competitive globally and the challenges have increased as a result of the global financial crisis. Toyota, a 70 year old company, is the number one automobile selling brand in America for the 11th time in 12 years7. Honda, the first Japanese automobile manufacture to enter the US just fifty years ago3, continues to be a strong competitor of Toyota. The Honda Accord Sedan was awarded the National Highway Traffic Safety Administration best possible vehicle3. Both manufactures sell items ranging from cars, hybrids, to auto merchandise. With the help of financial accounting analysis shall further explore the surrounding environment, and circumstances facing these two entities. The biggest challenge for both companies is the transition of recovery from the global recession. The lack of consumer confidence declines in money, combined with commodity and price volatility, shortages in supplies, credit risk problems, contributing to a declining demand1. Other administrative challenges are on the legal and property right side. Honda’s net sales and other operating revenue decline in March 31, 2010 to ¥8,579.1 billion from decreased automobile sales and negative currency translation effects1. Similarly Toyotas sales declined by 4.4% while the production also decreased by 3.4%5. Another reason for this decrease came from the decline in customers from 24,655 million in 2008 to 23,044 in 20095. Much of these problems have been due to the weakening of the Toyotas economic markets in Europe, America and Japan5, and Honda’s Asia markets. Both are trying to use measure to reduce costs, new operating measures, and use production measures in a flexible manner5&1. Both companies will continue to move forward as they sell the image of their powerful brand names. Part II. Horizontal Analysis Table of Honda’s Statement of Earnings1,2 For Honda, the percentage decreases in "Selling, general and administrative" and “Research and development” are significant and warrant further attention. In our opinion, these can be viewed as favorable trends. (1) The "Selling, general and administrative" expenses decreased ¥501.4 billion, or 27.3%, to ¥1,337.3 billion from the previous fiscal year2, due mainly to positive foreign currency effects, a decrease in provisions for credit losses and losses on lease residual values in financial services business and the impact of expenses in the previous year which is related to withdrawal from some racing activities and...
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