Financial Summary of Toyota Motor Corporation - Research Paper Example

2021-06-09 16:23:45
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Boston College
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Research paper
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17,936,397/ 7,400,208 = 2.42

A current ratio is the liquidity ratio that measures the capability of a company to pay its short term and long term goals. Which typically gives out the idea of a companys ability to pay back its liabilities using its assets. When a ratio is less than one, it indicates that the companys liabilities are greater than its assets and to that extent will not be in a position to pay its assets .on the other hand a ratio above three may indicate that a company is not using its assets appropriately and not managing its working capital. The Toyota Company stipulates a good financial health since it is in apposition to pay its current obligations.

The current ratio of Toyota Company has slightly decreased over the period of time since the company seems to be increasing its liability as time goes by. The company should be wary that its current ratio being at 1 in the current year is a threat to its capability to pay its obligation once the current ratio goes bellow one. The reduction in trend is a warning signal.

Quick ratios: Current assets minus inventory/current liabilities

Fy 2017

Ca=17,038,147

Inventories= 2,212,269

Current liabilities= 16,888,016

17, 038,147-2,212,269 /16,888,016= 0.88

Fy 2016

Ca = 18,179,547

Inventories=2,104,725

Current liabilities =16,492,399

18,179,547-2,104,725/16,492,399=0.97

Fy 2015

Ca = 17,936,397

Inventories=2,137,021

Current liabilities=7,400,208

17,936,397-2,137,021/7,400,208=2.13

Quick assets are typically assets owned by a company that has a commercial value which can easily be converted to cash. The quick ratio is similar to the current ratio except that current ratio is in inclusion of assets and inventories. Which is also used to measure a company's liquidity. From the calculations above it is evident that Toyota Company does not have a healthy financial status, expect for 2015 where the ratio is at 2. The quick assets ratio have decreased with time as compared to the previous years. This gives the company a strong warning on its health status.

Leverage ratios

Debt to total Assets Ratio: Total Debt/Total assets

fy2017

29,722,406/48,111,485= 0.6178

Fy2016

30,297,149/48,922,991= 0.6193

Fy2015

29,594,075/46,722,224=0.6334

Debt to assets ratio give an indication of the financial leverage of a company giving details of how much creditors financed a company. When a company has a higher ratio, it stipulates a lower degree of leverage from its debt. The Toyota Company has approximately 60% of its assets financed by debts which means it has a lower degree of leverage throughout the three years. The company is most likely to be undergoing financial instability. The downward trend indicates the reduction in the ratio giving a chance of a rise in leverage throughout the years.

Debt to equity ratio: total debt/total stockholders Equity

Fy 2017

29,722,406/17,905,651= 1.6599

Fy2016

30,297,149/18,147,865= 1.6695

Fy2015

29,594,075/17,128,149= 1.7278

Debt to equity ratio calculates the companys debt in relative to its total value of stock, a high debt to equity ratio means that a company is working hard in meeting its financial growth which is associated with more risk this is an indication that Toyota Company has taken a higher risk by acquiring more debts.

Times-interest earned ratio: profits before interest & taxes /total interest

Fy2017

587,538/ 49,890= 11.7767

Fyr 2016

2,452,912/135,061= 18.1615

Fyr 2015

2,892,828/147,122=19.6628

Times interest earned ratio is the stipulation of a companys capability to pay its debt obligation. The company does not stipulate a consistent earnings due to changes in the time- earned ratio.

Activity ratios

Inventory turnover: sales/ inventory of finished goods

Fy 2017

18,833,706/2,212,269= 8.5133

Fy 2016

20,028,604/2,137,021=9.3722

Fy 2015

25,612,836/ 2,133,775=12.0035

Activity ratio help determine if a company is in a position to convert different accounts into cash by measuring its relative efficiency. The inventor turnover gives the number of times the company has sold its inventory, which indicates low turnover as a weak sales giving excessive inventory, on the other hand a high ratio gives an impression of strong sales the company has a decrease in the turnover results compared to the previous years.

Fixed assets turn over: sales/fixed assets

Fy 2017

18,833,706/753,621= 24.9910Fy2016

20,028,604/937,146= 21.3719

Fy2015

25,612,836/1,146,318=22.3436

Total assets turnover: sales/total assets

Fy 2017

18,833,706/48,111,485= 0,3915Fy2016

20,028,604/48,922,991=0.4094

Fixed assets turnover measures the operative performance of a company, it measures the capability of a company to generate net sales which indicates a high Fixed assets turnover ratio

for a company the it can effectively investments in fixed assets. Toyota Company clearly used its assets in 2015 while the following years there was little use of the assets.

Average collection period: accounts receivable / (total credit sales/365days)

Fyr 2017

1,874,846/(18,833,706/365)

1,874,846/51599.19452054795= 36.3348

Fr yr 2016

1,915,833/(20,028,604/365)

1,915,833/54872.8876123288= 34.9140

Fr yr 2015

2,108,660/( 25,612,836 /365)

2,108,660/70172.153424655753= 30.0498

The average collection period stands for the average number of days that a company makes a credit sale and the time the payment is made. The average collection period can be used as a benchmark against other companies so as to have the best collection period. A low average period is more suitable since it stipulates the company is collecting money faster. Toyota Company has its average ratio increased with time to indicate slower collection of the funds. It could mean however that it has made its payment less strict attracting more customers

Profitability ratio

Gross profit margin: sales cost of sale

Fy 2017

18,833,706-15,693,468= 3,140,238

Fy 2016

20,028,604-16,125,146=3,903458Fy 2015

25,612,836-20,916,362= 4,696,474

The gross profit margin indicates the money that a company is left with after revenue and cost of goods which basically shows its financial health. Toyota Company has its gross profit margin decreasing over time. Which indicates an unstable or unhealthy financial system for that matter.

Operating profit margin

Earnings before interest and taxes / sales

Fyr 2017

1,764,072/18,833,707 =0.0937

Fyr 2016

2,542,912/20,028,604=0.1270

Fyr 2015

2,892,828/25,612,836=0.1129

The operating profit margin measure the company efficiency by measuring what is left after paying for wages and other raw material. Operating margin is formidable in encouraging investors as it used to analyze particular project with a company.

Toyota Motors corporation has shown clearly form the SWOT analysis that it is capable keeping its high positions in manufacturing of vehicles in the world. Toyota has one of the most famous brand known worldwide with several imports taking part in different countries. Customers are known to be loyal to their brands which gives the company a head start in maintaining clients. The strong brand name helps it economically in gaining customers each and every day. The good supply chain management which has ensured continuous supply of the services as also seen it having a long term competition capabilities.

The most internal weakness facing the company is the threat of more upcoming companies which will affect it economically. The moderate numbers of competitors may cause the company to incur large sum of losses or at times make it bankrupt.

Reference

Thembani Nkomo analysis of Toyota motor corporation retrieved from https://scholar.harvard.edu/files/tnkomo/files/analysis_of_toyota.pdf

Financial summary of Toyota Motor Corporation retrieved form http://www.toyota-global.com/pages/contents/investors/financial_result/2017

 

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