Financial Analysis of Toyota Company (Case Study Sample)

Toyota financial analysis for year 2009,
Capital expenditure characteristics,
Capital expenditure consists of expenditures on property, plant and equipment, vehicles and equipment, research and development amongst others. During this year, consolidated capital expenditure for Toyota Company decreased to ¥1,364.5 billion as compared to ¥ 1480.5 billion in the financial year 2008. Depreciation expenses were ¥1100 billion in 2009 as compared to ¥ (95.4) in 2008. Research and development amounted to ¥920.0 billion in 2009, as opposed to that of 2008, which was ¥ 958.8 billion.
Property, plant and equipment,
During the financial year 2009, Toyota Company decreased these expenditures by 7.8% to ¥1364 billion compared to ¥1480.5 billion in 2008.The value of these assets decreased by ¥410.3 billion in the same year due to depreciation and fluctuations in foreign currency. In year 2009, Toyota continued its investment in environmental fields. (Molson, J. 2010). These included fields such as increasing the production of hybrid batteries, and introduction of new products such as Lexus and Prius.
Vehicles and equipment,
The expenditures in vehicles equipment on operating leases dropped by 24.9% from ¥1279.4 billion in year 2008 to ¥960.3 billion in 2009 which was due to a decrease in financial services operations investments.
Research and development(R & D),
In 2009, Toyota was striving to achieve its main objectives of developing vehicles that meet the demand expectations while at the same time, making a consideration of striking a balance in environmental conservation, safety, drivability, comfort and reliability. However, R & D department dropped by 5.7% from the previous fiscal year of 2008 to ¥904.0 billion in 2009.This accounted for 4.4% of net assets excluding leased assets.
Capital Expenditure and R&D Expenses from 2006 to 2010,
Financial Performance
Consolidated Statements of Cash Flows
According to T.M.C Financial Statements annual report of 2009, in Year 2009, the consolidated cash provided by operating activities dipped from ¥2,981,624 million in 2008 to ¥1,476,905 million in 2009. The net cash flows from investing activities amounted to ¥ (1,230,220) in 2009, but the at the end of such a period in the previous Year, the same was ¥(3,814,886). Cash flows from financing activities dipped from ¥706,189 million in 2008 to ¥698,841 million in 2009.The cash and cash equivalents were ¥2,444,280millions in 2009 compared to ¥ 1,900,379 million in 2008.This effect was caused by changes in the exchange rates.
Consolidated Statement of income
During this financial period, consolidated vehicle sales in Japan and overseas decreased by 15.1% to 7,567units in 2009 compared to8913 units in 2008 (sustainability report 2009) even though the vehicle production was 8,547 and 7,051 units in 2008 and 2009 respectively. During this financial year, the net loss was ¥ 437.0 billion

Financial year 2008(Â¥)

Financial year 2009 (Â¥)

Net revenue

26.29 trillion

20.53 trillion

Operating Income

2.27 trillion

(0.461) trillion

Equity in earnings of affiliated Co.

0.27 trillion

42.72 billion

Net income

1.72 trillion

(437.0) billion

Emergency profit improvement,
Due to severe and hard economic conditions that have caused massive losses, Toyota Company decided to set up an Emergency Profit Improvement Committee in November 2008, meant to improve earnings for fiscal years 2009 and 2010 (Liker J. Franz J.K. 2009). During the fiscal year 2009, the company acted swiftly to deliver as many vehicles as possible to customers by strengthening products and introducing new special edition models, which adapt to customer needs. (Iyer, Seshadri S &Vasher 2009).The company also enforced cost reduction efforts for each vehicle sold, continued usual cost reduction efforts amongst other measures with an eventual generation of earnings of about approximately ¥130.0 billion.
Consolidated balance sheet
According to T.M.C 2009 Sustainability report, total assets at the end of year 2009 amounted to ¥ 29,062,037million compared to ¥32,458,320 million in 2008 and shareholders' equity was ¥10,061,207 million in 2009, a drop from 2008 0f ¥11,869,527 million. At the end of the financial year 2009, the liquid assets were approximated to be 3300 billion Yens. Cash and cash equivalents rose to ¥2,444,280 million in 2009 from ¥1,628,547 million yen of 2008. Finance receivables, which included retail, finance leases, allowances for credit losses, loans including others, all together summed to a net of ¥5,655,545 million in 2009 compared to ¥5,974,756 million in 2008.
Earnings per share
Total shareholders' equity dropped to ¥10,061,207million in 2009 from that of 2008, which were ¥11,869,527 millions. The diluted earnings per share which excluded extraordinary items was ¥540.44in 2008 but significantly dropped to ¥ (139.13) per share in 2009.
ROE Analysis
This is an indicator of profitability, which is calculated as a ratio of net income and revenue. The Toyotas reported return on Equity was down to (4.34 %) in 2009 compared to 14.47% in the previous year. However, the adjusted ROE in 2009 was (-7.39%) and 11.43% in 2008.
Cash Dividends per Share
During this year (2009), the full year dividend per share in the primary issue was ¥100 per share, a drop from ¥140 per share in 2008.
P/E Analysis
The number of shares of common stock outstanding in 2008 was 1,574,639,926 but in 2009, it was standing a 1,567,941,238t.The price to Earnings ratio tells us how much an investor in common stock pays per dollar of current earnings. In 2008, the P/E was -2.99 but in 2008, the P/E was 12.02
Toyota is funding decisions.
For a long time, Toyota has funded its capital expenditure and R & D using its cash generated in its operations. This has been geared towards ensuring sufficient liquidity and stable shareholders equity and confidence. Through the company's culture of share, repurchase scheme, it managed to buy shares worth 69.9 billion Yens in the year 2008 and 72.8 billion yen in the following financial year. In 2009, cash generated decreased due to decrease in sales volume, global recession, competition among other issues. Due to decrease in additions to finance receivables, market securities and security investment together with an increase in proceeds from sales of marketable securities and security investment, net cash used in investing activities decreased from ¥3,878.8 billion in 2008 to ¥1,230.2 billion in the financial year 2009.
The company has a beta of 0.74 and this low beta makes its cost of capital lower compared to that of Ford Motors, which have a beta of 2.28.
Toyotas Borrowing.
Toyota's total borrowing which comprises of short-term and long-term borrowing increased during this financial year by ¥408.3 billion. Short-term borrowing consisted of loans and commercial papers with weighted average interest rates of 2.44% and 1.52% respectively. They increased by 1.8% to ¥3617.6 billion. Long-term debts consisted of secured and unsecured loans, medium-term notes, unsecured notes and long –term capital obligations. These had an interest rates ranging from 0.17% to 31.50% and maturity dates ranging from 2009 to 2047.They decreased by 0.9% to ¥2699.5 billion while the non-current proportion increased by ¥319.5 billion to 6301.4 billion Yens.
Forecast for the financial year 2010.
Even though, there were profit improvement measures, the Toyota company still had a reduced projected expectation in consolidated vehicle sales from 7567 units in 2009 to about 6500 units in 2010.Research development was expected to promote further development of advanced technologies related to environmental issues, energy and safety. (Coniam, M. 2009).It was also expected to reduce expenses by streamlining development
Revenue generated in the financial year 2010 was expected to be ¥16500.00 million and operating income before income taxes expected to be ¥ (850) million whereas the total income projected to hit ¥ (550) million.
MITSUBISHI MOTORS,
According to Mitsubishi Corporation Annual Report 2009, Mitsubishi corporation (which has 590 consolidated subsidiaries) capital expenditure dropped to Â¥47.1 billion in 2009 from Â¥71.9 billion in 2008. Research and development expenses amounted to Â¥44.4 billion in 2009 as compared to that of 2008, which amounted to Â¥64.0 billion in 2008. In this same year of 2009, consolidated net sale amounted to Â¥1,445.6 billion as compared to that of 2008 of Â¥1,973.6 billion. Operating income amounted to Â¥13.9 billion in 2009, an increase from that of 2008, which was Â&ye...