Upload
mohammed-kamal-eldin
View
386
Download
0
Embed Size (px)
Citation preview
Financial Analysis Report for Honda Company Years 2011-2012
Prepared By: Rimaz Obied Mohammed. Mohamed Zain Abdalla Mohammed Ali. Gayas Mohammed Gesm Elseed. Tahir Fikri Tahir Mohammed. Mohammed Kamal Eldin Mohammed.
INDEX:
• INTRODUCTION.
• ABOUT HONDA.
• HONDA FINANCIAL STATEMENTS.
• HONDA RATIOS ANALYSIS.
• CONCLUSION.
INTRODUCTION:
This financial report is conducted for Honda Co.Ltd for
years 2011 and 2012 when Honda faced a great
economic impact overall their operating levels of
manufacturing which affect their sales and their status
with their shareholders.
Here is an introduction about Honda, and financial
status during the mentioned period.
ABOUT HONDA: History
• In October 1946, Soichiro Honda established the Honda Technical Research Institute
in Hamamatsu, Japan, to develop and produce small 2-cycle motorbike engines,
after years later, Honda Motor Company, Ltd. was born, in 1959 .
• Honda grown to become the one of the largest motorcycle manufacturing and
automakers.
• Honda has global network subsidiaries and 88 affiliates.
• Honda, is No 3 topped an annual ranking of global green brands by consultancy
firm Interbrand in 2012.
Honda has three lines :
• Motor cycles : working under objectives of durability ,
quietness , fuel economy).
• Automobile business: working under having environmental
technology to enhance the Honda brand.
Objectives: better fuel economy ,reducing CO2 emission of all
Honda products by 30%, using IMA(integrated motor assist ).
• Power product and other business: working under philosophy
( technology for people ) established in 1953 by agriculture
machinery ( water pump , snow blower)
• During the this two years Honda faced a challenging economic
environment.
• In Europe, the sovereign debt crisis, rising oil prices and other
factors led to stagnation which slowed economy to crawl in USA
also
• meanwhile there was slide growth in some Asian countries like
China and India.
• In Japan remained challenging under these conditions Honda’s
net sales and other operating revenue declined 11.1%to 7.948
yen.
HONDA FINANCIAL STATEMENTS
COMPANY ANALYSIS
BALANCE SHEET RATIOS
Current Ratio:
2011 2012
1.31
1.32The Liquidity ratio measures the
ability of the company to meet its
short term liabilities by the available
current assets of cash and cash
equivalents.
Honda during 2011 has the ability to
cover its current liabilities more than
one third by its current assets which
is being stable during 2012.
Quick Ratio:
2011 2012 Series 3
1.06
1.03
Quick Ratio
In the event of quick current
liabilities coverage case Honda has
the ability to cover its short term
liabilities by using its most liquid
assets in addition to surplus of 6% of
its quick assets during 2011 which
being reduced during 2012 to 3%
surplus.
Debt to Assets Ratio
2011 2012 Series 3
0.6
0.62
Debt to Assets Ratio
During 2011 the debts forming
60% of the company’s assets which
increased during 2012 to 62% that
reflect that Honda relay on
financing its investments by debt
by more than 60% during the two
years which exposing the company
to a huge risk of solvency if the
performance not going as desired.
Debt to Equity Ratio
2011 2012 Series 3
1.52
1.6
Debt to Equity Ratio
Honda in 2011 relied on the
external financers 1.52 times to
its dependency on its owner’s
equity which increased during
2012 to 1.6; that shows a clear
sign of deterioration of the
business.
Assets to Equity Ratio
2011 2012 Series 3
2.6
2.67
Leverage Ratio
It indicates that during 2011 Honda
financed its 61.54% of assets by
dept more than utilizing its equity
which increased during 2012 to
62.63% ; generally Honda exposed
to high risk by relay on the external
debt more than utilizing its own
capabilities.
STATEMENT OF INCOME ANALYSIS
Coverage Ratio:
2011 2012 Series 3
75.41
25.8
Coverage Ratio
During 2011 Honda Motors has an
ability to cover the interest
expenses over 75.41 times which
illustrate stronger financial
capability than the next year that its
ability to cover the interest
expenses reduced to 25.80 times.
Activity Ratios - Receivables Turnover
2011 2012
5.67 4.89
64.34
74.59
Receivables Turnover RatioReceivables Turnover in days
Its clearly shown that Honda in
2011 had an ability to receive its
credit sales 5.67 times during the
year by an interval 64.34 days for
each time; in 2012 Honda
collection activity deteriorated
which lead reduction on
receivables cycle to 4.89 times by
an intervals 74.59 days each
time.
Activity Ratios - Inventory Turnover
2011 2012 Series 3
7.22 5.72
50.55
63.87
Inventory Turnover Ratio Inventory Turnover in days
The above analysis shown that
Honda in 2011 succeeded to sell
its inventory 7.22 times during
the year by an interval of 50.55
days while its sales progress fall
during 2012 to reach that its
ability was reduced to 5.72 times
to sell the inventory by an interval
of 63.87 days for each time.
Total Assets Turnover:
2011 2012 Series 3
0.77
0.67
Total Assets Turnover
Honda has the succeeded to
generate a revenue equal to 77% of
its total assets value during 2011
which reduced during 2012 to 67% of
its total assets value.
Operating Cycle
2011 2012 Series 3
114.89
138.46
Operating Cycle
By the end of 2011 Honda
succeeded to circulate its
activity about three times by
114.89 days for each cycle
which reduced to two and
half during 2012 by 138.46
days for each cycle.
Profitability in relation to sales
2011 2012
27.30%
25.52%
Profitability in relation to sales
Hereby Honda earned 27.3%
gross Profit margin from its
sales during 2011 in
comparing with 25.52%
gross profit margin during
2012 from its annual sales.
Net Profit Margin
2011 2012
5.98%
2.66%
Net Profit Margin
The Net Profit Margin that
Honda earned during 2011 is
5.98% from its total sales
while it was earned 2.66% as
a net profit margin during
2012 from its total annual
sales.
Return on Investment (ROI)
2011 2012
4.62%
1.80%
Return on Investment (ROI)
The effectiveness of Honda to
generate a profit from its
available assets for 2011 is
4.62% as profit margin for the
total assets value while it was
deteriorated to 1.8% during
2012 which shows ineffective
utilization of assets.
Return on Equity (ROE)
2011 2012
12.00%
4.80%
Return on Equity (ROE)
The effective exploit of the
shareholders equity during
2011 that done by Honda to
generate a return on equity
is 12% while it was reduced
to 4.8% in 2012.
CONCLUSION
• Considering the crisis that Honda is facing during the second
year of this report its clearly that all of the ratios supports this
fact of deterioration of company operation and observed fall
in all of the company’s activities as well as the profitability
and its ability to meet its debts. Also Honda lose a lot of its
equity support which enforced the company to relay on the
external financers and debt to cover this gap.
• In conclusion Honda Motors performance in 2011 is better
than its performance in 2012.
THANK YOU