ANNUAL REPORT

HONDA MOTOR CO., LTD.HONDA MOTOR CO., LTD. BLAKE GOLDENBLAKE GOLDEN

002002

Executive SummaryExecutive Summary

I believe that Honda is a very reliable and safe company to invest in.

Honda is on the cutting edge of hybrid technology.

Honda is also among the industry leaders in safety.

http://world.honda.com/investors/annualreport/2005/index.html

Introduction

Honda’s C.E.O- Takeo Fukui

Honda’s Home Office- Minato-ku, Tokyo

Ending date of last fiscal year- March 31, 2005

Products- Automobile, Motorcycles, Personal Watercrafts, Lawn & Power products

Geographic Area of Operation- Japan and the United States of America

Audit Report

- KPMG is Honda Motor Co., Ltd’s KPMG is Honda Motor Co., Ltd’s independent auditorindependent auditor

- The auditors believe that Honda The auditors believe that Honda Motor Co. Ltd’s financial Motor Co. Ltd’s financial statements are accurate and fall statements are accurate and fall into accordance with all SEC into accordance with all SEC guidelines.guidelines.

Stock Market InformationStock Market Information

STOCK PRICE 3-3-2006: $28.96STOCK PRICE 3-3-2006: $28.96

52 WEEK RANGE: $23.75 - $30.3652 WEEK RANGE: $23.75 - $30.36

DIVIDEND PER SHARE (PER 2005 FINANCIAL STATEMENT): $ 0.47DIVIDEND PER SHARE (PER 2005 FINANCIAL STATEMENT): $ 0.47

THE INFORMATION ABOVE IS FROM 3-3-2006THE INFORMATION ABOVE IS FROM 3-3-2006

I WOULD HOLD ONTO THIS STOCK BECAUSE IT HAS BEEN I WOULD HOLD ONTO THIS STOCK BECAUSE IT HAS BEEN GROWING OVER THE PAST YEARGROWING OVER THE PAST YEAR

INDUSTRY SITUATION AND COMPANY PLANS

The industry situation for motorized products is on the The industry situation for motorized products is on the rise, especially for the motorcycles and mopeds. Due rise, especially for the motorcycles and mopeds. Due to everyone trying to save money on gas Honda has to everyone trying to save money on gas Honda has made many advances in its hybrid technologies.made many advances in its hybrid technologies.

Honda is also shifting some of its automobile focus to Honda is also shifting some of its automobile focus to light trucks instead of cars. As you can see by the light trucks instead of cars. As you can see by the 2005 J.D. Power truck of the year Honda Ridgeline.2005 J.D. Power truck of the year Honda Ridgeline.

Honda is currently near the top of the low emissions Honda is currently near the top of the low emissions standard with its new 4-stroke engines in its motorized standard with its new 4-stroke engines in its motorized vehicles. vehicles.

Income Statement

Multi-step model Multi-step model

20042004 20052005GROSS PROFITGROSS PROFIT 8,162,8008,162,800 8,650,1058,650,105

OPERATING INCOMEOPERATING INCOME 600,144 600,144 630,920630,920

NET INCOMENET INCOME 464,338 464,338 486,197486,197- All of these amounts are represented in millions Japanese All of these amounts are represented in millions Japanese

YenYen- All amounts made a jump from 2004-2005All amounts made a jump from 2004-2005

Balance sheet Balance sheet (Millions Yen)(Millions Yen)

ASSETS = LIABILITIES + OWNER’S ASSETS = LIABILITIES + OWNER’S EQUITYEQUITY

20042004 8,328,768 = 5,454,3688,328,768 = 5,454,368 + 2,874,400+ 2,874,400

20052005 9,316,970 =9,316,970 = 6,027,676 6,027,676 + 3,289,294+ 3,289,294

- From 2004 to 2005 it seems to me the company is growing in a - From 2004 to 2005 it seems to me the company is growing in a positive direction due to the jump in the companies assets positive direction due to the jump in the companies assets through there new inovations.through there new inovations.

Statement of Cash Flows

Cash flows for both 2004 and 2005 were more than the net income.

Through my findings I do not see any significant growing through investments of plant, property, etc.

Long-term Loans are Honda’s primary source of financing

Cash has increased over the past two years.

Accounting Policies

I could not find any significant I could not find any significant accounting policies that differed accounting policies that differed from the ones learned in class.from the ones learned in class.

Financial AnalysisLiquidity Ratios (Yen)

2004200420052005

Working capitalWorking capital 318,435318,435 260,178260,178

Current RationCurrent Ration 1.091.09 1.071.07

Receivable turnoverReceivable turnover 11.911.911.711.7

Avg. days’ sales uncollectedAvg. days’ sales uncollected 30.7 days30.7 days31.2days31.2days

Inventory turnoverInventory turnover 7.37.3 7.47.4

Avg. days’ inventory on handAvg. days’ inventory on hand 50 days50 days 49 days49 days

Profitability Ratios

20042004 20052005

Profit MarginProfit Margin 5.8%5.8% 5.7%5.7%

Asset TurnoverAsset Turnover 11 11

Return on AssetsReturn on Assets 5.6%5.6% 5.6%5.6%

Return on EquityReturn on Equity 17.2%17.2% 14.7%14.7%

Solvency Ratio

20042004 20052005

DEBT TO EQUITYDEBT TO EQUITY 190%190% 183%183%

Market Strength Ratios

20052005

Price/Earnings ratioPrice/Earnings ratio 15.2 times15.2 times

Dividend yieldDividend yield 1.3%1.3%