DuPont is the method of measuring the performance which was started by DuPont Corporation in 1920’s. With this method, assets are measured at their gross book value rather than at net book value in order to produce a higher return on equity (ROE). It is also known as "DuPont identity".

1. Page 1
Financial Management- Project
Financial Statement Analysis
Country- Japan
Industry- Automobile
Companies-:
Toyota Motor Corp (Lead Company)
Honda Motor Co Ltd
Suzuki Motor Corp

2. Page 2
Table of Contents Page No.
Executive Summary 3
Industry Sector Summary 4
Lead co. analysis 6
Comparativeanalysisof
Lead Co. with peer’s group 9
Overall analysis 13
References 14

3. Page 3
ExecutiveSummary-:
DuPont is the method of measuring the performance which was started by DuPont
Corporation in 1920’s. With this method, assets are measured at their gross book value
rather than at net book value in order to produce a higher return on equity (ROE). It is also
known as "DuPont identity".
DuPont analysis tells us that ROE is affected by three things:
- Operating efficiency, which is measured by profit margin
- Asset use efficiency, which is measured by total asset turnover
- Financial leverage, which is measured by the equity multiplier
The DuPont analysis also called the DuPont model a financial ratio based on the return on
equity ratio that is used to analyze a company's ability to increase its return on equity. In
other words, this model breaks down the return on equity ratio to explain how companies
can increase their return for investors.
The DuPont analysis looks at three main components of the ROE ratio.
 Profit Margin
 Total Asset Turnover
 Financial Leverage
Based on these three performances measures the model concludes that a company can
raise its ROE by maintaining a high profit margin, increasing asset turnover, or leveraging
assets more effectively.
It is one of the strongest indicators for a financially successful company. ROE is a great tool
for investors because it shows you what the return is on the portion of the company that
belongs to equity. It is a simple calculation that quickly summarizes the ability of
management to turn shareholder equity into profitable returns.
There are two other indicators that would like to analyze in a company: Profit margin and
Asset turnover. Ideally we would like to see a company with high numbers for both of these,
but that’s not always possible. It is a must that the company has at least one of these
performing better than the industry standard. If the asset turnover is low, then the profit
margin better be high (a specialty producer with a competitive advantage). If the profit
margin is low, then the asset turnover better be high (a low cost provider with large market
share).
In this report there is comparison between three top automobile companies in Japan i.e.
HONDA, TOYOTAand SUZUKI, through DuPont analysis tool.
The Du-Pont analysis is only the first step in analysing the firm’s performance. The next step
is to dig deeper into the differences between the firm’s performance and the benchmark
against which it is being measured.
After analyzing these automobile companies we observed that “Toyota” maintaining highest
ROE as per comparison of others automobile companies more effectively. This analysis can
provide the management with valuable insights into how it can improve its operations and
increase its ROI.

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Introduction-IndustrySector Summary-:
The Japanese Automobile industry is one of the most prominent and largest industries in the
world. Japan has been in the top three of the countries with most cars manufacture since the
1960s, surpassing Germany.
The automotive industry in Japan rapidly increased from the 1970s to the 1990s (when it
was oriented both for domestic use and worldwide export) and in the 1980s and 1990s,
overtook the U.S. as the production leader with up to 13 million cars per year manufactured
and significant exports. After massive ramp-up by China in the 2000s and fluctuating U.S.
output, Japan is now currently the third largest automotive producer in the world with an
annual production of 4,970,265 units in 2016. Japanese investments helped grow the auto
industry in many countries throughout the last few decades.
Japanese zaibatsu (business conglomerates) began building their first automobiles in the
middle to late 1910s. The companies went about this by either designing their own trucks
(the market for passenger vehicles in Japan at the time was small), or partnering with
a European brand to produce and sell their cars in Japan under license.
Some of its most well-known global brands belong to the automotive industry. People all
around the world are familiar with Toyota, Honda, Suzuki, Nissan, Mitsubishi, Subaru,
Daihatsu, Fuso, Hino, Mazda, Lexus, and many more.
They belong to the country’s most famous exports. And what is more, Japanese automotive
components can be found in cars being manufactured on six continents.
In fact, automotive related manufacturing takes up 89 percent of the country’s largest
manufacturing sector, the transportation machinery industry. Automotive components and
vehicles account for 18 percent of all manufacturing shipments in Japan.
Japan Automobile Manufacturing Association (JAMA)
JAMA Established in 1967 Its the Japan Automobile Manufacturers Association. (JAMA) is a
non-profit industry association which comprises Japan's fourteen manufacturers of
passenger cars, trucks, buses and motorcycles. Its organization today is the result of the
merger of the Japan Motor Industrial Federation (JMIF) and the Japan Automobile Industry
Employers’ Association (JAIEA) with JAMA in May, 2002.
Automobile manufacturing integrates many supporting industries, and automobile use is the
focus of a wide range of related industries. Directly or indirectly, roughly 9% of Japan’s
working population is involved in auto industry-related work. Auto production furthermore
accounts for 16% of the total value of Japan’s manufacturing shipments and for 37% of the
value of the machinery industries’ combined shipments. The automotive industry is thus one
of the Japanese economy’s core industrial sectors. The globalization of auto manufacturing
also contributes significantly to local and national economies around the world.
JAMA works to support the sound development of Japan’s automobile industry and to
contribute to social and economic welfare.
Chairman of JAMA: - Fumihiko IKE

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Objective of JAMA
To promote the sound development of the Japanese automobile industry and contribute to
social and economic welfare.
TotalMember Company of JAMA
Domestic auto production has been steadily rising since 2012, in light of a weaker yen and a
stronger global market for motor vehicles. This has led to extended expansion by Japan’s
major automakers and a smaller focus on selling in the home market.
In 2016, Toyota, Honda and Suzuki were the best-selling car brands with top car
manufacturer Toyota gaining market share in a slightly weaker market. Of the top-selling car
brands in Japan in 2016. Toyota, Daihatsu and Isuzu increased sales while Mazda,
Mitsubishi, and Nissan had much weaker sales. Mercedes Benz was again the leading
foreign brand in Japan while Volkswagen continued to lose market share in Japan. The
Toyota Prius was the best-selling car model in Japan in 2016.
Future Outlook
Toyota remains the largest automaker in the world by volume. Japanese automotive
production is also recently on the rise. As car manufacturers are taking more focus on
foreign markets, their investments in innovation and increasing exports are expected to grow
as a result.
Lead Company “Toyota Motor Corporation “Analysis &
Interpretation-:
ROE= Net Income/Equity
Figures In JPY Mil
2014 2015 2016
 Daihatsu Motor Co., Ltd.
 Fuji Heavy Industries Ltd.
 Hino Motors, Ltd.
 Honda Motor Co., Ltd.
 Isuzu Motors Limited
 Kawasaki Heavy Industries, Ltd.
 Mazda Motor Corporation
 Mitsubishi Motors Corporation
 Mitsubishi Fuso Truck & Bus corporation
 Nissan Motor Co., Ltd.
 Suzuki Motor Corporation
 Toyota Motor Corporation
 UD Trucks Corporation
 Yamaha Motor Co., Ltd.

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Net Income 1,823,119 2,173,338 2,312,694
Equity 34.92 35.17 35.31
ROE 13.7 13.91 13.76
Interpretation-: The amount of net income returned as a percentage of shareholders equity. Return
on equity measures a corporation’s profitability by revealing how much profit a company generate with
the money shareholder have invested. ROE of the company is lower in 2014 after that its goes up in
2015 than in 2016 it goes down a bit. That means company tries to sustained and achieve their
previous position.
ROA=Net Income/Total Assets
Figures In JPY Mil
2014 2015 2016
Net Income 1,823,119 2,173,338 2,312,694
Total Assets 41,437,473 47,729,830 47,427,597
ROA 4.74 4.87 4.85
Interpretation-: ROA is an indicator of how profitable a company is relative to its total assets. ROA
gives an idea as to how efficient management is at using its assets to generate earning. ROA of
Toyota shows ups and downs in last three year. According to analysis firm has to put more effort to
utilize their assets to generate more profits.
Asset Turnover Ratio= Net Sales/Total Assets
Figures In JPY Mil
2014 2015 2016
Net Sales 25,691,911 27,234,521 28,403,118
Total Assets 41,437,473 47,729,830 47,427,597
13.7
13.91
13.76
13.5
13.6
13.7
13.8
13.9
14
2014 2015 2016
ROE
4.74
4.87
4.85
4.65
4.7
4.75
4.8
4.85
4.9
2014 2015 2016
ROA
ROA

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Asset Turnover Ratio 0.67 0.61 0.59
Interpretation-: Assets Turnover measures firm’s efficiency at using its assets in generating sales
and revenue; Companies with low profit margins tend to have high assets turnover, while those with
high profit margin have low assets turnover. Assets turnover ratio is decreasing slightly year on year,
which shows that performance of using assets in generating sales increased in 2015 & 2016 as
compare to 2014.
Gross Profit Margin= Gross Profit/Net Sales
Figures In JPY Mil
2014 2015 2016
Gross Profit 4,890,772 5,392,845 5,797,653
Net Sales 25,691,911 27,234,521 28,403,118
Gross Profit Margin 19.04 19.8 20.41
Interpretation-: Gross profit margin is the financial matrix used to assess a firm’s financial health by
revealing the proportion of money left over from revenue after accounting for the cost of goods sold.
Gross profit margin serves as the source for paying additional expenses and future saving, increasing
gross profit margin which is good for the company.
Net Profit Margin= Net Profit/Net Sales
Figures In JPY Mil
2014 2015 2016
Net Profit 1,823,119 2,173,338 2,306,607
Net Sales 25,691,911 27,234,521 28,403,118
0.67
0.61
0.59
0.5
0.55
0.6
0.65
0.7
2014 2015 2016
Asset Turnover Ratio
Asset Turnover Ratio
19.04
19.8
20.41
18
18.5
19
19.5
20
20.5
21
2014 2015 2016
Gross Profit Margin
Gross Profit Margin

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Net Profit Margin 7.1 7.98 8.12
Interpretation-: Net profit (NP) margin is a useful tool to measure the overall profitability of the
business. A high ratio indicates the efficient management of the affairs of business. Here Toyota
business is constantly improving its profitability.
Financial Leverage= ROE/ROA
Figures In JPY Mil
2014 2015 2016
ROE 13.7 13.91 13.76
ROA 4.74 4.87 4.85
Financial Leverage 2.86 2.84 2.83
Interpretation-: Financial Leverage can be defined as the degree to which a firm uses fixed income
securities, such as debt and preferred equity. An excessive amount of financial leverage increases
the risk of failure, since it becomes more difficult to repay debt, In this case financial leverage goes
down which is good for company credibility.
Comparative analysis & Interpretation of Lead Company withpeer group -:
 Toyota Motor Corp (Lead Company)
7.1
7.98
8.12
6.5
7
7.5
8
8.5
2014 2015 2016
Net Profit Margin
Net Profit Margin
2.86
2.84
2.83
2.81
2.82
2.83
2.84
2.85
2.86
2.87
2014 2015 2016
Financial Leverage
Financial Leverage

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 Honda Motor Co Ltd (Peer group)
 Suzuki Motor Corp (Peer group)
ROE= Net Income/Equity
FiguresIn JPY Mil
2014 2015 2016
Toyota Motor Corp 13.7 13.91 13.76
Honda Motor Co Ltd 10.48 7.82 4.97
Suzuki Motor Corp 8.69 6.9 9.56
Interpretation-: After comparing all the three companies it shows that Toyota is on the top as
compare to other two companies. ROE of this company is higher than any other company that means
Toyota enjoying the profitability and generated money from shareholder investment. Highest ROE
shows that future of Toyota is better than any other companies.
ROA=Net Income/Total Assets
FiguresIn JPY Mil
2014 2015 2016
Toyota Motor Corp 4.74 4.87 4.85
Honda Motor Co Ltd 3.92 2.99 1.88
Suzuki Motor Corp 4.01 3.16 3.92
13.7 13.91 13.76
10.48
7.82
4.97
8.69
6.9
9.56
0
2
4
6
8
10
12
14
16
2014 2015 2016
Toyota Motor Corp
Honda Motor Co Ltd
Suzuki Motor Corp

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10
Interpretation-: after analyzing all the companies result, come out is Toyota has highest ROA than
any other companies. That means Toyota successfully utilizing their assets and generating income
from their assets in comparison to its peer’s group.
Asset Turnover Ratio= Net Sales/Total Assets
FiguresIn JPY Mil
2014 2015 2016
Toyota Motor Corp 0.67 0.61 0.59
Honda Motor Co Ltd 0.81 0.78 0.8
Suzuki Motor Corp 1.1 0.98 1.07
Interpretation-: Assets Turnover measures of Suzuki shows the efficiency at using its assets in
generating sales and revenue comparing to its peer’s group- the higher the number the better. It’s
also indicates their better price strategy; Companies with low profit margins tend to have high assets
turnover.
Gross Profit Margin= Gross Profit/Net Sales
FiguresIn JPY Mil
2014 2015 2016
Toyota Motor Corp 19.04 19.8 20.41
Honda Motor Co Ltd 23.31 22.49 22.39
Suzuki Motor Corp 27.08 27.36 27.25
4.74 4.87 4.85
3.92
2.99
1.88
4.01
3.16
3.92
0
2
4
6
2014 2015 2016
Toyota Motor Corp
Honda Motor Co Ltd
Suzuki Motor Corp
0.67
0.61 0.59
0.81 0.78 0.8
1.1
0.98
1.07
0
0.2
0.4
0.6
0.8
1
1.2
2014 2015 2016
Toyota Motor Corp
Honda Motor Co Ltd
Suzuki Motor Corp

11. Page
11
Interpretation-: As we know Increasing gross profit margin which is good for the company, here
Suzuki has an enough financial health comparing to its peer’s group, to revealing the proportion of
money left over from revenue after accounting for the cost of goods sold. Gross profit margin serves
as the source for paying additional expenses and future saving.
Net Profit Margin= Net Profit/Net Sales
FiguresIn JPY Mil
2014 2015 2016
Toyota Motor Corp 7.1 7.98 8.12
Honda Motor Co Ltd 4.85 3.82 2.36
Suzuki Motor Corp 3.66 3.21 3.67
Interpretation-: Net profit (NP) margin is a useful tool to measure the overall profitability of the
business. A high ratio indicates the efficient management of the affairs of business. Here Toyota
business is constantly improving its profitability significantly as compare to its peer’s group.
Financial Leverage= ROE/ROA
FiguresIn JPY Mil
2014 2015 2016
Toyota Motor Corp 2.86 2.84 2.83
Honda Motor Co Ltd 2.64 2.59 2.7
Suzuki Motor Corp 2.16 2.19 2.82
19.04 19.8 20.41
23.31 22.49 22.39
27.08 27.36 27.25
0
5
10
15
20
25
30
2014 2015 2016
Toyota Motor Corp
Honda Motor Co Ltd
Suzuki Motor Corp
7.1
7.98 8.12
4.85
3.82
2.36
3.66 3.21 3.67
0
2
4
6
8
10
2014 2015 2016
Toyota Motor Corp
Honda Motor Co Ltd
Suzuki Motor Corp

12. Page
12
Interpretation-: Financial Leverage can be defined as the degree to which a firm uses fixed income
securities, such as debt and preferred equity. Here Toyota has a high Degree of Financial leverage in
which they have to pay High interest payment as compared to its peer’s group.
2.86 2.84 2.832.64 2.59 2.7
2.16 2.19
2.82
0
1
2
3
4
2014 2015 2016
Toyota Motor Corp
Honda Motor Co Ltd
Suzuki Motor Corp

13. Page
13
Overall Analysis-:
 After comparing all the automobile companies we observed that Toyota Moto Corp
performing very well in the Industry.
 The amount of net income returned as a percentage of shareholder equity. Return on
Equity measures a corporation’s profitability by revealing how much profit a company
generates with the money shareholders have invested. Here Toyota is very much ahead
from its peer’s group.
 ROE of the company increase which is a good sign for the company. Increasing ROE
Shows Company is growing, Toyota has better ROE
 Return on Assets (ROA) can vary substantially across different industries. The only
common rule is that the higher return on assets is the better, because the company is
earning more money on its assets. Here Toyota is earning more money on its assets.
 Assets turnover is good or bad depends on the industry in which company operates.
Some industries are simply more asset-intensive than others are, so their overall turnover
ratios will be lower, therefore it can be observed in Toyota Moto Corp.
 High gross profit margin indicates that the company can make a reasonable profit, as
long as it keeps the overhead cost in control. Low gross profit margin indicates that the
business is unable to control its production cost. Here Suzuki is doing relatively well as
compare to other two companies.
 Net profit margin is an indicator of how efficient a company is and how well it controls its
costs. The higher the margin is, the more effective the company is in converting revenue
into actual profit. Here Toyota is far ahead for its two competitors.
 Financial leverage is the amount of debt that an entity uses to buy more assets.
Leverage is employed to avoid using too much equity to fund operations. An excessive
amount of financial leverage increases the risk of failure, since it becomes more difficult
to repay debt. Here all companies has more or less same Financial leverage, but as we
go by year on year comparison Suzuki position is slightly better as compare to its peer
group.

14. Page
14
References/Bibliography -:
http://www.morningstar.com/
http://www.toyota-global.com/investors/financial_result/2016/
http://www.globalsuzuki.com/index.html
http://world.honda.com/index.html
http://www.jama-english.jp/publications/industry.html