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1. SCHOOL OF ARCHITECTURE, BUILDING AND DESIGN
Centre for Modern Architecture Studies in Southeast Asia
Foundation of Natural and Built Environments (FNBE)
Basic Accounting [ACC30205/FNBE0145]
Prerequisite: None
Lecturer: Chang Jau Ho
Assignment: Financial Ratio Analysis
Submission: by 12pm, Friday, 4th June 2015 (Week 16)
KiralyRenaud0320322
Lam Wee Wee 0320129
Nur ImanBinMohd Zahari 0321736
2. COMPANY BACKGROUND
TOYOTA MOTOR CORPORATION is an automotive company that based in Japan. It
was founded by Kiciro Toyoda in 1937 as a result from his father company. Toyota is
the most famous automotive brand in Japan as the company was ranked the twelfth-
largest company in the world .Toyota was the top brand name of the automotive, ahead
from Volkswagen Group and General Motors by its production. It’s produced 5.5 million
units worldwide which is equivalent to produce 1 unit of the car in 6 seconds. The
company made named when they created their first product, the type A engine in 1934
.and their first passenger car in 1936. There are 5 brand names of car that are produced
under Toyota Motor Corporation which include Lexus , Hino , Toyota and Ranz.The
vision of Toyota Motor Corporation is to lead the way to the future of mobility , enriching
lives around the world with the safest and most responsible ways of moving people .
3. Recent Developments
On 15 May 2015, Toyota Motor Corp said that it is recalling 637,000 vehicles in the
United States as part of massive expansion of global recall to replace potentially
defective air bag that could burst, with metal fragments sending shrapnel into the
vehicle occupants. Document posted by the National Highway Traffic Safety
Administration(NHTSA) and air bag supplied by Takata Corp with the effort of Toyota in
helping them.
To raise up to 500 billion yen,Toyota Motor Corp have issued up to 50 million first class
series of Class AA shares through public offering on 28 April 2015. Stating that the
issue period will last for 1 year starting from May 9 2015 to May 8 2016. The money with
then used for development of fuel cell electric vehicle, infrastructure research.
Furthermore, Toyota Motor Corp have announced that they have agreed to cooperate
with Mazda Motor as their business alliance to work on environmental technology and
advanced safety technology.
4. Profitability Ratios
ProfitabilityRatios 2013 2014 Interpretation
Returnon Equity
(ROE)
NetProfit x100%
Average O/E
=962,163 x100%
13,995,921.5
=6.9%
NetProfit x100%
Average O/E
=1,823,119 x100%
13,995,921.5
=13.5%
Duringthe periodof 2013-
2014, the ROE has increased
from6.9% to 13.02%. This
meansthe Toyota are getting
higherreturnontheircapital
thisyear.
NetProfitMargin
(NPM)
NetProfitx100%
NetSales
=962,163 x100%
20,914,150
=4.6%
NetProfitx100%
NetSales
=1,823,119 x100%
24,312,644
=7.4%
Duringthe periodof 2013-
2014, the NPMhas increased
from4.6% to 7.4%. This
meansthe businessabilityto
control overall expense has
improved.
Gross ProfitMargin
(GPM)
Gross Profitx100%
NetSales
=4,053,623 x100%
20,914,150
=19.4%
Gross Profitx100%
NetSales
=5,703,666 x100%
24,312,644
=23.5%
Duringthe periodof 2013-
2014, the GPM hasincrease
from19.4% to 23.5%. This
meansthe businessabilityto
control Cost of goodssold
expenseshasimproved
SellingExpense Ratio
(SER)
SellingExpense x100%
NetSales
=1,051,154.5 x100%
20,914,150
=5.03%
SellingExpense x100%
NetSales
=1,299,330 x100%
24,312,644
=5.3%
Duringthe periodof 2013-
2014, the SER has increased
from5.03% to 5.3%. This
meansthe businessabilityto
control the SER isslightly
worsening.
General Expense Ratio
(GER)
General Expense x100%
NetSales
=1,051,154.5 x100%
20,914,150
=5.03%
General Expense x100%
NetSales
=1,299,330 x100%
24,312,644
=5.3%
Duringthe periodof 2013 –
2014, the GER hasincreased
from5.03% to 5.3%. This
meansthe businessabilityto
control the GER isslightly
worse.
Financial ExpenseRatio
(FER)
Financial Expensex100%
NetSales
=22,967 x100%
20,914,150
=0.11%
Financial Expensex100%
NetSales
=19,630 x100%
24,312,644
=0.081%
Duringthe periodof 2013-
2014, the FER has decreased
from0.11% to 0.081%. This
meansthe businessabilityto
control the FER has
increased.
Average O/E:(12,772,856 + 15,218,987) / 2 = 13,995,921.5
Gross Profit2013: 22,064,192-18,010,569 = 4,053,623
Gross Profit2014: 25,691,911-19,988,245 = 5,703, 666
General,sellingandadministrativeexpenses2013: 2,102,309/2 = 1,051,154.5
General,sellingandadministrativeexpenses2014: 2,598,660/2 = 1,299,330
5.
6. Financial Stability Ratios
Financial Stability
Ratio
2013 2014 Interpretations
Working Capital
Ratio(WCR)
Total Current Asset
______________
Total Current Liabilities
13,784,890
12,912,520
= 1.068 : 1
15,717,706
14,680,685
= 1.071 : 1
Over the period 2013 to
2014, Working Capital have
increased from 1.068:1 to
1.071:1. The business
ability to pay off its current
liabilities is getting better.
However, it does satisfy the
minimum 2:1 ratio.
Total Debt Ratio(TDR)
Total
Liabilities
________ x100%
Total
Assets
22,710,461 x100%
35,483,317
= 64%
26,218,486 x100%
41,437,473
= 63.3%
Over the period 2013 to
2014, Total Debt have
decreased from 64% to
63.3%. The business total
debt have decreased. In
addition it is still above the
maximum 50% level.
Inventory Turnover
Ratio(ITR)
Cost of
Goods
Sold
365days / ________
Average
Inventory
18,010,569
365 days / ____________________
(1,715,786+1,622,282)/2
18,010,569
= 365 days / __________
1,669,034
= 33.8 days
19,988,245
365 days / ____________________
(1,894,704+1,715,786)/2
19,988,245
= 365 days / __________
1,805,245
= 32.9 days
Over the period 2013 to
2014, Inventory Turnover
have decreased from 33.8
days to 32.9 days. The
business is selling its goods
faster.
Debtor Turnover
Ratio(DTR)
Credit
Sales
365days / ________
Average
Debtors
10,457,075
365 days / ____________________
(1,971,659+1,999,827)/2
10,457,075
= 365 days / _________
1,085,743
= 38 days
12,156,322
365 days / ____________________
(2,041,232+1,971,659)/2
12,156,322
= 365 days / _________
2,006,445.5
= 59.8 days
Over the period 2013 to
2014, Debtor Turnover
have increased from 38
days to 59.8 days. The
business is taking a longer
to collect off their debts.
Interest Coverage
Ratio(ICR)
Interest Expense +
Net Profit
________________
Interest Expense
22,967+962,163
_______________
22,967
= 42.9 times
19,630+1,823,119
_______________
19,630
= 93.9 times
Over the period 2013 to
2014, Interest coverage
have increased from 42.9
times to 93.9 times. The
business ability to pay off
its interest is getting better.
In addition, it satisfy the
minimum requirement of 5
times.
7. Price/Earnings Ratio
P/E= Current Share Price
Earnings per share
= 116.55
11.17
=10.43
The ratio measureshowexpensive ashare is.The higherthe P/Eratio, the more expensive itis.
The P/E ratio forToyota Motors is10.43 thereforwe saythat itwill take investors10.43 yearsto recoup
theirinvestment.
8. Investment Recommendations
A) Profitability
From the informationwe gatheredaboutprofitabilityinvestinginToyotaMotorsCorporation
for the periodof 2013 to 2014 isbeneficial.Thisisbecause basedonthe profitabilityratiosthe
businesshasimproved.The returnonequityshowsanincrease of 6.9% - 13.5% whichmeans
that ToyotaMotors ownersare gettingahigherreturnon theircapital duringthatperiod.Also
the businessesabilitytocontrol itsoverall expenseshasimproved.The NetProfitMarginhas
increasedfrom4.6% to 7.4% givingarise of 2.8%. The Gross ProfitMargin has alsomade an
improvementof 4.1%meaningthatthe businesseshasimprovedatcontrollingitsCostof Goods
Soldexpenses.Onthe otherhandthe Sellingexpense ratioandGeneral Expense ratiohaven’t
done quite well,bothshowinganincrease duringthatperiod.Butitisonlya slightincrease of
0.27%. Thismeansthe businesshasn’tworsenedbyalarge margin.Andlastlythe Financial
Expense Ratiohasimprovedcomparedtothe previousyearfrom0.11% to 0.081%.This isa
decrease of 0.029% and will resultinahigherNetProfitMargin.
B) Stability
Toyota Motors Corporationdemonstratessmall signsof beingfinanciallystable.Duringthe
periodof 2013 to 2014 the WorkingCapital Ratiohas increasedfrom1.068:1 to 1.071:1. This
showsa slightimprovementalbeitdoesnotsatisfythe minimum2: 1 ratio. The Total Debt Ratio
alsoshowsimprovementasthere isa decrease from64%-63.3% as well asexceedingthe
maximum50% limitwe believe thatthisdoesnothinderitsstability.The InventoryTurnover
Ratioprovesthat the businessissellingitsgoodsfaster(33.8dayspreviouslyto32.9 days
currently),the DebtorTurnoverRatioshowsthatthe businessiscollectingitsdebtbyamargin
of 21.8 days(38 daysto 59.8 days.Toyotais takinglongertocollectingitsdebt.Andfinallythe
Interestcoverage Ratiohasincreasedfrom42.9 timesto 93.9 timesinadditionitexceedsthe
minimumrequirement5times.
C) Price
Toyota Motors Corporationsshare price isconsiderablycheap.
To conclude fromall the informationgatheredandcompiledinvestorsare encouragedtoinvestinthis
companyseeingasitshowsgood profitability,signsof financial stabilityandthe share pricesare not
exaggerated.
![SCHOOL OF ARCHITECTURE, BUILDING AND DESIGN
Centre for Modern Architecture Studies in Southeast Asia
Foundation of Natural and Built Environments (FNBE)
Basic Accounting [ACC30205/FNBE0145]
Prerequisite: None
Lecturer: Chang Jau Ho
Assignment: Financial Ratio Analysis
Submission: by 12pm, Friday, 4th June 2015 (Week 16)
KiralyRenaud0320322
Lam Wee Wee 0320129
Nur ImanBinMohd Zahari 0321736](https://image.slidesharecdn.com/accountingassignment21-150619152001-lva1-app6892/85/Accountingassignment2-1-1-320.jpg)
