Honda Motor Company achieved virtually all of the goals they set in their three-year mid-term business plan to "make 20 million customers happy" and grow in all business segments. Their annual report provides financial statements and notes for the fiscal year ending March 31, 2005, showing increases in gross profit, income from operations, and net income compared to the previous fiscal year. Key notes include accounting policies, translation of financial statements, receivables, inventories, debt, taxes, pensions, and investments in affiliates.

1. HONDA MOTOR CO., LTD.
ANNUAL REPORT
Presented to:Sir.Umar Iftikhar
Presented by:Aliya Rubab

2. Executive Summary

Honda Motor Company has established itself as one of the
world’s leading producers of automobiles, as well as the largest
manufacturer of motorcycles. At the beginning of their three year
mid-term business plan, Honda set some goals that allowed them
to “make 20 million customers happy,” and this challenge
allowed them to grow in all business segments. They achieved
virtually all of their goals.
http://www.world.honda.com/investors

3. INTRODUCTION

Honda’s President and Chief Executive Officer is Taeko Fukui.

Honda’s home office is located at:
2-1-1 Minami Aoyama
Minato-ku, Tokyo 107-85566, Japan

The U.S. home office is located at:
540 Madison Ave., 32nd Floor
New York, NY 10022

The ending date of their last fiscal year was March 31, 2005

Honda operates in three main geographic locations:
Japan
United Kingdom
United States

The company produces automobiles, motorcycles and power products, as well as
providing financial services to its customers.

4. AUDITOR’S REPORT

The company’s independent auditor is a company known as
KPMG, located in Tokyo, Japan.

The independent auditors of Honda claim that they have
reviewed the company’s financial reports fairly, according to
the standards set by the Public Company Accounting Oversight
Board in the United States.

5. STOCK MARKET INFORMATION
The
most recent stock price on the New York Stock Exchange
was $28.77.
Honda had a twelve month trading range going from $23.55 in
October 2004, to $29.15 in October 2005.
The dividends per share were $0.47.
This stock information is dated October 4, 2005.
It is my opinion that current stockholders hold their stock. The
stock price seems fairly stable.

6. INDUSTRY SITUATION

Honda is among one of the top producers of motorcycles and
automobiles.

They focus on trying to make their vehicles environmental
friendly by producing a number of hybrid models.

Honda also has its own financing division to assist their
customers in purchasing vehicles and other power products.

7. COMPANY PLANS

Honda’s primary market is in Japan, where its head office and CEO are
located. Therefore, that is the area where they centralize their growth.
Consumer spending has increased in Japan, and because of this, they
expect the competition in the Japanese market to intensify.

They feel that there are some specific areas in need of improvement that
are essential to their success:
-Research and Development
-Production Efficiency
-Sales Efficiency
-Product Quality
-Safety Technologies
-The Environment
-Continuing to Increase Society’s Trust in and
Understanding Toward Honda

They feel that, through improving in these seven areas, they will achieve
the Honda visions, which consist of “Value Creation,” “Globalization,”
and “Commitment to the Future.”

8. INCOME STATEMENT
The income statement appears to
be similar to a single-step income
statement.
In Millions
2004
2005
Gross Profit
$23,771
$24,322

The increases in these numbers
seem to be quite small,
considering how large of a
corporation Honda is.
Income from
Operations
5,588
5,875

Most of the Net Income for the
year ended March 31, 2005, was
generated by other subsidiaries
operating outside of Japan.
Net Income
4,324
4,527


9. BALANCE SHEET (IN YEN)
Assets
Liabilities
Stockholders’ Equity
2004 8,328,768 = 5,454,368
+
2,874,400
2005 9,316,970 = 6,027,676
+
3,289,294
It appears that the numbers on the Balance Sheet have increased from
2004 – 2005. The total assets seem to have increased the most.

10. STATEMENT OF CASH FLOWS (IN YEN)
 For
the past two years, cash flow from operations have
been greater than net income.
 The
cash flow from investing seems to be getting smaller
and smaller from past years.
 Their
primary source of financing is the proceeds from
long-term debt.
 In
2004, cash increased a great deal. In 2005, however,
cash only increased a little bit.

11. ACCOUNTING POLICIES
The following are the topics of significant accounting policies that the company mentions in their financial
statements.
-Description of Business
-Basis of Presenting Financial Statements
-Consolidation Policy
-Use of Estimates
-Revenue Recognition
-Cash Equivalents
-Inventories
-Investments in Securities
-Goodwill
-Depreciation
-Impairment of Long-Lived Assets
-Income Taxes
-Product-Related Expenses
-Basic Net Income per Common Share
-Foreign Currency Translation
-Shipping and Handling Costs
-New Accounting Pronouncements not Adopted Yet
-Reclassification

12. NOTES TO FINANCIAL STATEMENTS



General and Summary of
Accounting Policies
Basis of Translating Financial
Statements
Presentation of Finance
Subsidiaries-Receivables in the
Consolidated Statement of Cash
Flows and the Consolidated
Balance Sheet

Finance Subsidiaries-Receivables
and Securitization

Inventories

Investments and Advances-Other

Short-Term and Long-Term Debt

Other Liabilities

Income Taxes

Dividends and Legal Reserves

Pension and Other Postretirement
Benefits

Investments and AdvancesAffiliates