Financial Analysis of Toyota Indus Motor Company
Total Page：16
File Type：pdf, Size：1020Kb
Financial Analysis of Toyota Indus Motor Company 2017 Financial Analysis of Toyota Indus Motor Company Financial Year 2011-2016 Ayesha Majid Lahore School of economics 5/1/2017 Financial Analysis of Toyota Indus Motor Company i Table of Contents Preamble .................................................................................................................... 1 Categories of Financial Ratios Analysed ................................................................ 1 Limitations .............................................................................................................. 2 Toyota Indus Motors................................................................................................... 3 Company Profile ..................................................................................................... 3 Financial Profile ...................................................................................................... 3 Introduction ............................................................................................................. 4 Mission Statement ............................................................................................... 5 Vision Statement ................................................................................................. 5 Slogan ................................................................................................................. 5 Quote Summary as on 1st May 2017 .......................................................................... 6 SWOT Analysis .......................................................................................................... 8 Industry Analysis ........................................................................................................ 9 Competitors .......................................................................................................... 10 Porter’s Five Forces of the Automotive Industry ................................................... 13 Threat of New Entry (Weak): ............................................................................. 13 Supplier power (Weak): ..................................................................................... 13 Buyer power (Strong): ....................................................................................... 13 Threat of Substitutes (Weak): ........................................................................... 13 Competitive Rivalry (Very Strong): .................................................................... 14 Future Plans ............................................................................................................. 14 Ratio Analysis .......................................................................................................... 15 Liquidity Ratios ..................................................................................................... 15 1. Current Ratio ........................................................................................... 16 2. Quick Ratio .............................................................................................. 16 3. Acid Test Ratio......................................................................................... 16 4. Inventory Turnover ................................................................................... 17 5. Receivables Turnover .............................................................................. 17 6. Days Sales in Inventory ........................................................................... 17 7. Days Sales in Receivables ...................................................................... 17 8. Operating Cycle ....................................................................................... 18 Financial Analysis of Toyota Indus Motor Company ii Profitability Ratios ................................................................................................. 19 1. Return on Sales ....................................................................................... 19 2. Gross Profit Margin .................................................................................. 19 3. Operating Profit Margin ............................................................................ 20 4. EBIT to Sales ........................................................................................... 20 5. EBITDA to Sales ...................................................................................... 20 6. Return on Assets (ROA) .......................................................................... 20 7. Return on Equity (ROE) ........................................................................... 21 8. Return on net operating Assets (RNOA) .................................................. 21 9. Return on capital (ROC) .......................................................................... 21 Solvency Ratios .................................................................................................... 22 1. Liabilities to Equity ratio ........................................................................... 22 2. Total Leverage ......................................................................................... 22 3. EBITDA Coverage Ratio .......................................................................... 23 4. Times Interest Earned .............................................................................. 23 Asset Utilization & Efficiency Ratios ..................................................................... 24 1. Sales to Asset ratio (Asset turnover) ........................................................ 24 2. Sales to Average Net Working Capital ..................................................... 24 3. Sales to Fixed Assets turnover ................................................................ 24 Market Value Ratios ............................................................................................. 25 1. Price Earnings Ratio ................................................................................ 25 2. Dividend Yield .......................................................................................... 25 3. Market to Book Value ............................................................................... 25 Du-Pont Analysis .................................................................................................. 26 Conclusion & Recommendations ............................................................................. 28 References ............................................................................................................... 29 Balance Sheet .......................................................................................................... 30 Income Statement .................................................................................................... 31 Cash flow Statement ................................................................................................ 32 DuPont ..................................................................................................................... 32 Ratios ....................................................................................................................... 32 Benchmark ............................................................................................................... 34 Financial Analysis of Toyota Indus Motor Company 1 Preamble I have conducted this project as a part of my Bachelor’s Course: Financial Statement Analysis. The project is creäted on five years of Annual Financial Statements of the company from 2011 to 2016. In evaluation for industrial benchmark, average of three companies is used; due to time and resource constrains. The competitors’ ratios were obtained from peers doing their term project on the respective companies. The competitors are Pak Suzuki Motors, Honda Atlas and Ghandhara Nissan Motors Limited. Categories of Financial Ratios Analysed The accounting ratios are clustered in to five categories: 1. Liquidity Ratios The ratio shows the extent to which the firm can meet its financial obligations. Used to gauge a company's ability to pay off its debts in short term. 2. Profitability Ratios It is a measure of the capacity to make a profit, and a profit is what has remained from income earned after you have deducted all costs and expenses these ratios relate to profits to sales and assets. 3. Asset Management Ratios Measures the speed with which various accounts are converted into sales or cash- inflows or cash-outflows. That is the firm's success in managing its assets to generate sales. 4. Debt Management Ratios It shows the extent to which a firm uses debt financing or leverage. It assess the financial leverage and financial flexibility of a firm. 5. Market Value Ratios Financial Analysis of Toyota Indus Motor Company 2 These ratios are a measure of the return on investment, and whether the prices are over/under priced. Limitations Availability of the resources in gathering of data and information is one of the major limitation to be considered when different methods and sources employed. In addition, 100% accuracy cannot be guaranteed, as there are be very small chances that sources may not be reliable which result in inaccuracy of information. Aside from that, there are no primary data that was used due to time and cost constraints. There are many limitations to using ratio analysis such as; operating and accounting policies differ from firm