Toyota Essay

1808 WordsJan 19, 20158 Pages
Financial Analysis Between the two companies, Honda is in the better financial situation. While Toyota consistently has the higher revenue, Honda three times as high of Return on Sales, Return on Assets, and Return on Equity. Honda also has double the Gross Profit Margin of Toyota. Toyota used 3.8% of net revenue toward research and development, an increase from last year. However, this is still down from the pre-global recession of 2009 levels. Honda used 5.5% of their total revenue toward the research and development. The high spending by both companies shows they are investing heavily in their future designs. A possible cause for the lower ratios with Toyota can be attributed to the global recession in 2009 begun in the United States with the burst of the housing bubble; however, the dramatic decrease in the net income does not agree with the decrease in revenue. In 2009 Toyota took a net loss of $4.4 billion. | Honda | Toyota | | 2009 | 2010 | 2011 | 2009 | 2010 | 2011 | Current Ratio | 1.09 | 1.35 | 1.31 | 1.07 | 1.22 | 1.10 | Inventory Turnover | 5.96 | 6.86 | 7.22 | 12.65 | 11.73 | 12.74 | Days of Inventory | 61 | 53 | 51 | 29 | 31 | 29 | Debt | 0.66 | 0.63 | 0.62 | 0.64 | 0.64 | 0.63 | Debt-to-Equity | 1.95 | 1.69 | 1.60 | 1.83 | 1.87 | 1.83 | Gross Profit Margin | 25.9% | 25.2% | 27.3% | 10.1% | 12.0% | 12.5% | ROA | 1.2% | 2.3% | 4.6% | -1.5% | 0.7% | 1.4% | ROE | 3.4% | 6.2% | 12.0% | -4.3% | 2.0% | 4.0% | ROS | 1.4% | 3.1% | 6.0% | -2.1% | 1.1% | 2.1% | Table [ 1 ]: Financial Ratios for Honda and Toyota for the years 2009 through 2011 The company I choose to focus on is Toyota. Although Toyota has higher revenue, the net

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