This report focuses on the different capital budgeting techniques used in an organisation for investment appraisal and financial statement analysis using valuation and profitability ratios.
The first part of the report shows the capital budgeting techniques used by Brimoh Construction Limited for the appraisal of two projects. The techniques used in this report are the NPV, IRR, ARR and PBP. The advantages, disadvantages of each techniques and a comparison of all the techniques were also addressed in this report.
The second part of this report evaluates the performance of Toyota Motors Corporation and Honda Motors Corporation for the past four years, using relevant valuation and profitability ratios and comparing them with their industry average. The valuation ratios show that Toyota has more value than Honda, while the profitability ratios states otherwise. Some of the limitations to the use of financial ratios were also addressed by this report.
1.0 INTRODUCTION
The first part of this report deals with the different capital budgeting techniques used in investment appraisal. Capital budgeting is the process of identifying and selecting investments in long-term assets or assets expected to produce benefits over more than one year (Peterson and Fabozzi 2002). Due to the capital intensive nature of certain investments in an organisation, capital budgeting techniques are used to appraise the various projects an organisation wishes to invest on, in order to advise the management on the appropriate investment for the organisation. According to Cheng A, Kite D and Radtke R 1994, capital budgeting plays an essential role in a firms long-term viability and survival. Different types of capital budgeting techniques such as the net present value, internal rate of return, pay-back period and accounting rate of return where used in this report to appraise two mutually exclusive projects of Brimoh Construction Limited.
The second part of this report focuses on financial ratios and the analysis of financial statements and performance of two chosen organisations - Toyota Motor Corporation Limited and Honda Motor Corporation Limited from the car manufacturing industry. The financial statements for these organisations for the past four years were obtained from Marketwatch.com and various valuation and profitability ratios calculated. The results were compared with past records and the industry average to analyse the performance of both companies.
2.0 CAPITAL BUDGETING
Capital Budgeting is defined as planning and financing long term investment projects in an organisation (Skierkowski, 1981). Capital budgeting helps the organisation to decide whether or not an investment is worth taking. Capital budgeting is the technical component of an organization's strategic planning process (White 1997). Capital budgeting techniques is grouped into two methods; the discounted cash flow method and the non-discounted cash flow method. The discounted method such as the NPV and IRR makes use of the time value of money thereby discounting the cash flows to its present value while the non-discounted such as the ARR and PBP cash flow method does not take into account the time value of money. NPV and IRR are the two most popular discounted cash flow method used by organisation.
2.1 NET PRESENT VALUE
The NPV is the net difference between the present value of the investment's net cash inflows and its outflow (Horngren Harrison and Oliver 2011). NPV is the sum of the present value of all cash inflows from the project and initial outflow of the project. The idea behind the NPV is that the cash flows are being discounted at an agreed discount rate to its present value and net off from the initial cost of investment.
The decision rules for NPV are as follows:
Projects with a positive NPV should be accepted while projects with a negative NPV should be rejected.
For mutually exclusive projects; accept project with the highest NPV.
NPV could be calculated using the discount factor tables. The example below is used to illustrate the use of NPV for investment appraisal applying the discount factor table;
The management of Brimoh Construction Limited is faced with the task of choosing between two projects, to either acquire new machinery for its business or lease the machine. Both projects have the same initial cost of investment with five years useful life, the residual value for acquiring the machine at the end of the fifth year is £20,000, the leasing option has no residual value. The company makes use of a straight line method of depreciation and its cost of capital is 10%. The outflow and inflows for both projects is given below:
NPV for both projects is calculated in the table below at a discount rate of 10%.
The discount rate can be obtained from the present values table or by using the formula below;
Where r is the discount rate of 10% and
n is the number of years.
From the calculations above, both projects has a positive NPV of 117.425 for the acquisition of the machinery and 84.59 for the lease option. NPV decision rule in this situation states that the project with the highest NPV should be selected.
Based on this, the management of Brimoh Construction Limited is advised to acquire the machinery since the returns from the acquisition as shown by the NPV is greater than the returns from leasing the machinery. This shows that more returns will be generated over the initial cost of the investment.
Advantages of NPV:
It considers the time value of money by discounting the cash flows to their present value.
Makes use of all relevant cash flows.
It is simple for the management of the organisation to make a decision because a positive NPV means accept the project while a negative means rejection.
It is useful in comparing similar projects with the same cost.
Disadvantages of NPV:
People without a finance background find it difficult to calculate and understand the concept.
The cost of capital used is an assumption which is prone to change as the year progresses.
2.2 INTERNAL RATE OF RETURN
IRR of a particular investment is the discount rate that when applied to its future cash flows, will produce an NPV of precisely zero. In essence, it represents the yield from an investment (Atrill and McLaney 2008). It is the annual rate of return earned by the project on the capital employed (Fung and Stapleton 1980).
The IRR is computed by finding the discount rate that equates the present value of a project's cash outflows with the present value of its cash inflows (Garrison, Noreen and Brewer 2008). It is the rate of return that will give an NPV equals to zero.
The decision rules for NPV are as follows:
If IRR is greater than the company's cost of capital, then the project should be accepted.
For mutually exclusive projects, accept project with the highest IRR.
IRR can be calculated using the interpolation method, by applying the formula below.
L + NPVL (H - L)
NPVL -- NPVH
Where : NPVL is the NPV of the lower discount rate.
NPVH is the NPV of the higher discount rate.
L is the lower rate of return and
H is the higher rate of return.
To apply this formula to Brimoh Construction Limited, we assume a discount rate of 40% which will give us a negative NPV since at the rate of 10% the NPV of both projects are positive. The NPV at 40% discount rate is shown in the table below:
Applying the formula to both projects, the IRR for the acquisition of the machinery is 36.06% while for the lease option it is 35.53%. Both projects gave an IRR above the cost of capital of 10%, hence the management is advised to acquire the machinery since its rate of return is greater than the lease option.
Advantages of IRR:
Like the NPV, it considers the time value of money and makes use of all the relevant cash flows.
It shows if the investment will increase the value of the organisation.
Disadvantages of NPV:
It's complicated to calculate.
In some cases the IRR conflicts with the NPV.
It requires an estimate of the cost of capital.
2.3 ACCOUNTING RATE OF RETURN:
The ARR method takes the average of accounting operating profit that the investment will generate and expresses it as a percentage of the average investment made over the life of the project (McLaney and Atrill 2008). It is calculated by dividing the average annual profit from the investment by the average investment that produced the profit expressed as a percentage. The formula for ARR can be stated below;
ARR = Average annual operating profit x 100%
Average investment to earn that profit
The average annual profit is obtained after taking consideration of depreciation, while the average investment is calculated using the formula below:
Average investment = Cost of machine + Disposal value
2
The decision rule for ARR is to accept project with ARR above the minimum rate required by the business but where there is competing projects and all seems to be above the minimum rate, the project with the highest ARR is normally selected (McLaney and Atrill 2008).
Applying the formula above to calculate the ARR for Brimoh Construction Limited, the ARR for acquiring the project is 51% while the leasing option has an ARR of 40%. Hence the management of the organisation is therefore advised to consider the acquisition of the machinery since it offers a higher ARR which is above the company's cost of capital of 10%.
Advantages of ARR:
Easy to calculate as the formula is known.
Simple to understand and compare with target or other projects.
Disadvantages of ARR:
It ignores the time value of money.
It makes use of accounting information which can be distorted.
It doesn't take into consideration the concept of cash flow since it is based on accounting profit.
2.4 PAY BACK PERIOD
This method involves calculating the period of time likely to recoup the initial outlay on a project and then comparing this with the acceptable period (CIMA 2011). It is the length of time that is required for a stream of cash proceeds from an investment to recover the original cash outlay required by the investment (Dury 2004).
Decision rule for PBP:
For independent projects, the PBP is compared with the target of the organisation.
For mutually exclusive projects, the project with the shortest PBP is usually selected.
The PBP for Brimoh Construction Limited is calculated below;
Form the table above, it will take between 2 to 3years for the Brimoh construction limited to recover the cost of acquiring the machinery while it will take them only 2years to recover the cost of investment if the machinery is acquired on lease. Hence, applying the PBP rule, the management is advised to choose the lease option since it has the shortest PBP. But if the PBP for acquiring the machinery is within the target of the organisation, it would be a better option because it offers a higher return after the PBP, although the PBP does not take into account cash flows after the PBP.
Advantages of PBP:
It is easy to calculate and understand because people with non-financial background can do the calculation with ease.
It is a useful tool for short-term decision making.
Disadvantages of PBP:
It ignores the time value of money just like the ARR.
It disregards cash flows after the PBP thereby not taking into account the risk that might occur after the PBP.
3.0 COMPARISONS OF THE DIFFERENT TECHNIQUES
The different capital budgeting techniques discussed above are grouped into two main groups; the non-discounting method and the discounted method. The PBP and the ARR are grouped under the non-discounted method because they both ignore the time value of money which is considered as their major pitfall. The concept of time value of money is essential and should be considered when making investment decisions because the value of £1000 pounds today will not be the same in future.
NPV and IRR are the two major discounted method mostly used by organisations. This is because both techniques take cognisance of the time value of money, thereby discounting the cash flows to its present value. This is considered as an appropriate way of investment appraisal.
3.1 NPV AND IRR COMPARED
Gitman and Forrester (1977), in their survey of 103 large firms, find that only 9.8% of firms use net present value as their primary method and 53.6% report IRR as primary method. This was also supported by Stanley and Block (1984) in their survey which shows that 65% of respondents report IRR as their primary capital budgeting technique. This shows that organisations prefer to use the IRR as a method of investment appraisal.
According to Cheng, Kite and Radtke (1994), both methods are theoretically sound because each measures a different aspect of capital projects profitability. NPV measures the change in the net worth of the firm due to the project while IRR measures the periodic rate of return for the projects required capital investment. The main problem with the use of IRR as noted by Graham and Harvey (2002) in his survey is that in some cases, managers intent on maximizing IRR may actually reduce value by rejecting positive NPV projects. NPV can be a better technique for investment appraisal when compared with the IRR because;
IRR may not work properly for projects with unconventional cash flow.
In the case of mutually exclusive projects, IRR might give a conflicting decision.
IRR is not consistent with the shareholder wealth maximization of an organisation and does not consider the scale of the investment.
4.0 FINANCIAL ANALYSIS - TOYOTA AND HONDA MOTOR CORPORATION
Financial ratios are used in analysing a firm's financial position and the efficiency of its assets and liabilities management (Altman 1968, Beaver 1968). The cornerstone of financial statement analysis is the use of ratios (Horngren et al 2006).
4.1 VALUATION RATIOS
Table 5: Valuation Ratios
Price Earnings Ratio: The PE ratio shows the amount investors are prepared to pay per dollar of stated profits (Brigham and Houston 2012). According to Riahi-Belkaoui and Picur (2001), survey and empirical evidence suggests that the dominant valuation model used by analyst is the PE ratio. Form the table above the PE ratio of Toyota motors dropped to negative in 2009, this could have been caused by the negative EPS because the company recorded a loss same year, however the ratio increased in 2010. The current PE ratio of the company is high when compared to the industry average which shows that its equity is gaining more value. PE ratios depend on the price of the company's share and could be affected by the differences in capital structure (Rankine and Howson, 2006).
For Honda motors, the PE ratio increased in 2009 which has the highest ration which could have been caused by its high net income for that year. But the ratio started decreasing from 2009 which might have been caused by the decreasing net income and EPS. The PE ratio for the company when compared with the industry average is low showing that the value of the company's equity is decreasing. For both company, Toyota stands at a better ground because its PE ratio is above the industry average.
Market to Book Ratio: This ratio is used to show the value of a company by comparing its market value to the book value of its equity. It measures the value of a company in the financial market (Weaver and Weston, 2004). From the valuation table, the market to book ratio for Toyota increased in 2009 because of an increase in the market price of its shares, however this trend started decreasing in 2010 as the share price decreases, although the current ratio is still above the industry average. Honda motors experienced an increase in its ratio in 2009 and 2010 as the share price increases, but decreased in 2011 below the industry average. This decrease might have been caused by a decrease in its share price in 2011.
For this ratio, Toyota stands at a better chance for investors as they will perceive its stock as having more value than that of Honda motors.
Enterprise Value to EBITDA: This ratio which shows the value of a company is calculated by dividing the enterprise value by the earnings before interest, tax, depreciation and amortization. From the table above, we can see that this ratio for Toyota motors has been fluctuating with a sharp increase in 2009 and decreased in 2010 and 2011 respectively. This shows that the company generates a high EBITDA. The same thing could be seen in the case of Honda motors with an increase in 2009 from 2.10 to 10.53 and decreasing in 2010 and 2011 respectively.
Comparing the two company shows that Toyota with a higher ratio could be seen as having value more than Honda motors.
Note: The industry average for this ratio was not found making it difficult to compare the ratio of both companies with their industry.
4.2 PROFITABILTY RATIOS
This ratio measures whether the company is performing satisfactorily, the performance of management, identify if a company may be a worthwhile investment opportunity and determine a company's performance relative to its competitors (Wood and Sangster 2008).
Table 6: Profitability Ratios
Operating Margin: This ratio relates the operating profit for the period to the sales revenue during that period (Atrill and McLaney 2008). From the table above, the OM ratio for Toyota motors decreased to negative in 2009, this could have been caused by the increase in unusual expenses for 11.35 billion in 2008 to 220.92 billion in 2009; this led to the net loss recorded by the company for that year.
Both companies have an operating margin ratio below the industry average which suggests that the companies have a high operating expense. Although the ratio for Honda motors is better than that of Toyota, showing that Honda motors operating cost is lower than that of Toyota.
Net Profit Margin: This ratio shows the profitability of the company for a particular period. It is calculated by dividing the net income of the company with the sales revenue for the period. The NPM ratio for Toyota motors has been decreasing between 2008 and 2009, with a negative ratio in 2009 caused by the net loss recorded in the organisation. There was a sharp increase in the unusual expense of the company in 2009 which could have led to the net loss. This net loss recorded in 2009 affected the NPM ratio of 2010 with a slight increase in 2011 caused by an increase in the net income of the company. Honda motors NPM ratio decreased in 2009, this could have been caused by an unusual expenses incurred that year, which reduced the net income of the company. However this ratio increased in 2010 and 2011 as the net income of the company increases. Both companies are not performing well when compared with the industry average, although Honda seems to be performing better than Toyota.
Return on Equity (ROE): This ratio measures the return earned by management on the stockholders investment - owner's equity (Williams et al 2002). This ratio is calculated by dividing the net income of the company by the book value of the equity. ROE for Toyota motors was quite high in 2008 because of a high net income and book value of equity, this trend dropped to negative in 2009 due to the loss recorded that year and a decrease in the book value of equity. Honda motors have a high ROE in 2009 because of its high net income. However, it dropped in 2009 which could have been caused by the decrease in net income and the book value of the company. An increase in the net income and the book value of the company increased the ROE in 2010 and 2011 respectively. The current ROE for both companies is below the industry average although Honda is performing better than Toyota as regards the return earned on shareholder's investment.
4.3 LIMITATIONS OF FINANCIAL RATIOS
Atrill and McLaney (2008), has identified the following limitations to the use of financial ratio;
Quality of financial statements: ratio analysis is based on financial statement and is likely to inherit the limitations of the financial statement.
Inflation: financial statements on which ratio analysis is based can be distorted by the effects of inflation and this will affect the reliability of the ratio.
Basis of comparison: ratios are always compared with the ratios of other companies in the same industry. This basis of comparison may not be relied upon as any difference in accounting policy between the two companies being compared can affect the ratios.
Balance sheet ratio: ratios based on balance sheet figures such as the liquidity ratio may not show the true representative of the financial position of the company because the balance sheet shows the summary of the business at a particular time.
5.0 CONCLUSION
This report has addressed different capital budgeting techniques used for investment appraisal in an organisation. It has also analysed the financial statements of Toyota Motors Limited and Honda Motors Limited using the valuation and profitability ratios.
The capital budgeting techniques were used to advise the management of Brimoh Construction Limited on the choice of project for investment. The NPV, IRR and ARR techniques suggest that the management of the organisation should acquire the machinery instead of leasing it, but the PBP suggests that the lease option should be considered by the firm, because it will take them less time to recover the initial investment.
The second part analysed the financial statement of Toyota and Honda motors. Toyota has a high valuation ratio when compared to Honda; however Honda's profitability ratios are higher than Toyota. Some of the limitations associated with the use of ratio were also identified.
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APPENDIX 1
CALCULATION OF IRR
To calculate the IRR applying the formular L + NPVL (H - L)
NPVL -- NPVH
Acquiring the machinery:
IRR = 10 + 117.425 (40 - 30) = 36.06%
117.425 + 17.73
Leasing the machinery:
IRR = 10 + 117.425 (40 - 30) = 36.06%
117.425 + 17.73
CALCULATION OF ARR
To calculate the ARR for acquiring the machinery, since the company depreciates its assets on a straight basis, the depreciation will be calculated to obtain the operating profit after depreciation
Average annual operating profit before depreciation:
Acquiring the machinery = 50,000+60,000+70,000+80,000+85,000 = 69,000 5
Leasing the machinery = 80,000+70,000+60,000+50,000+40,000 = 60,000 5
Average annual operating profit after depreciation:
Using the straight line method, depreciation is calculated as follows;
Depreciation = Cost of machine - Disposal value
5
Acquiring the machinery = 150,000 - 20,000 = 26,000
5
Leasing the machinery = 150,000 - 0,000 = 30,000
5
Therefore the average annual operating profit after depreciation is calculated as follows;
Acquiring the machinery = £69,000 - £26,000 = £43,000.
Leasing the machinery = £60,000 - £30,000 = £30,000.
Average investment:
Cost of machine + Disposal value
2
Acquiring the machinery = £150,000 + £20,000 = £85,000
2
Leasing the machinery = £150,000 + £0,000 = £75,000
2
Therefor the ARR will be calculated as follows;
Acquiring the machinery = £43,000 x 100% = 51%
£85,000
Leasing the machinery = £30,000 x 100% = 40%
£75,000
APPENDIX 2
INCOME STATEMENT OF TOYOTA MOTORS
Fiscal year is April-March. All values JPY millions.
2008
2009
2010
2011
Sales/Revenue
26.29T
20.53T
18.95T
18.99T
Cost of Goods Sold (COGS) incl. D&A
21.52T
18.46T
16.68T
16.62T
COGS excluding D&A
20.03T
16.96T
15.27T
15.44T
Depreciation & Amortization Expense
1.49T
1.5T
1.41T
1.18T
Depreciation
-
-
-
-
Amortization of Intangibles
-
-
-
-
Gross Income
4.77T
2.07T
2.27T
2.38T
2008
2009
2010
2011
SG&A Expense
2.5T
2.53T
2.12T
1.91T
Research & Development
812.65B
904.08B
725.35B
730.34B
Other SG&A
1.69T
1.63T
1.39T
1.18T
Other Operating Expense
0
0
0
0
Unusual Expense
11.35B
220.92B
2.49B
7.92B
EBIT after Unusual Expense
(11.35B)
(220.92B)
(2.49B)
(7.92B)
Non-Operating Income/Expense
58.63B
29.97B
101.62B
41.47B
Non-Operating Interest Income
165.68B
138.47B
78.22B
90.77B
Equity in Affiliates (Pretax)
-
-
-
-
Interest Expense
46.11B
46.88B
33.41B
29.32B
Gross Interest Expense
46.11B
46.88B
33.41B
29.32B
Interest Capitalized
0
0
0
0
Pretax Income
2.44T
(560.38B)
291.47B
563.29B
Income Tax
911.5B
(56.44B)
92.66B
312.82B
Income Tax - Current Domestic
491.19B
65.68B
65.97B
85.29B
Income Tax - Current Foreign
338.85B
72.86B
1.16B
141.82B
Income Tax - Deferred Domestic
119.33B
(26.47B)
(126.72B)
(44.27B)
Income Tax - Deferred Foreign
(37.88B)
(168.52B)
152.25B
129.98B
Income Tax Credits
0
0
0
0
Equity in Affiliates
270.11B
42.72B
45.41B
215.02B
Other After Tax Income (Expense)
0
0
0
0
Consolidated Net Income
1.8T
(461.22B)
244.21B
465.49B
Minority Interest Expense
77.96B
(24.28B)
34.76B
57.3B
Net Income
1.72T
(436.94B)
209.46B
408.18B
Extraordinaries & Discontinued Operations
0
0
0
0
Extra Items & Gain/Loss Sale Of Assets
0
0
0
0
Cumulative Effect - Accounting Chg
-
-
0
0
Discontinued Operations
0
0
0
0
Net Income After Extraordinaries
1.72T
(436.94B)
209.46B
408.18B
Preferred Dividends
0
0
0
0
Net Income Available to Common
1.72T
(436.94B)
209.46B
408.18B
EPS (Basic)
540.65
-139.13
66.79
130.17
Basic Shares Outstanding
3.18B
3.14B
3.14B
3.14B
EPS (Diluted)
540.44
-139.13
66.79
130.16
Diluted Shares Outstanding
3.18B
3.14B
3.14B
3.14B
EBITDA
3.76T
1.03T
1.56T
1.64T
BALANCE SHEET FOR TOYOTA MOTORS
Assets
Fiscal year is April-March. All values JPY millions.
2008
2009
2010
2011
Cash & Short Term Investments
2.31T
2.98T
4.05T
3.51T
Cash Only
1.63T
2.44T
1.87T
2.08T
Short-Term Investments
676.98B
540.5B
2.19T
1.43T
Total Accounts Receivable
6.86T
5.62T
6.46T
5.89T
Accounts Receivables, Net
2.04T
1.39T
1.89T
1.45T
Accounts Receivables, Gross
2.06T
1.41T
1.9T
1.46T
Bad Debt/Doubtful Accounts
(17.47B)
(15.03B)
(13.74B)
(11.86B)
Other Receivables
4.82T
4.22T
4.57T
4.44T
Inventories
1.83T
1.46T
1.42T
1.3T
Finished Goods
1.21T
875.93B
885.01B
715.27B
Work in Progress
239.94B
251.67B
199.27B
218.34B
Raw Materials
374.21B
331.79B
265.49B
299.76B
Progress Payments & Other
0
0
72.61B
70.88B
Other Current Assets
1.09T
1.24T
1.14T
1.12T
Miscellaneous Current Assets
563.22B
605.33B
1.14T
1.12T
Total Current Assets
12.09T
11.3T
13.07T
11.83T
2008
2009
2010
2011
Net Property, Plant & Equipment
7.81T
7.4T
6.71T
6.31T
Property, Plant & Equipment - Gross
17.4T
17.19T
17.09T
16.61T
Buildings
3.57T
3.61T
3.67T
3.62T
Land & Improvements
1.26T
1.26T
1.26T
1.24T
Computer Software and Equipment
-
-
-
-
Other Property, Plant & Equipment
0
0
-
-
Accumulated Depreciation
9.58T
9.79T
10.38T
10.3T
Total Investments and Advances
5.53T
3.93T
4.14T
5.4T
Other Long-Term Investments
3.43T
2.1T
2.26T
3.57T
Long-Term Note Receivable
6.05T
5.73T
5.7T
5.62T
Intangible Assets
-
-
-
-
Net Goodwill
-
-
-
-
Net Other Intangibles
-
-
-
-
Other Assets
875.29B
557.6B
608.38B
542.98B
Tangible Other Assets
875.29B
557.6B
608.38B
542.98B
Total Assets
32.46T
29.06T
30.35T
29.82T
Liabilities & Shareholders' Equity
2008
2009
2010
2011
ST Debt & Current Portion LT Debt
6.23T
6.32T
5.5T
5.95T
Short Term Debt
3.55T
3.62T
3.28T
3.18T
Current Portion of Long Term Debt
2.68T
2.7T
2.22T
2.77T
Accounts Payable
2.21T
1.3T
1.96T
1.5T
Income Tax Payable
312.55B
65.16B
162.73B
127.72B
Other Current Liabilities
3.19T
2.91T
3.07T
3.21T
Dividends Payable
-
-
-
-
Accrued Payroll
-
-
-
-
Miscellaneous Current Liabilities
3.19T
2.91T
3.07T
3.21T
Total Current Liabilities
11.94T
10.59T
10.69T
10.79T
Long-Term Debt
5.98T
6.3T
7.02T
6.45T
Long-Term Debt excl. Capitalized Leases
5.95T
6.26T
7T
6.43T
Non-Convertible Debt
5.95T
6.26T
7T
6.43T
Convertible Debt
0
0
0
0
Capitalized Lease Obligations
36.15B
40.18B
18.15B
17.63B
Provision for Risks & Charges
632.3B
634.61B
678.68B
668.02B
Deferred Taxes
987.53B
492.78B
690.6B
691.28B
Deferred Taxes - Credit
1.1T
642.29B
813.22B
810.13B
Deferred Taxes - Debit
111.48B
149.51B
122.62B
118.85B
Other Liabilities
278.15B
293.63B
225.32B
179.78B
Other Liabilities (excl. Deferred Income)
278.15B
293.63B
225.32B
179.78B
Deferred Income
-
-
-
-
Total Liabilities
19.93T
18.46T
19.42T
18.9T
Non-Equity Reserves
0
0
0
0
Preferred Stock (Carrying Value)
0
0
0
0
Redeemable Preferred Stock
-
-
0
0
Non-Redeemable Preferred Stock
-
-
0
0
Common Equity (Total)
11.87T
10.06T
10.36T
10.33T
Common Stock Par/Carry Value
397.05B
397.05B
397.05B
397.05B
Retained Earnings
12.41T
11.53T
11.57T
11.84T
ESOP Debt Guarantee
0
0
0
0
Cumulative Translation Adjustment/Unrealized For. Exch. Gain
(501.37B)
(882.67B)
(872.78B)
(1.16T)
Unrealized Gain/Loss Marketable Securities
310.98B
17.88B
194.29B
168.23B
Revaluation Reserves
-
-
0
0
Treasury Stock
(1.19T)
(1.26T)
(1.26T)
(1.26T)
Total Shareholders' Equity
11.87T
10.06T
10.36T
10.33T
Accumulated Minority Interest
656.67B
539.53B
570.72B
587.65B
Total Equity
12.53T
10.6T
10.93T
10.92T
Liabilities & Shareholders' Equity
32.46T
29.06T
30.35T
29.82T
INCOME STATEMENT FOR HONDA MOTORS
Fiscal year is April-March. All values JPY millions.
2008
2009
2010
2011
Sales/Revenue
12T
10.01T
8.58T
8.94T
Cost of Goods Sold (COGS) incl. D&A
8.54T
7.42T
6.41T
6.5T
COGS excluding D&A
8.02T
6.78T
5.79T
5.93T
Depreciation & Amortization Expense
518.43B
637.64B
629.67B
563.64B
Depreciation
-
-
-
-
Amortization of Intangibles
-
-
-
-
Gross Income
3.46T
2.59T
2.16T
2.44T
2008
2009
2010
2011
SG&A Expense
2.51T
2.4T
1.8T
1.87T
Research & Development
587.96B
563.2B
463.35B
487.59B
Other SG&A
1.92T
1.84T
1.34T
1.38T
Other Operating Expense
0
0
0
0
Unusual Expense
0
20.82B
0
0
EBIT after Unusual Expense
0
(20.82B)
0
0
Non Operating Income/Expense
(90.79B)
(25.78B)
(33.26B)
45.67B
Non-Operating Interest Income
50.14B
41.24B
18.23B
23.58B
Equity in Affiliates (Pretax)
0
0
-
-
Interest Expense
16.62B
22.54B
12.55B
8.47B
Gross Interest Expense
16.62B
22.54B
12.55B
8.47B
Interest Capitalized
0
-
0
0
Pretax Income
895.84B
161.73B
336.2B
630.55B
Income Tax
387.44B
109.84B
146.87B
206.83B
Income Tax - Current Domestic
356.1B
30.49B
36.63B
(52.7B)
Income Tax - Current Foreign
0
37.58B
53.63B
129.35B
Income Tax - Deferred Domestic
31.34B
7.65B
(7.02B)
22.32B
Income Tax - Deferred Foreign
0
34.12B
63.62B
107.86B
Income Tax Credits
0
0
0
0
Equity in Affiliates
118.94B
99.03B
93.28B
139.76B
Other After Tax Income (Expense)
0
0
0
0
Consolidated Net Income
627.35B
150.93B
282.61B
563.48B
Minority Interest Expense
27.31B
13.93B
14.21B
29.39B
Net Income
600.04B
137.01B
268.4B
534.09B
Extraordinaries & Discontinued Operations
0
0
0
0
Extra Items & Gain/Loss Sale Of Assets
0
0
0
0
Cumulative Effect - Accounting Chg
-
-
0
0
Discontinued Operations
0
0
0
0
Net Income After Extraordinaries
600.04B
137.01B
268.4B
534.09B
Preferred Dividends
0
0
0
0
Net Income Available to Common
600.04B
137.01B
268.4B
534.09B
EPS (Basic)
330.54
75.5
147.91
295.67
Basic Shares Outstanding
1.82B
1.81B
1.81B
1.81B
EPS (Diluted)
330.54
75.5
147.91
295.67
Diluted Shares Outstanding
1.82B
1.81B
1.81B
1.81B
EBITDA
1.47T
827.29B
993.45B
1.13T
BALANCE SHEET FOR HONDA MOTORS
Assets
Fiscal year is April-March. All values JPY millions.
2008
2009
2010
2011
Cash & Short Term Investments
1.05T
701.82B
1.12T
1.28T
Cash Only
1.05T
690.37B
1.12T
1.28T
Short-Term Investments
-
11.46B
1.89B
1.7B
Total Accounts Receivable
2.36T
2.03T
1.98T
1.92T
Accounts Receivables, Net
1.02T
854.21B
883.48B
787.69B
Accounts Receivables, Gross
1.02T
861.67B
892.03B
795.6B
Bad Debt/Doubtful Accounts
-
(7.46B)
(8.56B)
(7.9B)
Other Receivables
1.34T
1.17T
1.1T
1.13T
Inventories
1.2T
1.24T
936.98B
900.6B
Finished Goods
755.12B
830.97B
559.57B
531.07B
Work in Progress
38.76B
45.2B
35.56B
49.61B
Raw Materials
405.38B
367.79B
340.5B
319.14B
Progress Payments & Other
0
0
1.35B
790M
Other Current Assets
618.94B
648.68B
571.32B
589.96B
Miscellaneous Current Assets
618.94B
648.68B
571.32B
589.96B
Total Current Assets
5.23T
4.62T
4.61T
4.69T
2008
2009
2010
2011
Net Property, Plant & Equipment
3.12T
3.44T
3.39T
3.3T
Property, Plant & Equipment - Gross
6.23T
6.77T
7.05T
6.97T
Buildings
1.4T
1.45T
1.51T
1.47T
Land & Improvements
457.35B
469.28B
489.77B
483.65B
Computer Software and Equipment
-
-
-
-
Other Property, Plant & Equipment
-
-
-
-
Accumulated Depreciation
3.11T
3.33T
3.66T
3.67T
Total Investments and Advances
771.92B
688.78B
641.16B
638.77B
Other Long-Term Investments
222.11B
182.95B
183.33B
198.75B
Long-Term Note Receivable
2.71T
2.4T
2.36T
2.35T
Intangible Assets
-
-
-
-
Net Goodwill
-
-
-
-
Net Other Intangibles
-
-
-
-
Other Assets
608.03B
432.01B
408.19B
434.62B
Tangible Other Assets
608.03B
432.01B
408.19B
434.62B
Total Assets
12.62T
11.82T
11.63T
11.57T
Liabilities & Shareholders' Equity
2008
2009
2010
2011
ST Debt & Current Portion LT Debt
2.56T
2.68T
1.79T
2.06T
Short Term Debt
1.69T
1.71T
1.07T
1.09T
Current Portion of Long Term Debt
871.05B
977.52B
722.3B
962.46B
Accounts Payable
1.05T
706.33B
827.17B
716.74B
Income Tax Payable
71.35B
34.24B
26.04B
33.12B
Other Current Liabilities
994.9B
812.45B
777.28B
761.14B
Dividends Payable
-
-
-
-
Accrued Payroll
-
-
-
-
Miscellaneous Current Liabilities
994.9B
812.45B
777.28B
761.14B
Total Current Liabilities
4.68T
4.24T
3.42T
3.57T
Long-Term Debt
1.84T
1.93T
2.31T
2.04T
Long-Term Debt excl. Capitalized Leases
1.84T
1.93T
2.31T
2.04T
Non-Convertible Debt
1.84T
1.93T
2.31T
2.04T
Convertible Debt
0
0
0
0
Capitalized Lease Obligations
0
0
0
0
Provision for Risks & Charges
746.5B
741.76B
699.92B
640.96B
Deferred Taxes
129B
152.95B
195.51B
312B
Deferred Taxes - Credit
304.93B
392.37B
403.89B
472.38B
Deferred Taxes - Debit
175.93B
239.42B
208.38B
160.38B
Other Liabilities
362.83B
384.44B
336.72B
263.19B
Other Liabilities (excl. Deferred Income)
362.83B
384.44B
336.72B
263.19B
Deferred Income
-
-
-
-
Total Liabilities
7.93T
7.69T
7.17T
6.99T
Non-Equity Reserves
-
-
0
0
Preferred Stock (Carrying Value)
0
0
0
0
Redeemable Preferred Stock
-
-
0
0
Non-Redeemable Preferred Stock
-
-
0
0
Common Equity (Total)
4.54T
4.01T
4.33T
4.45T
Common Stock Par/Carry Value
86.07B
86.07B
86.07B
86.07B
Retained Earnings
5.1T
5.1T
5.3T
5.67T
ESOP Debt Guarantee
-
-
0
0
Cumulative Translation Adjustment/Unrealized For. Exch. Gain
(590.81B)
(1.07T)
(977.81B)
(1.27T)
Unrealized Gain/Loss Marketable Securities
31.68B
6.62B
29.72B
30.3B
Revaluation Reserves
-
-
0
0
Treasury Stock
(71.93B)
(71.71B)
(71.73B)
(26.11B)
Total Shareholders' Equity
4.54T
4.01T
4.33T
4.45T
Accumulated Minority Interest
141.81B
123.06B
127.79B
132.94B
Total Equity
4.69T
4.13T
4.46T
4.58T
Liabilities & Shareholders' Equity
12.62T
11.82T
11.63T
11.57T
