FINACIAL ACCOUNTING II

 Section :- AD-BS commerce

 Submitted to :- Prof. Toheed Alam

 Reg no: F1F17ASCM0004

 Submitted by :- M.TALHA
 Introduction
Honda:
Honda is a Japanese public multinational conglomerate corporation primarily
known as a manufacturer of automobiles, aircraft, motorcycles, and power
equipment. Honda was the first Japanese automobile manufacturer to release a
dedicated luxury brand, Acura, in 1986. Aside from their core automobile and
motorcycle businesses, Honda also manufactures garden equipment, marine
engines, personal watercraft and power generators, and other products. Since 1986,
Honda has been involved with artificial intelligence/robotics research and released
their ASIMO robot in 2000.
Balance sheet of Honda year 2016-17
Cashflow statements

Income Stament
Introduction
TOYOTA:
Toyota Motor usually shortened to Toyota, is a Japanese multinational automotive
manufacturer headquartered in Toyota, Aichi, Japan. In 2017, Toyota's corporate
structure consisted of 364,445 employees worldwide and, as of October 2017, was
the fifth-largest company in the world by revenue. As of 2017, Toyota is the
world's second-largest automotive manufacturer. Toyota was the world's first
automobile manufacturer to produce more than 10 million vehicles per year which
it has done since 2012.

Balance sheet
Income statement
Cash flow statement
 Financial Ratios
Ratios Honda Toyota
Current 1.20 1.02
acid-test 0.95 0.89
Debt to equity 0.54 0.49
debt to total Assets 0.22 0.18
Debtors Turnover 5.18 4.55
Average collection Period 69 days 79days
Inventory Turn over 9.89 11.5
Inventory Turn over in days 36 days 31 days
Total Asset turnover 0.58 0.53
Return on Investment 0.036 0.040
Return on equity 0.09 0.10
Propriety ratio 4.6 5.41
Creditor turnover 9.81 10.05
Creditor turnover in days 39 days 35 days
Net profit margin 0.06 0.07
Analysis

Over the years, investors and analysts have developed numerous analytical tools, concepts and
techniques to compare the relative strengths and weaknesses of companies. These tools, concepts
and techniques form the basis of fundamental analysis.

Ratio analysis is a tool that was developed to perform quantitative analysis on numbers found on
financial statements. Ratios help link the three financial statements together and offer figures that
are comparable between companies and across industries and sectors. Ratio analysis is one of the
most widely used fundamental analysis techniques.

Receivable turnover:
Since Honda has higher receivable turnover which is 5.18 and they receives payments in 69days
(where Toyota receives payment in 79 days).

Creditor Turnover:
Since Honda owes money from their suppliers less than Toyota so they are better.

Honda owes 9.18 times a year from a supplier and Toyota owes 10.5 times.

Asset turnover:
Asset turnover measures how efficiently a company uses its total assets to generate revenues.
Since Honda has higher assets turnover which 0.58 (0.53 of Toyota) which means Honda is
better using their assets. A low asset turnover ratio may mean that the firm is inefficient in its use
of its assets or that it is operating in a capital-intensive environment.

Current Ratio:
The current ratio measures a company’s current assets against its current liabilities. Honda has
high current ratio 1.20:1 (Toyota is 1.02:1) so Honda can better payoff off its short-term
liabilities in an emergency by liquidating its current assets.

Net Profit margin:

If a company has a higher gross profit margin than is typical of its industry, it likely holds a
competitive advantage in quality, perception or branding, enabling the firm to charge more for its
products. Alternatively, the firm may also hold a competitive advantage in product costs due to
efficient production techniques or economies of scale. Since Honda has higher Gross profit
margin Honda is better.

Return on Assets:
It is a measure of how efficiently a firm utilizes its assets. A high ratio means that the company is
able to efficiently generate earnings using its assets. Honda has high ratio which is 0.036(0.040
of Toyota) so Honda is better.

Conclusion:
Through above ratios Honda is a better company because they are more solvent and I would like
to invest my money in Honda .

THE END