Financial Ratios of Toyota Company Statistics Project

Essays on Financial Ratios of Toyota Company Statistics Project The paper â€Å"Financial Ratios of Toyota Company" is an informative example of a statistic project on finance accounting. The returns on Toyota shareholders' funds decreased from 4.12% to 1.92 % from the year 2009 to 2010. It means that shareholders were experiencing loss or decrease in the interest they had in the Company.Liquidity/ Solvency RatiosWorking Capital (or Current) RatioComponent20092010Current Assets112989291.07: 1130736041.22:1Current Liabilities10589293  10686214  In order for a company to able to cover its short term liabilities, it requires necessarily have a current ratio of 1:1 (Penwell 1994). Thus, during the years 2009 and 2010, Toyota had enough liquid assets to cover short term obligations; 1.07:1 and 1.2:1 respectively.Quick Asset (or Acid Test) RatioComponent20092010Current Assets-Inventory(11298929-1459394)0.93:1(13073604-1422373)1.09:1Current Liabilities10589293  10686214  In the year 2009, it seems that Toyota had a slightly less liquid resourc e to meet its short term obligations compared to the year 2010. However, this is risky for the business, because in the short term all the available liquid assets may become depleted and thus the company may not be able to meet its obligations.Asset Efficiency RatiosStock TurnoverComponent20092010Cost of salesClosing stock17468416145939411.97 times per annum15971496142237311.23 times per annum  Days in year36530 days36533 daysStock turn11.97  11.23  There was no much big difference in the years 2009 and 2010 for Toyota in terms of a number of times it sold out its stock.Debtors TurnoverComponent20092010Credit salesClosing trade creditors19173720139274913.77 times per annum1772472918862739.40 times per annum  Days in year36526.5 days36539 daysStock turn13.77  9.40  In the year 2010, the number of days that the debtors took in order to clear their debts increased for 27 days in the year 2009 to 39 days. That means the overall cash the company received was less compared to what its customers owed the company.Creditors Payment PeriodComponent20092010Cost of salesClosing trade creditors17468416129945513.44 times per annum1597149619565058.16 times per annum  Days in year36527 days36545 daysStock turn13.44  8.16  In the year 2010, Toyota took longer than usual to pay its suppliers and this worked to its advantage in that it was more predisposed at using creditors’ money to generate income.Working Capital Operating Cycle  2009  20102003Stock takes30days to sell after it has been manufactured, then33Debtors take27days to pay, meaning that39  57days will have elapsed before any cash arrives72but Creditors are paid in(27)days, which means that the business has to finance(45)  30days of activity from cash reserves or overdraft27The working capital management policy of Toyota improved in the year 2010 and this is favorable in that the number of days required being financed from cash reserves reduced for 30 in 2009 to 27 in 2010.Asset Turnov erComponent20092010Revenue17178790.093 times2094560.012 timesTotal capital employed(29062037-10589293)  (30349287-10686214)  In the year 2010, the management of Toyota became inefficient in managing the assets of the company. Asset turnover decreased to 0.012 up from 0.093.Capital Structure RatiosGearing RatioComponent20092010Loans and borrowings(10589293 +7872007)x10099.94%(10686214+8732630)x 10098.76%Total capital employed(29062037-10589293)  (30349287-10686214)  The gearing ration of Toyota in the years 2009 and 2010 was extremely high meaning that it had a large number of loans compared to its own equity. This is however tolerable for a company in the auto industry as it requires a huge capital investment which ultimately implies the potential to make huge profits.Fixed Interest CoverComponent200820092010Operating profit227037549 times(461011)(9.83) times1475164.42 timesInterest payable on borrowings46113  46882  33409  In the year 2008, Toyota had sufficient opera ting profit to cover the interest it was supposed to pay on loans and other borrowings. However, in the years 2009 and 2010, the reduced significantly to less than 0 and 4.42 respectively hence it incurred a lot of loss in paying for loan interest.Investor’s RatiosDividend per Share (DPS)DPS = Earnings Distributed to Shareholders/Number of SharesThis is given in the consolidated income statement: for the years 2008, 2009 and 2010 DPS amounted to  ¥ 140,  ¥ 100, and  ¥ 45 respectively.An increase in dividend per share implies an increased value of shareholders' wealth in a company. For Toyota DPS decreased sharply for the years 2008, 2009, and 2010. This can be attributed to decreased unit sales as a result of vehicle recalls in the years 20009 and 2010.Market Price Per Share (MPS)MPS = value of common stock/ Number of shares issued