Financial Analysis Report for

Honda Company
Years 2011-2012

Prepared By:
Rimaz Obied Mohammed.
Mohamed Zain Abdalla Mohamme
Ali.
Gayas Mohammed Gesm Elseed.
Tahir Fikri Tahir Mohammed.
Mohammed Kamal Eldin Mohamm
INDEX:
INTRODUCTION.

ABOUT HONDA.

HONDA FINANCIAL STATEMENTS.

HONDA RATIOS ANALYSIS.

CONCLUSION.
INTRODUCTION:
This financial report is conducted for Honda
Co.Ltd for years 2011 and 2012 when Honda
faced a great economic impact overall their
operating levels of manufacturing which affect
their sales and their status with their
shareholders.

Here is an introduction about Honda, and

financial status during the mentioned period.
ABOUT HONDA:
History

In October 1946, Soichiro Honda established the Honda Technical

Research Institute in Hamamatsu, Japan, to develop and produce

small 2-cycle motorbike engines, after years later, Honda Motor

Company, Ltd. was born, in 1959 .

Honda grown to become the one of the largest motorcycle

manufacturing and automakers.

Honda has global network subsidiaries and 88 affiliates.

Honda, is No 3 topped an annual ranking of global green brands

by consultancy firm Interbrand in 2012.

Honda has three lines :

Motor cycles : working under objectives of

durability , quietness , fuel economy).

Automobile business: working under having

environmental technology to enhance the Honda
brand. Objectives: better fuel
economy ,reducing CO2 emission of all Honda
products by 30%, using IMA(integrated motor
assist ).

Power product and other business: working under

philosophy ( technology for people ) established
 During the this two years Honda faced a
challenging economic environment.

In Europe, the sovereign debt crisis, rising oil

prices and other factors led to stagnation which
slowed economy to crawl in USA also

meanwhile there was slide growth in some Asian

countries like China and India.

In Japan remained challenging under these

conditions Hondas net sales and other operating
revenue declined 11.1%to 7.948 yen.
HONDA FINANCIAL
STATEMENTS
COMPANY ANALYSIS
BALANCE SHEET RATIOS
Current Ratio:
The Liquidity ratio measures
the ability of the company to 1.32
meet its short term liabilities
by the available current
assets of cash and cash
1.31
equivalents.
Honda during 2011 has the
ability to cover its current
2011 2012
liabilities more than one third
by its current assets which is
being stable during 2012.
Quick Ratio:
In the event of quick current 1.06

liabilities coverage case

Honda has the ability to
cover its short term liabilities
1.03
by using its most liquid
assets in addition to surplus
of 6% of its quick assets
during 2011 which being 2011 2012 Series 3

reduced during 2012 to 3% Quick Ratio

surplus.
Debt to Assets Ratio
0.62
During 2011 the debts
forming 60% of the
companys assets which
increased during 2012 to
62% that reflect that Honda 0.6
relay on financing its
investments by debt by
more than 60% during the
2011 2012 Series 3
two years which exposing
Debt to Assets Ratio
the company to a huge risk
of solvency if the
Debt to Equity Ratio
1.6
Honda in 2011 relied on
the external financers 1.52
times to its dependency on
its owners equity which
1.52
increased during 2012 to
1.6; that shows a clear
sign of deterioration of the
2011 2012 Series 3
business. Debt to Equity Ratio
Assets to Equity Ratio
It indicates that during 2011 2.67
Honda financed its 61.54%
of assets by dept more than
utilizing its equity which
increased during 2012 to 2.6
62.63% ; generally Honda
exposed to high risk by relay
on the external debt more 2011 2012 Series 3

than utilizing its own Leverage Ratio

capabilities.
STATEMENT OF INCOME
ANALYSIS
Coverage Ratio:75.41
During 2011 Honda Motors
has an ability to cover the
interest expenses over 75.41
times which illustrate
25.8
stronger financial capability
than the next year that its
ability to cover the interest
2011 2012 Series 3
expenses reduced to 25.80
Coverage Ratio
times.
Activity Ratios - Receivables
Turnover
Its clearly shown that
74.59
Honda in 2011 had an 64.34
ability to receive its credit
sales 5.67 times during
the year by an interval
64.34 days for each time; 5.67 4.89
in 2012 Honda collection
2011 2012
activity deteriorated which Receivables Turnover Ratio
lead reduction on Receivables Turnover in
days
receivables cycle to 4.89
times by an intervals
Activity Ratios - Inventory
Turnover
The above analysis shown 63.87
that Honda in 2011 50.55
succeeded to sell its
inventory 7.22 times
during the year by an
interval of 50.55 days while
7.22 5.72
its sales progress fall
during 2012 to reach that 2011 2012 Series 3
Inventory Turnover Ratio
its ability was reduced to Inventory Turnover in days
5.72 times to sell the
Total Assets Turnover:
0.77
Honda has the succeeded to
generate a revenue equal to
77% of its total assets value
during 2011 which reduced 0.67
during 2012 to 67% of its
total assets value.
2011 2012 Series 3
Total Assets Turnover
Operating Cycle
138.46
By the end of 2011
114.89
Honda succeeded to
circulate its activity
about three times by
114.89 days for each
cycle which reduced to
two and half during
2011 2012 Series 3
2012 by 138.46 days
Operating Cycle
for each cycle.
Profitability in relation to
sales
27.30%
Hereby Honda earned
27.3% gross Profit
margin from its sales
25.52%
during 2011 in
comparing with
25.52% gross profit 2011 2012
margin during 2012 Profitability in relation to
sales
from its annual sales.
Net Profit Margin
5.98%
The Net Profit Margin
that Honda earned
during 2011 is 5.98%
from its total sales 2.66%

while it was earned

2.66% as a net profit
margin during 2012
2011 2012
from its total annual
Net Profit Margin
sales.
Return on Investment
(ROI)
The effectiveness of
4.62%
Honda to generate a
profit from its available
assets for 2011 is 4.62%
1.80%
as profit margin for the
total assets value while
it was deteriorated to
2011 2012
1.8% during 2012 which
Return on Investment (ROI)
shows ineffective
utilization of assets.
Return on Equity (ROE)
12.00%
The effective exploit of
the shareholders
equity during 2011
that done by Honda to 4.80%

generate a return on
equity is 12% while it
was reduced to 4.8% 2011 2012

in 2012. Return on Equity (ROE)

CONCLUSION
 Considering the crisis that Honda is facing during
the second year of this report its clearly that all of
the ratios supports this fact of deterioration of
company operation and observed fall in all of the
companys activities as well as the profitability
and its ability to meet its debts. Also Honda lose a
lot of its equity support which enforced the
company to relay on the external financers and
debt to cover this gap.
In conclusion Honda Motors performance in 2011
is better than its performance in 2012.
THANK
YOU