Toyota

Annual Project Carolina Yidios Financial Accounting Professor Scrosson October 2006

oyota Table Of Contents E. Financial Analysis and Solvency Ratios Executive Summary A. Introduction A. Audit Report Table Of Contents A. Stock Market Information B. Industry Situation and Company Plans C. Income Statement C. Balance Sheet C. Statement of Cash Flows D. Accounting Policies E. Financial Analysis and Liquidity Ratios E. Financial Analysis and Profitability Ratios oyota E. Financial Analysis and Solvency Ratios E. Financial Analysis and Market Strength Ratios

Executive Summary Toyota is a world wide company focused in the selling and production of automobiles and other business activities. As shown below almost all rates and production are increasing significantly. Net revenues increased 13.4 % in relation with last year, operating income increased 12.3%, operating costs and expense increased 13.5 %, and net income increased 17.2 %. In all the places were Toyota has sales they have increased notably, the places were they increased the most was in North America. In the production sector they are making excellent cars that are in a very good level. Toyota is company that has a lot of future it is not only doing good, but it is also planning to maintain a high performance in all their activities and break their own records. Table of Contents http://www.toyota.co.jp/en/ir/library/annual/pdf/2006/ar06_e.pdf

A. Introduction Executive Officer: Hiroshi Okuda Location of Home Office: Tokyo, Japan Ending Date of Latest Fiscal Year: March 31, 2006 Principal Products that the Company Provides: Automotives Financial Services: include loans and leasing programs for customers and dealers Other business operations: consist of housing, including the manufacture and sale of prefabricated homes; information technology related businesses, including information technology and telecommunications, intelligent transport systems, GAZOO; marine, biotechnology and forestation. Table of Contents

A. Introduction Main Geographic Area of Activity:

A. Audit Report Table of Contents Full-Time Corporate Auditors Hideaki Miyahara Chiaki Yamaguchi Masaki Nakatsugawa Corporate Auditors Yasutaka Okamura Yoichi Kaya Yoichi Morishita Akishige Okada What did the Auditors say about the Company? The auditors say that in their opinion the Consolidated Balance Sheet, the Income Statement, Shareholders’ Equity Statement and Cash Flow seem reasonable. They also considerate that the cash flows operations until the last Fiscal year is in conformity with accounting principles generally accepted in the United States of America. The Audit report also state what they are giving is an opinion and that the real responsible of the Financial Statements is the Company’s management. At the end they explain the process of how they got to their conclusion. Their plan consists on planning and performing the audit to obtain reasonable assertion about whether the financial statements are free of false information. “An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation.” Table of Contents

A. Stock Market Information Dividends Per Share In my opinion I would buy some stock from this company. This company fulfills all my requirement for a high-quality company. It is always looking for progress, and dividends per share throughout the years is increasing. Regarding the dividends for the last term, the interim dividend in November 2005 was 35 yen per share, and the dividend at the end of the fiscal year was 55 yen per share, which resulted in an annual dividend of 90 yen per share and a total dividend value that amounted to 292.141 billion yen. As a result, our consolidated dividend payout ratio reached 21.3%. Table of Contents

Corporate Stock Summary Ownership Breakdown

Toyota's share price and trading volume on the Tokyo stock exchange]                                                                                                               

B. Industry Situation and Company Plans Toyota recorded its highest-ever revenues and earnings in the last fiscal year. This was purchased thanks to marketing efforts, and cost reductions. One of its mayor accomplishment was when the company was able to post net income above ¥1 trillion for the third successive fiscal year. Another mayor achievement made by Toyota was increasing revenues from Asia and Other Regions. Toyota financial strategies are shown in the first graph to the right. Toyota plans are focused on having more revenues and earning through out the sales of core global cars such as Corolla, Camry, Yaris, IMV series, and hybrid vehicles like the Lexus. Since the core global models take up 30% of the consolidated vehicles, they are improving this sector by creating a new Camry model and projecting a Camry Challenge, a worldwide production sector. They also want to increase 476,000-unit in consolidated vehicle sales from fiscal 2006, to 8.45 million units. In consolidated business results, they anticipate net revenues of ¥22.30 trillion, operating income of ¥1.90 trillion, and net income of ¥1.31 trillion. To succeed in all their future plans Toyota will increase their capabilities in technology, supply, and marketing and will take opportunities in all product segments and regions without taking any risk. Consolidated Vehicle Sales                           http://www.toyota.co.jp/en/ir/message/president_3.html http://www.toyota.co.jp/en/ir/library/annual/2006/executive/index.html Table of Contents

C. Income Statements This format is more like a single step format because it has no gross domestic product or profit. Non-Financial Services Businesses The difference from the Net Revenue from the year 2004 and 2005 was 1,213,543 yens. Between 2005 and 2006 the difference was 2,267,927 yens. The net revenues minus the total expenses and costs give us a net income in Non-Financial Services Businesses of 1,074,758 in 2004, ¥ 1,047,741 in 2005 and ¥ 1,264,223 in 2006. The difference between the two last years is ¥ 216,482. This shows us a greater increase than the years 2004 and 2005 because in 2005 there was less income in Non-Financial Services Businesses than 2004 by ¥27,000 yens. By this we can conclude that Toyota not only improved, but also surpass its goals. Financial Services Businesses The Net Income for 2005 was ¥ 1,171,260 and for the year 2006 it was ¥ 1,372,180. With a difference of ¥ 200, 920 between this two years we can conclude that Toyota is in a continuous raise. Table of Contents Income Statement Table

C. Balance Sheet Assets = Liabilities + Stockholder’s Equity March 31, 2005 ¥24,335,011 ¥ 3,789,503 ¥ 9,044,950 March 31, 2006 ¥28,731,595 ¥ 5,040,058 ¥ 10,560,449 As you can see there is an increase in all sectors of the balance sheet. Liabilities increase by ¥ 1,250,555 and stockholders increase by ¥ 1,515,499.. As this two increase assets increase as well by ¥4,396,584. Table of Contents Balance Sheet Table

C. Statement of Cash Flow March 31, 2005 March 31, 2006 Cash Flow from Operating Activity ¥ 2,370,940 ¥2,515,480 Cash Flow From Investing Activities ¥(3,061,196) ¥(3,375,500) Cash Flow From Financial Activities ¥ 1,483,753 ¥1,569,387 Cash Flow from Operating activities has increased from the year 2006 and 2005 by ¥144,540. I can conclude that Toyota is increasing its Investing activities because this numbers are bigger in the year 2006 than in 2005. Toyota main source of financing is Proceeds from issuance of long-term debt. Cash has decreased by ¥ 465, 950. Table of Contents Statement of Cash Flow Table

D. Accounting Policies Table of Contents Accounting Policies Topics of the Notes to the Financial Statement 1. Nature of operations 2. Summary of significant accounting policies 3. U.S. dollar amounts 4. Supplemental cash flow information 5. Acquisitions and dispositions 6. Marketable securities and other securities investments 7. Finance receivables 8. Other receivables 9. Inventories 10. Vehicles and equipment on operating leases 11. Allowance for doubtful accounts and credit losses 12. Affiliated companies and variable interest entities 13. Short-term borrowings and long-term debt 14. Product warranties 15. Other payables 16. Income taxes 17. Shareholders’ equity 18. Stock-based compensation 19. Employee benefit plans 20. Derivative financial instruments 21. Other financial instruments 22. Lease commitments 23. Other commitments and contingencies, concentrations and factors that may affect future operations 24. Segment data 25. Per share amounts Table of Contents Accounting Policies

Accounting Policies Revenue Recognition: Revenues from sales of vehicles and parts are generally recognized upon delivery. Toyota accrues sales incentives as revenue reductions upon the sale of a vehicle. Revenues from retail financing contracts and finance leases are recognized using the effective yield method. Gains or losses from the sales of the finance receivables are recognized in the period in which such sales occur. Cash: Cash includes all highly liquid investments with original maturities of three months or less. Short term Investment: None – (Not shown) – Optional look at page 91 Inventories: Inventories are valued at cost, not in excess of market. Property and Plant Equipment: Property, plant and equipment are stated at cost. Major renewals and improvements are capitalized; minor replacements, maintenance and repairs are charged to current operations.

E. Financial Analysis Liquidity Ratio March 31, 2005 March 31, 2006 Working Capital (current assets - current liabilities) ¥1,212,900 ¥706,487 Current Ratio (current assets / current liabilities) 1.15 Times 1.07 Times Receivable Turnover (net sales / avg. accounts receivable) 10.2 10.6 Avg. Days Sales Uncollected (365 / account receivable turnover) 35.78days 34.43days Inventory Turnover (COGS / avg. inventory) .72 .81 Avg. Days Inventory on Hand (365 / inventory turnover) 506.94days 450.62days Toyota has a good liquidity ratio, and it has sufficient money to stay a lot of years in the market. Table of Contents

E. Financial Analysis Profitability Ratio March 31, 2005 March 31, 2006 Profit Margin (net income / net sales) 6.31% 6.52% Asset Turnover (net sales / avg. total assets) 1.91 1.96 Return on Assets (profit margin x asset turnover) 12.4% 12.8% Return on Equity (net income / avg. stockholder equity) 12.9% 13.0% On each dollar of net sales, Toyota .65 yens. Between this years there was a small increase. Toyota produces 1.96 yens Per yen invested. For each yen invested, Toyota Assets generated 12.8 yens of Income. For each yen invested, Toyota Stockholder Equity generated 13.0 yens of income, .1% more than last year. Table of Contents

E. Financial Analysis Solvency Ratio March 31, 2005 March 31, 2006 Debt to Equity (total liabilities / total stockholder’s equity) 91% 95% This company is hold by the stock holders not the creditors. Table of Contents

E. Financial Analysis Market Strength Ratios March 31, 2006 Price / earning per share 7.15 times Dividend Yield 1.3% The dividends in this company as you can appreciate have a very stable they have been Increasing over the past years. The price earning per share are also having a good results\. Table of Contents

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