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REPORT ON TOYOTA MOTOR COMPANY LIMITED

Arfa Zahur Anam Shafique

Roll no.10725 Roll no.10726

MBA 2nd semester(Morning)

Submitted to Sir Rao Akmal Department Of Management Sciences

Toyota Motor Company Ltd (Financial Analysis)

In the Name of Allah the Most Gracious, the Most Beneficent and the Most Merciful

ACKNOWLEDGEMENT
I find no words at our command to express our deepest sense of gratitude to the Almighty ALLAH , the most Gracious, the most Merciful and the most Beneficent, who gives us the talent to complete this task success fully, He is the one who gave us courage to do this. we much obliged to my loving Parents whose prayers have enabled us to reach this stage. At this occasion we cant forget our parents for their guidance at the crucial moments of our life. we wish to thanks all our Friends and Classmates who really helped us by giving suggestions and critical review of the manuscript. Obviously this achievement was not possible without all of you.

Table of Contents
1.Executive summary 2.Introduction 3.History 4.Product line 5.Vision 6.Mission

7.Core values 8.Boad of Directors 9.Swot Analysis 10.Pest Analysis 11.Ratio Analysis
11.1 Short Term Debt Paying Ability 11.1.1 Net working Capital 11.1.2 Current Ratio 11.1.3 Acid Test Ratio 11.1.4 Cash Ratio 11.1.5 Cash flow from operations Ratio 11.2 Long term Debt paying Ability 11.2.1 Time Interest Earned Ratio 11.2.2 Fix Charged Earned Ratio 11.2.3 Debt Ratio 11.2.4 Debt Equity Ratio 11.2.5 Debt To Tangible Network 11.3 Short Term Liquidity 11.3.1 Days Sale in A/R 11.3.2 Accounts Receivable Turnover 11.3.3 Days Sale in Inventory 11.3.4 Inventory Turnover 11.4 Horizontal & Vertical Analysis 11.4.1 Net Profit Margin 11.4.2 Total Assets Turnover

11.4.2 Return On Assets 11.4.3 Operating Income Margin 11.4.4 Operating Assets Turnover 11.4.5 Return On Operating Assets 11.4.5 Sales To Fixed Assets 11.4.6 Return On Equity 11.4.5 Gross Profit Margin 11.5 Investors Analysis 11.5.1 Earning Per Share 11.5.2 Price Earning Ratio 11.5.3 Dividend Payout Ratio 11.5.4 Dividend Yield Ratio

12.Conclusion 13.Recommendations 14.References

Executive Summary
Toyota Motor Company is one of the Automobile Companies which formed with the help of house of Habib , Toyota Motor Corporation, Toyota Tsusho Corporation. It manufactures and imports cars and enjoys a healthy share in the market. It is competing with the Honda, Nissan, Suzuki and Mitsubishi. To sustain its lead IMC must maintain strategic competitive advantage which is its production strength, ability to produce quality cars with respect to low cost and research and development in hybrid and bio fuel cars. But recently company is in stabilization mode trying to improve its functional area, consolidation of resources and maintaining SCA. In my Opinion it is the best move made by IMC to survive the financial holocaust.

Introduction
Auto market is one of the largest segments in world trade. Changing models, Improving ,fuel efficiency, cutting costs and enhancing user comfort without compromising quality are the most important challenges of the auto industry in a fast globalizing world .The automotive assembling in Pakistan started in 1950 when

National Motors Limited, a public limited company and the pioneer in the industry, came into existence, established b y General Motors of USA. National Motors assembled passenger cars as well as commercial vehicles which carried General Motors brands such as Bedford, Vauxhall, Chevrolet. The indigenized parts in these vehicles did not exceed 20% with only exception of Bed Ford trucks with a deletion level of 80%. By the end of 70s practically all automobile assembling in Pakistan ceased. A regular car industry started in the country in 1983, when Suzuki commenced production eyeing the small and LCV car segment of 800cc-1000cc range, and introduced Suzuki car which targeted the middle-income group (constituting the larger segment of the market) b y providing an affordable car. Then there was a long gap until the early 90s when Toyota Motor Company was established to manufacture Toyota vehicles in Pakistan. Soon after Honda Atlas came with the Civic and Gandhara Nissan entered the market with Sunny. In the late 90,s Dewan Farooque Motors set up a plant to manufacture Hyundai and Kia vehicles in Pakistan. Since then the market has changed all together. Lately Few new market players entered the market such as Gandhara Nissan again with now the imported Nissan range of vehicles, Dewan Mushtaq Motors with imported Mitsubishi range of vehicles, Nexus Automotive with Chevrolet importe vehicles and others imported Chinese vehicles such as Karakoram Motors, Roma Automobiles and Foton by Dewan Innovations Limited along with Pak Cherry Automobiles. Sigma Motors made its mark with Rover recently. Apart from these the big brands of the auto industry also entered the Pakistani market such as BMW , Mini & Rolls Royce by Dewan Motors, Porsche, Mercedes andAudi have also launched their brands in Pakistan catering to the very upper niche.

History
Toyota Motor Company (TMC) is a joint venture between the House of Habib, Toyota Motor Corporation Japan (TMC) and Toyota Tsusho Corporation Japan (TTC) for assembling, progressive manufacturing and marketing of Toyota vehicles in Pakistan since July 01, 1990. IMC is engaged in sole distributorship of Toyota and Daihatsu Motor Company Ltd. vehicles in Pakistan through its dealership network. It manufactures and Imports Cars and enjoys a healthy share in the market. The company was incorporated in Pakistan as a public limited company in December 1989 and started commercial production in May 1993. The shares of company are quoted on the stock exchanges of Pakistan. Toyota Motor Corporation and Toyota Tsusho Corporation have 25 % stake in the company equity. The majority shareholder is the House of Habib. TMC is competing with the Honda, Nissan, Suzuki and Mitsubishi. To sustain its lead IMC must maintain Strategic Competitive Advantage which is its Production Strength, ability to produce quality cars with respect to low cost and Research and Development in Hybrid and Bio Fuel Cars. But recently Company is in Stabilization mode trying to improve its functional area, consolidation of resources and maintaining SCA.

Toyota Motor is the country's second largest auto manufacturer, after the Pak Suzuki Motors. IMC's production facilities are located at Port Bin Qasim Industrial Zone near Karachi in an area measuring over 105 acres, having an assembling capacity of 55,000 units per annum. Toyota Motor Companys plant is the only manufacturing site in the world where both Toyota and Daihatsu brands are being manufactured. Its core business is manufacture Market

In addition, the company also sells auto parts and accessories. Heavy investment was made to build its production facilities based on state of art technologies. To ensure highest level of productivity world-renowned Toyota Production Systems are implemented. Its product line includes 6 variants of newly introduced Toyota Corolla, Toyota Hilux and 3 variants of Daihatsu Cuore. The company also offers six different imported vehicles namely Toyota Camry, Prado, Land Cruiser, RAV, Hilux and Hiace. Major contributor to the revenue is Corolla, having a contribution of 66.5% in company's sales.

Product Line
Corolla:

Corolla includes six variants of cars which are: 1) XLi 2) GLi 3) Corolla Altas M/T 4) Corolla Altas A/T 5) 2.0D 6) 2.0D Saloon

Cuore:

Cuore consist of 3 variants of cars that are as under: 1) CX 2) CX CNG 3) CX A/T Hilux:

Hilux consist of following car. 1) 4 x 2 S/Cab

VISION
To be the most respected a nd successful enterprise, delighting customers with a wide range of products a nd solutions in the a utomobile industry with the best people and the best technology.

MISSION
TMCs mission is reflects in Companys Slogan. ACT#1 Action, Commitment a nd Tea mwork to become #1 in Pakistan. The Toyota Team is committed ACT so tha t it achieves the position in the Auto Industry in:

to #1

Respect & Corpora te image. Customer Satisfaction. Profitability. Qua lity & Safety. Production & Sales. Best Employer.

CORE VALUES

Customer Satisfaction. Team Work. Ethics and Practices.

Board Of Directors
1) Mr. Ali S. Habib (Chairman) 2) Mr. Koji Hyodo (Vice Chairman) 3) Mr. Yutaka Arae 4) Mr. Parvez Ghias (Chief Executive Officer) 5) Mr. Farhad Zulfiqar 6) Mr. Mohammad Ali R. Habib 7) Mr. M. Ilyas Suri 8) Mr. Mitsuhiro Sonoda 9) Mr. Yosuki Tsubaki

Swot Analysis
In formulating sound strategic plans, an organization must assess its internal strengths and weaknesses in relation to the external opportunities and threats it faces. An effective strategy will take advantage of an organizations strengths and opportunities at the same time it minimizes or overcomes weaknesses and threats. Reguller assessment and SWOT analysis is thus given importance. STRENGTHS: Strengths are the core competencies of any organization & as far as Toyota Motor Company Limited is concerned the core competencies of this organization are: Toyota has become the generic name in the Pakistan market. Whenever the company launches the new car in the market it has always the great support of the already market orientatio n so the car introduced by it easily covers the introduction stage. People have a lot

WEAKNESSES:

of trust for their name and this is why Toyota is the leader in automobile industry. Toyota has a great strength for its 2.OD car, Toyota is the hot selling diesel engine car in Pakistan and is the only company offering the diesel engine in this category of cars. The important edge over the company editors are the ample availability of the spare parts in the markets. The price of spare parts is comparatively low and availabilit y all over the countr y has proved to be beneficial for the company. Toyota is a financially strong company. This can be seen by analysis of the financial reports of the previous years. Toyota vehicles have got a much stronger resale value than other car in Pakistan. This is why people prefer to buy a Toyota. Toyota vehicles are made according to the Pakistani environment. No doubt the other cars are available but Toyota has an edge because it has learnt various conditions of the Pakistan environment and people. So new additions and changes are proving to be successfu l. Toyota has an ed ge over others because it is the only automobile company in Pakistan, while offers many variants of its vehicles. Also Toyota offered many variants of colors. Toyota is proud to have a successful team of competent managers and skilled workers. Extensive training has enabled the employees to perform outstandingly. Toyota is the only company having the most sophisticated network of dealerships where customers are treated by professional dealers.

Weaknesses are the lacking points which every organization must avoid in order to make its operational effectiveness. There is some weakness in the case of ergo nomic interior of Toyota corolla as well. The power steering is not speed sensitive and the air conditioning system in severe heat is in-effective. Interior dimensions are less and heavy bod y and small engine sometimes create problems in hilly areas. There are some weaknesses in the dealership network. The dealers sometimes tend to deviate from the recommended course of action and principles of Toyota. This results in customers complaints sometimes. The company is besieged with internal operating problems which are not very serious. Because of dependenc y on Toyotas principles deliver y of cars is done after 4-6 months. This is because CKD kits are ordered four months before and once they arrive from Japan, assembl y and delivery takes some more time. A lot of effort is pull into the sales forecasting because of the changing political and economic scenarios. For this reasons inventor y has to be kept low. The company feels that one weakness is the changing policies of the government and also the 30% cash L/C margin. This has lead to an adverse environment.

OPPORTUNITIES: In fact, when we study all our weaknesses critically & deeply than we come to know that we can convert our weaknesses into strengths. So basically these are our opportunities. The opportunities for IMC are: Export is a major opportunit y for Toyota Indus Motors. Vehicles were exported to Bangladesh just once in order to prove the plant capacit y and efficiency of the company. This should be started again. The contract with the government departme nts e.g. Motorway Po lice, Shaheen Force and the dignitaries where corolla has an opportunit y to deal with the business markets along with dealing in consumer markets. Toyota can do better by focusing on segments much more than presently being done. Toyota should also try to lower its price of Corolla in the segment where Honda city has penetrated. It can offer discounts to Government departments and large organizations on purchase of its vehicles in more quantities. Success of the manufacturing of Daihatsu cuore is a major opportunit y for Toyota to excel further careful planning and the right time to launch the new car can prove to be a success. THREATS: Though Indus Motor Company Limited has a strong footing and maintain a good number of loyal customer, still bank has threats in various sectors. When we see the possible threats for IMC, the threats are prevailing such as: Even though Toyota keeps a careful e ye on the changing trends, still the changing customer needs and trends can prove to be a threat. A major threat is the changing political and economic scenarios of Pakistan. Changing government policies affect the companys performance. Devaluatio n of rupee adverse shifts in foreign exchange rates, trade policies of governments is a threat. Moreover the company is threatened by the ongoing rate of 30% cash L/C margin. Import of re-conditioned cars is also considered as a threat for the company. The planned car manufacturing plants of Hyundai and Daewoo can prove to be tough competitio n for Toyota if they are successful.

PEST ANALYSIS
PEST analysis is the analysis which we tend to perform in order to analyze the external as well as the internal environment in which organization is currently working. PEST analysis revolves around the four things.

POLITICAL FACTORS: Government at all levels is an important component of the general environment. No organization or industry is immune from the various decisions made by the government. The Pakistan Governments inconsistent policies, frequent change in duty tariff and smuggling are main reasons of unstable market conduction. Like other motor companies Toyota is also affected by the current changing policies of the government. In 1995, all the previous taxes and duties were rolled into one import duty of 30 percent on CKD kits as well as CBU vehicles. In 1996 the sales tax on CBU was increased cost to 18 percent. In 1997 the ministry of industries and production recommended that duty on CKD be reduced form 40 percent to 35 percent while the car sales should be exempted from CVT and the deletion program should be accelerated. Just a half year back the general sales tax has been increased to 16 percent promoting more price like. So there is going to be a Rs. 80,000 to Rs. 1,00,000 increase in vehicle. ECONOMICAL FACTORS: Government economic policies at the federal level clearly influence the ability of the industries to survive and progress. Inflation is a major economic factor which has affected the Pakistans Automobile industry including Toyota. The current inflation rate is 21% to 23% annually prices in the auto market were deregulated in 2000 and grew almost 20 percent to 30 percent per annum to allow Toyota to bring their prices to profitable levels. After three years of Still Market, the market picked up. The recent increase of 16 percent sale tax is however, going to result in a price increase. SOCIAL FACTORS: Society holds a global or summary belief that an organization is proper and worthy of support. Toyota takes pride in being the most trusted name all over Pakistan. Its vehicles are regarded as a status symbol. It is the guiding principles of Toyota which has strongly developed trust in the people. Toyota respects the culture and customs of every nation and community and contributes to the economic and social development through corporate activities in the communities. This is the reason that Toyota is proud of the fact that Pakistani society considers Toyota vehicles to be a symbol of reliability, comfort, luxury and a have to be trusted. TECHNOLOGICAL FACTORS: Technology is of particular importance because it has been and continues to be the main source of increases in productivity. Despite changes in the means used to motivate people and the variety of incentives that have been offered to stimulated production, the resulting increase has been negligible when compared to that of created by technology.

Ratio Analysis
Short Term Debt Paying Ability

Net Working Capital


Net working capital is a financial metric which represents operating liquidity available to a business. Along with fixed assets such as plant and equipment, working capital is considered a part of operating capital. It is calculated by following formula: Current Assets - Current Liabilities

3,513,878

2005

4,651,103

2006

6,149,403

2007

5,885,153

2008

6,830,469

2009

Interpretation:
Working capital of the company has always been maintained very high up to FY 2007. The company then reduced it in FY 2008 to avoid excessive working capital but in FY 2009 it again increased which shows company has sufficient capital to pay its liabilities.

CURRENT RATIO:
The current ratio is a financial ratio that measures whether or not a firm has enough resources to pay its debts over the next 12 months. It compares a firm's current assets to its current liabilities. It is expressed as follows:

Current Assets Current Liabilities

2005
1.46 : 1

2006
1.49 : 1

2007
1.83 : 1

2008
2.56 : 1

2009
1.69 : 1

Interpretation:
Current Ratio of the company has a increasing trend up to FY 2008. It was minimum in FY 2005. As the graph shows that current ratio remains positive in last five years so the company has the abilit y to pay its current liabilities with its current assets. Current ratio was maximum in FY 2008 than once again it decreased in FY 2009 due to increase in liabilities.

ACID TEST RATIO: A stringent test that indicates whether a firm has enough short-term assets to cover its immediate liabilities without selling inventory. The acid-test ratio is far more strenuous than the working capital ratio, primarily because the working capital ratio allows for the inclusion of inventory assets.

Current Assets - Inventory Current Liabilities

2005
1.05 : 1

2006
1.07 : 1

2007
1.44 : 1

2008
1.86 : 1

2009
1.28 : 1

Interpretation:
Quick ratio of the company has an increasing trend up to FY 2008 showing the adequacy in paying off the current liabilities. Then it decreased slightly in FY 2009. But as a whole the graph shows that company has a tendency that the most liquid assets of the company are in a position to payoff the current liabilities.

CASH RATIO: The cash ratio is a formula for measuring the liquidity of the company by calculating the ratio between all cash and cash equivalent assets and all the current liabilities. The formula for calculating the cash ratio is as under: Marketable Securities + Cash Current Liabilities

2005
0.88 : 1

2006
0.79 : 1

2007
1.15 : 1

2008
1.16 : 1

2009
0.98 : 1

Interpretation:
Cash ratio of the company was quite good in FY 2005 and FY 2006, than it increased in FY 2007 and FY 2008 showing that company in not using cash to its best advantage. In FY 2009 the decrease in cash ratio shows that company has now started using the cash up to its maximum advantage.

CASH FLOW FROM OPERATIONS RATIO: Cash flow from operations or operating cash flow ratio measure of how well current liabilities are covered by the cash flow generated from a company's operations. The formula for calculating the ratio is: Cash from Operations Current Liabilities

2005
0.12 : 1

2006
0.28 : 1

2007
0.38 : 1

2008
(0.21) : 1

2009
0.66 : 1

Interpretation:
Cash flow from operations ratio of the company was low in FY 2005 showing that the operating profit of the company was not meeting the need of short term liabilities well. Ratio increased in FY 2006 and FY 2007. But the company was facing the problems in FY 2008 of meeting the need of current liabilities from its operating profit due to the negative cash flow. In FY 2009 the ratio again increased and now the company is in a position to meet its short term cash needs well in time.

LONG TERM DEBT PAYING ABILITY:


TIME INTEREST EARNED RATIO: The times interest earned ratio is an Indicator of a companys ability to meet the interest payments on its debt. The times interest earned calculation is a corporations income before interest and income tax expense, divided by interest expense. The calculating method is: Earning before Interest and Tax Interest Expense

2005

25.48

33.08

2006

187.44

2007

1,284.23

2008

78.09

2009

Interpretation:
The times interest earned ratio of the company was very low in FY 2005 and FY 2006. This is due to the high interest expense of the company. In FY 2007 and FY 2008 a increasing trend is shown in the ratio which shows that company has reduced its interest expenses. But in FY 2009, after a massive decrease, company is still able to generate 78 times the expense of interest from its operations.

FIXED CHARGED COVERAGE RATIO: A ratio that indicates a firm's ability to satisfy fixed financing expenses, such as interest and leases. A ratio calculated by dividing profits before payment of interest and income taxes by interest paid on bonds and other long-term debt. It is calculated as the following: Earning before Interest and Tax Interest + Lease Payment + Principal Payment

2005
22.60

2006
32.10

2007
187.44

2008
1,284.23

2009
78.09

Interpretation:
Fixed charged coverage ratio of the company is mostly same as time interest earned ratio. It shows that company has no long term finances on which company has to pay interest. Company has the liability against leased assets in FY 2005 and FY 2006. Figure shows the increasing trend from FY 2005 to FY 2008 which means that company has better position to pay its debt expenses. Than it decreased in FY 2009 but still company is in good position.

DEBT RATIO: The ratio gives an idea to the leverage of the company along with the potential risks the company faces in terms of its debt-load. A low percentage means that the company is less dependent on leverage. The lower the percentage, the less leverage a company is using and the stronger its equity position. In general, the higher the ratio, the more risk that company is considered to have taken on. The formula for calculating the debt ratio is:

(
2005 2006

Total Liabilities Total Assets

)100
2008 2009

63.30%

60.45%

48.65%

2007

31.36%

50.22%

Interpretation:
Debt ratio of the company is significantly decreasing from FY 2005 to FY 2008. It reached to its lowest of 31.36% in FY 2008 but than there was increase in FY 2009. The decreasing trend of the debt ratio is due to the decrease in total liabilities. That is beneficial for company. But in FY 2009 the liabilities of the company increased but the assets of the company also increased.

DEBT EQUITY RATIO: This ratio indicates how much the company is in debt by comparing what is owed to what is owned. A high debt to equity ratio could indicate that the company may be over-leveraged, and should look for ways to reduce its debt.

(
2005
0.00%

Long Term Debt Share Holder's Equity

)100
2009
0.00%

2006
0.00%

2007
0.00%

2008
0.00%

Interpretation:
The figure shows that company had enough equity to serve over period of time. The graph shows the strategy of the company that company is totally based on equity. Debt is not taken to run the operations of the company.

DEBT TO TANGIBLE NETWORK: Debt to tangible net worth ratio measures the degree of protection that exists for creditors. The lower the ratio the better is for company. The value is computed b y dividing total liabilities by total equity minus intangible assets. The formula is:

(
2005
172.86%

Total Liabilities Owner's Equity - Intangible Assets

)100
2009
100.93%

2006
152.99%

2007
94.78%

2008
45.71%

Interpretation:
Debt to tangible net worth ratios shows the decreasing trend from FY 2005 to FY 2008 which is very good for the company. The decrease in the ratio is due to the decrease in the intangible assets of the company. The ratios increased once again FY 2009 due to increase in intangible assets of the company.

SHORT TERM LIQUIDITY:


DAYS SALES IN A/R: The ratios measure of the average number of days that a company takes to collect revenue after a sale has been made. The formula of the ratio is: Gross A/R Net Sales / 365 days

2005
13.09

2006
24.89

2007
15.86

2008
18.90

2009
26.02

Interpretation:
Accounts receivable turnover in days is 13 days in FY 2005 and then it increased in FY 2006 up to 25 days but then it decreased to 16 days in FY 2007. After this it

showed an increasing trend up to FY 2009. This shows that receivables management of the company is not improving as compared to the previous years and 7 days have been increased in this manner in FY 2009 as compared to the FY 2008.

ACCOUNTS RECEIVABLE TURNOVER: Measures the number of times accounts receivable are collected during the year. This ratio measures the efficiency of credit and collection policies and the quality of outstanding average accounts receivable. The formula of the ratio is: Net Sales Gross A/R

2005
27.89

2006
14.66

2007
23.01

2008
19.32

2009
14.03

Interpretation:
Accounts receivable turnover of the company was maximum in FY 2005 i.e. 27.89 times. Than it decreased to 14.66 times in FY 2006. Once again increase was recorded in FY 2007 of 23.01 times. Than decreasing trend was recorded in FY 2008 and FY 2009. This shows that company in not managing its receivable in better ways as compared to the previous years. Company is collecting receivable only 14.03 times in FY 2009 in comparison with the previous years. This is all due to the decrease in the volume of sales and increase in trade receivable.

DAYS SALES IN INVENTORY: A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory into sales. Generally, the lower (shorter) the days sale in inventory is the better. It can be calculated by following formula: Ending Inventory Cost of Goods Sold / 365 days

2005
11.80

2006
15.55

2007
5.57

2008
10.92

2009
14.20

Interpretation:
Days sales in inventory shows and increasing trend of 4 day in FY 2007 as compared to the previous year. Than it decreased to 5.57 days in FY 2007. After this increase is recorded in FY 2007 and FY 2008. Company is taking 14.20 days to convert its inventory into sales in FY 2009, while company was taking 10.92 days in FY 2008. The inventory management was best in FY 2007 in which company was taking 5.57 days.

HORIZONTAL & VERTICAL ANALYSIS


NET PROFIT MARGIN: A ratio of profitability calculated as net profits divided by net sales. It measures how much out of every dollar of sales a company actually keeps in earnings. The formula to calculate the net profit margin is:

(
2005 2006

Net Income Net Sales

)100
2008 2009

5.38%

7.52%

7.03%

2007

5.53%

3.66%

Interpretation:
Net profit of the company shows an increasing trend in up to FY 2006. Than from FY 2007 to FY 2009 it shows the decrease in the net profit. Net profit is minimum in FY 2009 i.e.3.66% as compared to the previous years.

TOTAL ASSETS TURNOVER: A financial ratio that indicates the effectiveness with which a firm's management uses its assets to generate sales. A relatively high ratio tends to reflect intensive use of assets. The formula for calculating the ratio is: Net Sales Total Assets

2005
2.26

2006
2.23

2007
2.49

2008
3.01

2009
1.83

Interpretation:
The ratio has decreased to 2.23 in FY 2006 from 2.26 in FY 2005. Then it showed a very good increase in FY 2007 and FY 2008 and reached to 2.49 and 3.01 respectively. But once again ratio decreased to 1.83 in FY 2009. The reason behind this decrease is the decrease in volume of sales.

RETURN ON ASSETS: An indicator of how profitable a company is relative to its total assets. ROA gives an idea as to how efficient management is at using its assets to generate earnings. The formula for calculating the ratio is:

(
2005
12.17%

Net Income Total Assets

)100
2008
16.66%

2006
16.74%

2007
17.53%

2009
6.70%

Interpretation:
The ratio has a increasing trend up to FY 2007. This increase is due to the increase in total assets. And then it showed the decreasing trend in FY 2008 and FY 2009. The decrease in the ratio is FY 2007 was due to the decrease in total assets as compared to the previous years while the reason of decrease in the FY 2009 is the decrease in the net income of the company.

OPERATING INCOME MARGIN: A ratio used to measure a company's pricing strategy and operating efficiency. Operating margin is a measurement of what proportion of a company's revenue is left over after paying for variable costs of production such as wages, raw materials, etc. The formula for calculating the ratio is:

(
2005
7.73%

Operating Income Net Sales

)100
2008
7.40%

2006
9.93%

2007
9.38%

2009
3.97%

Interpretation:
The operating income margin of the company has an increasing trend up to FY 2006. But then it decreased slightly in FY 2007 to 9.38% from 9.93% in FY 2006. The trend remains decreasing in FY 2008 and FY 2009. The decrease in last two years is due to the decrease in operating profit of the company.

OPERATING ASSETS TURNOVER: A financial ratio that indicates the effectiveness with which a firm's management uses its operating assets to generate sales. The calculation technique for the ratio is: Net Sales Operating Assets

2005
30.63

2006
25.02

2007
20.53

2008
11.53

2009
9.71

Interpretation:
The turnover is showing a decreasing trend up to FY 2009. The reason behind the trend is the increase in operating assets.

RETURN ON OPERATING ASSETS: An indicator of how profitable a company is relative to its operating assets. Return on operating assets gives an idea as to how efficient management is at using its operating assets to generate earnings. The ratio is calculated as follow:

(
2005
164.77%

Net Income Operating Assets

)100
2008
63.77%

2006
188.06%

2007
144.29%

2009
35.51%

Interpretation:
The ratio has a increasing trend up to FY 2006. This increase is due to the increase in operating assets. And then it showed the decreasing trend in FY 2007, FY 2008 and FY 2009. The reason behind the decrease in the ratio is decrease in the net income of the company.

SALES TO FIXED ASSETS: Sales to fixed assets ratio measures a company's ability to generate net sales from fixed asset investments specifically property, plant and equipment. A higher the ratio shows that the company has been more effective in using the investment in fixed assets to generate revenues. The ratio is calculated by following formula: Net Sales Fixed Assets

2005
27.63

2006
20.53

2007
18.66

2008
10.27

2009
9.62

Interpretation:
The ratio has shown a decreasing trend from FY 2005 to FY 2009. The ratio was highest in FY 2005 i.e. 27.63 and lowest in FY 2009 i.e. 9.62. It is all because of the greater increase in fixed assets as compared to the increase in sales volume of the company. This all shows that company is not making productive use of its fixed assets by generating good volume of sales.

RETURN ON EQUITY: The amount of net income returned as a percentage of shareholders equity. Return on equity measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested. The formula for the ratio is:

(
2005
33.17%

Net Income Total Equity

)100
2008
24.28%

2006
42.32%

2007
34.13%

2009
13.45%

Interpretation:
Return on equity of the company shows an increasing trend in FY 2006 as compared to the FY 2005. The increase was due to the increase in total equity of the company. Than it shows a decreasing trend from FY 2007 to FY 2009. Here total equity is still increasing but the decreasing trend is due to the decrease in net income of the company.

GROSS PROFIT MARGIN: A financial metric used to assess a firm's financial health by revealing the proportion of money left over from revenues after accounting for the cost of goods sold. Gross profit margin serves as the source for paying additional expenses and future savings. It can be calculated as follow:

(
2005
9.80%

Gross Profit Net Sales

)100
2008
9.29%

2006
11.77%

2007
11.37%

2009
6.14%

Interpretation:
The gross shows an increasing trend up to FY 2006. Than there is a decrease in gross profit in FY 2007 and trend remains same in FY 2008 and FY 2009. The decrease in FY 2008 was due to the increase in cost of goods sold. While the decrease in FY 2009 is due to the low sales of the company.

INVESTORS ANALYSIS:
6.5.1 EARNING PER SHARE: The portion of a company's profit allocated to each outstanding share of common stock. Earnings per share serve as an indicator of a company's profitability. It is calculated as follow: Net Income No. of Equity Shares

2005
18.89

2006
33.70

2007
34.93

2008
29.15

2009
17.62

Interpretation:
EPS of the company has increasing trend from FY 2005 to FY 2007. It is due to the high income earned by the company. Than suddenly EPS decreased in FY2008 and FY 2009 rapidly. This decrease in EPS shows that company has low earnings in last two years as compared to the previous years.

PRICE EARNING RATIO: The price earning ratio is a way to show how a companys earning relate to a stock price. The higher the price earning the more earnings growth investors are expecting and the higher premium they are willing to pay for that anticipated growth. The formula for the ratio is: Market Price Per Share Earning Per Share

2005
4.76

2006
5.67

2007
8.75

2008
6.86

2009
6.11

Interpretation:
The price earning ratios shows an increasing trend from FY 2005 to FY 2009. This increase is due to the increase in EPS. Than ratio decreased in FY 2008 and FY 2009. The decrease in the price earning ratio is due to decrease in EPS. But the decrease in market price of share is also recorded.

DIVIDEND PAYOUT RATIO: The dividend payout ratio measures what a companys payout to investors in the form of dividend. The ratio can be calculated by the following formula:

(
2005
52.94%

Dividend Per Share Earning Per Share

)100
2008
36.02%

2006
35.61%

2007
37.22%

2009
56.75%

Interpretation:
The dividend payout ratio of the company is high in the FY 2005 due to the low EPS. Than it remains stable in FY 2006, FY 2007 and FY 2008 because of almost same dividend per share of the company in these years. In FY 2009 the ratio decrease due to the decrease in EPS of the company in that year.

DIVIDEND YIELD RATIO: The dividend yield ratio allows investors to compare the latest dividend they received with the current market value of the share as an indictor of the return they are earning on their shares. The formula for calculating the ratio is: ( Dividend Per Common Share /Market Price Per Share) 100

11.11%

2005

6.28%

2006

4.26%

2007

5.25%

2008

9.28%

2009

Interpretation:
The trend is negative in this ratio up to FY 2007 because of the increase in the prices of the shares up to FY 2007. In FY 2008 and FY 2009 ratio shows increasing trend. This increase is due to the decrease in the market price of share in those years.

CONCLUSION & RECOMMENDATIONS


Toyota Motor Company, has worked closely with its 62 local vendors for increased localization and technology transfer. The company has expanded its dealership network across Pakistan to 29 dealerships and this will increase further in the coming years. TMCs products, renowned for their quality, durability, safety, fuel economy and resale value, are appreciated by customers in Pakistan. There has been high demand for the Corolla which is the market leader in this segment. Pakistan is the highest producer of Corolla in Asia. TMC expect 2009/10 to be a better year but a critical one for sustainable growth and development of Pakistans economy. Profit margins are still under pressure due to foreign currency fluctuations. TMC is working on definitive plans to expand dealer network and launch new CKD/CBU products. TMC will do utmost to optimize costs without compromising on quality and delivery. TMC has improved its market share in a declining market but will continue to remain aggressive, focused and innovative in their marketing activities coupled with dealership improvements. It is essential for the government to effectively address the following challenges concerning consolidation of macroeconomic stability. Mitigating the effects of the global economic crisis, in particular on manufacturing and exports. Implementing tax policy and administration reforms and managing the security issues engulfing the nation; Make a concrete plan to revisit the AIDP and achieve implementation recognizing the recommendations made by OEMs and the Pakistan Automobile Manufacturers Association.

REFRENCES
Toyota Motor Company Limited Annual Report 2005 Toyota Motor Company Limited Annual Report 2006 Toyota Motor Company Limited Annual Report 2007 Toyota Motor Company Limited Annual Report 2008 Toyota Motor Company Limited Annual Report 2009 James C. Van Horn, John M. Wachowicz, Jr (1992) Fundaments of Financial Management, 12th Edition 7. http://www.toyota-motors.com 8. http://economicpakistan.wordpress.com/2009/02/01/automobile-industry/ 9. http://www.zenwealth.com/BusinessFinanceOnline/RA/RatioAnalysis.html
1. 2. 3. 4. 5. 6. 10. http://en.wikipedia.org/wiki/Toyota