Financial Analysis of Toyota Motor Corp. Essay

1186 Words5 Pages
In 2009 Toyota Motors (TM) posted a net loss of $4.6 billion ("Market watch," 2014). From 2009 to 2011 Toyota encountered a number of factors contributing to their economic downturn. It began with recalling millions of vehicles, for quality related problems, followed by natural disasters hitting northeastern Japan. These disasters wiped out Toyota’s production capabilities (Tabuchi & Vlasic, 2014). While these events were occurring, the cloud of the 2008 global financial crisis was still being felt. This crisis weakened demand in the automotive industry. This weakened demand increased the competitive landscape for all automotive manufactures. This drove down automotive prices and effectively contribution margins (i.e. sold less…show more content…
This analysis will determine whether or not the project is worth pursuing using a net present value (NPV) approach. Assessment Toyota was the pinnacle of quality in the 1990’s. Their use of “lean production” focused on eliminating waste and non-value added steps. This provided a competitive advantage surrounding cost and quality (Harmon, 2012). Toyota was viewed as a stable company by which investors could realize positive returns. In 2009 this pattern of stability was challenged. These challenges affected the overall brand value. Table 1 outlines the historical pricing of Toyota’s stock (TM) and associated market capitalization using close out prices from the end of each fiscal year. Table 1 (Market watch, 2014) 2009 2010 2011 2012 2013 Historical Stock Price ($) 84.16 78.63 66.13 93.25 121.92 Shares Outstanding (B) 3.14 3.14 3.14 3.14 3.17 Market Cap (B) 264.2624 246.8982 207.6482 292.805 386.4864 This information demonstrates how the challenges from 2009 to 2011 affected overall brand value. This information confirms Toyota’s new strategy supported revival in 2012. Table 2 outlines the cash, debt and value positions. EV was calculated using the market cap value calculated from Table 1. This EV was then used to determine D/EV. Table 2 (Market watch, 2014) 2009 2010 2011 2012 2013 Cash & Short Term Investments (T) 2.98 4.05 3.51 2.94 3.27 ST Debt & Current Portion LT Debt (T)
Open Document