Part C: Toyota’s financial analysis
Toyota’s business divisions encompass automotive operations along with financial and other customer services operations. Among these activities, automotive operations, which accounting for 89% of the company’s revenue in 2012 (toyota-global.com), are major segment of the business. In 2012, Toyota’s predominant markets for vehicle sales include: Japan-28%, North America-25%, Europe-11% and Asia-18% (toyota-global.com). Overall, the automobile industry is intensely competitive and highly volatile. Customers’ demand for personal vehicles is affected by many factors, including: social, political, technological and economic conditions (toyota-global.com). These factors can fluctuate the supply and demand of…show more content… Toyota’s unit sales have dropped approximately 11% since 2010 in North America. However, there was also significant increase of sales in Asia and other regions. The following table compares between the company’s overall operational results in 2011 and 2012:
According to the table above, Toyota’s net revenue of 2012 has decreased from 18,993.7 billion to 18,583.6 billion or approximately 2.2% compared to previous fiscal year. This is partially the negative results of currency fluctuations within different regions in which the company operated combined with the numbers of increase/decrease in automobile sales and other factors within these regions. Notably is the serious decreasing in revenue of the company at 12.5% in North America. The declining revenue and net income of Toyota in 2012 has also led to reduction in the company’s earnings per share. Specifically, Toyota’s EPS has dropped from ¥260.32 to ¥180.4 (financial.morningstar.com). An increase in the company’s dividends from ¥39.71 to ¥94.29 combined with the above earnings per share has caused the company’s payout ratio to increase from 15.3% to 52.3%, which in this case is unfavourable.
Toyota’s financial conditions in 2012 has also become the major reasons for the declining of the company’s return on assets (1.36% to 0.94%) and return on equity ratios (3.95% to 2.72%). The company total liabilities increased from 65.35% in 2011 to 65.58% in