16Th, November, 2013
Honda Motor Corp
Introduction:
Honda Motor Corp is a Japanese automobile and motorcycle manufacturer which have multinational presence around the globe. Founded in the year, 1949. The company is the leading manufacturer of motorcycles and eight largest manufacturer of automobiles in the world.
Financial Analysis:
Profit Margin Ratios
These ratios access the profitability of the entity and can said to be the true indicator for accessing the profitability of the concerned company. We will be using these ratios to adjudge how well Honda Motor Corp and General Motor Corp generates operating profits and net profit from its revenue.
Operating Profit Margin: (Operating profit/ Revenues)
Net Profit Margin:
Dividend Yield Ratio
The dividend yield ratio is used by the investors to judge the return provided by the company’ s stock in terms of dividend received only.At present, the dividend yield of Honda Motor Corp is 5% while the dividend declared is $2.
Debt Equity Ratio:
This ratio is used to judge the use of debt financing in the total capital structure of the company. High debt to equity ratio is considered undesirable as more debt indicates high financial risk in the company because of which investors might refrain from investing in the company.
Intermediary Analysis:
Our analysis reveals that though Honda Motor Corp was losing its position in 2012 with 11.06% fall in its total revenue. However, company came back strong in 2013 with its revenue increasing by 24% while the operating profitability showed an increasing trend from 2.9% to 5.5%. However, over the years company have increased use of debt in the capital structure.
General Motors
Introduction:
Popularly known as GM in automobile industry, General Motors is a US based automobile giant with multinational presence. Founded in 1908, company is amongst the leading automobile manufacturers in the industry and operates under several brand names.
Financial Analysis:
Profitability Analysis
Operating Profit Margin:
Net Profit Margin:
Dividend Yield
At present GM Corporation offers dividend yield of 3% while the dividend declared is only $0.30. Another important consideration is that the company issued its IPO only during 2010.
Debt To Equity Ratio
Conclusion:
The reason for Honda Motors scoring over GM is the growing dissatisfaction of American Citizens for US based cars and trucks and the growing satisfaction gap between foreign car makers and US based car makers. As a result, General Motors, which is among leading automobile manufacturer in US is facing a set back from is competitor Honda Motors which is also getting benefited from continuous devaluation of Japanese Yen.
On the other hand, General Motors is lagging both in domestic and import demand, which is primarily because of strong position of US Dollars. Thus, where the year of 2013 has proved successful for Honda with high growth in both revenue and profit margins, General Motors who is yet to announce its results, is most likely to be behind Honda Motor Corp considering the current demand trend in US and depressed overseas demand for American Cars.
Works Cited
LeBeau, P. (2013, August 27). US automakers fall further behind foreign brands. Retrieved November 16, 2013, from MSN Money: http://money.msn.com/top-stocks/post--us-automakers-fall-further-behind-foreign-brands
