Annual Report

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Annual Report:

Annual Report Honda Motor Co., Ltd. Leanne Buffington ACG2021 Section 080

Executive Summary:

Executive Summary Honda Motor Company has established itself as one of the world’s leading producers of automobiles, as well as the largest manufacturer of motorcycles. At the beginning of their three year mid-term business plan, Honda set some goals that allowed them to “make 20 million customers happy,” and this challenge allowed them to grow in all business segments. They achieved virtually all of their goals. http://www.world.honda.com/investors

Introduction:

Introduction Honda’s President and Chief Executive Officer is Taeko Fukui. Honda’s home office is located at: 2-1-1 Minami Aoyama Minato-ku, Tokyo 107-85566, Japan The U.S. home office is located at: 540 Madison Ave., 32 nd Floor New York, NY 10022 The ending date of their last fiscal year was March 31, 2005 The company produces automobiles, motorcycles and power products, as well as providing financial services to its customers. Honda operates in three main geographic locations: Japan United Kingdom United States

Auditor’s Report:

Auditor’s Report The company’s independent auditor is a company known as KPMG, located in Tokyo, Japan. The independent auditors of Honda claim that they have reviewed the company’s financial reports fairly, according to the standards set by the Public Company Accounting Oversight Board in the United States.

Stock Market Information :

Stock Market Information The most recent stock price on the New York Stock Exchange was $28.77. Honda had a twelve month trading range going from $23.55 in October 2004, to $29.15 in October 2005. The dividends per share were $0.47. This stock information is dated October 4, 2005. It is my opinion that current stockholders hold their stock. The stock price seems fairly stable.

Industry Situation:

Industry Situation Honda is among one of the top producers of motorcycles and automobiles. They focus on trying to make their vehicles environmental friendly by producing a number of hybrid models. Honda also has its own financing division to assist their customers in purchasing vehicles and other power products.

Company Plans:

Company Plans Honda’s primary market is in Japan, where its head office and CEO are located. Therefore, that is the area where they centralize their growth. Consumer spending has increased in Japan, and because of this, they expect the competition in the Japanese market to intensify. They feel that there are some specific areas in need of improvement that are essential to their success: -Research and Development -Production Efficiency -Sales Efficiency -Product Quality -Safety Technologies -The Environment -Continuing to Increase Society’s Trust in and Understanding Toward Honda They feel that, through improving in these seven areas, they will achieve the Honda visions, which consist of “Value Creation,” “Globalization,” and “Commitment to the Future.”

Income Statement:

Income Statement The income statement appears to be similar to a single-step income statement. The increases in these numbers seem to be quite small, considering how large of a corporation Honda is. Most of the Net Income for the year ended March 31, 2005, was generated by other subsidiaries operating outside of Japan. In Millions 2004 2005 Gross Profit $23,771 $24,322 Income from Operations 5,588 5,875 Net Income 4,324 4,527

Balance Sheet (in Yen):

Balance Sheet (in Yen) Assets Liabilities Stockholders’ Equity 2004 8,328,768 = 5,454,368 + 2,874,400 2005 9,316,970 = 6,027,676 + 3,289,294 It appears that the numbers on the Balance Sheet have increased from 2004 – 2005. The total assets seem to have increased the most.

Statement of Cash Flows (in Yen):

Statement of Cash Flows (in Yen) For the past two years, cash flow from operations have been greater than net income. The cash flow from investing seems to be getting smaller and smaller from past years. Their primary source of financing is the proceeds from long-term debt. In 2004, cash increased a great deal. In 2005, however, cash only increased a little bit.

Accounting Policies:

Accounting Policies The following are the topics of significant accounting policies that the company mentions in their financial statements. -Description of Business -Basis of Presenting Financial Statements -Consolidation Policy -Use of Estimates -Revenue Recognition -Cash Equivalents -Inventories -Investments in Securities -Goodwill -Depreciation -Impairment of Long-Lived Assets -Income Taxes -Product-Related Expenses -Basic Net Income per Common Share -Foreign Currency Translation -Shipping and Handling Costs -New Accounting Pronouncements not Adopted Yet -Reclassification

Notes to Financial Statements:

Notes to Financial Statements General and Summary of Accounting Policies Basis of Translating Financial Statements Presentation of Finance Subsidiaries-Receivables in the Consolidated Statement of Cash Flows and the Consolidated Balance Sheet Finance Subsidiaries-Receivables and Securitization Inventories Investments and Advances-Other Short-Term and Long-Term Debt Other Liabilities Income Taxes Dividends and Legal Reserves Pension and Other Postretirement Benefits Investments and Advances-Affiliates

Liquidity Ratios :

Liquidity Ratios 2004 2005 Working Capital (in Yen) 318,435 260,178 Current Ratio 1.09 times 1.07 times Receivable Turnover 11.9 times 11.7 times Avg. Days’ Sales Uncollected 30.7 days 31.2 days Inventory Turnover 7.3 times 7.4 times Avg. Day’s Inventory on Hand 50 days 49.3 days

Profitability Ratios:

Profitability Ratios 2004 2005 Profit Margin 5.7% 5.6% Asset Turnover .98 times .98 times Return on Assets 5.6% 5.5% Return on Equity 16.2% 15.8%

Solvency Ratio:

Solvency Ratio 2004 2005 Debt to Equity Ratio 1.9 times 1.8 times

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