Financial Analysis of Toyota Motor Corp.

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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 and made less per sale). At the end of 2011 Toyota’s stock had collapsed by approximately 70% from its peak in 2007 (Daltorio, 2012). In 2011 Toyota appeared to be headed for the corporate graveyard; however a refocus in strategy precipitated a financial turnaround in 2012. This turnaround continues and has Toyota on track to post record earnings in 2014 (Tabuchi & Vlasic, 2014). There have been a number of factors leading to Toyota’s resurgence. The primary being Toyota’s pursuit of cost cutting. Cost cutting measures such as part standardization, emphasis on buyer power and a reduction of management wages have laid the foundation for Toyota’s improvements. These measures have resulted in lowering expenditures nearly 25% from 2007 levels (Daltorio, 2012). This assessment will evaluate how both firm and market events impacted Toyota’s financials from 2009 through 2013. The assessment will compare and contrast indicators such as debt (D), equity (E), weighted average cost of capital (WAC... ... middle of paper ... ... (2011). Corporate finance: The core, second edition. (2nd ed.). Boston, MA: Prentice Hall. Daltorio, T. (2012, September 26). The turnaround story that is toyota . Seeking Alpha. Retrieved from http://seekingalpha.com/article/890341-the-turnaround-story-that-is-toyota Harmon, P. (2012). Once more: Lean, the toyota production. BPTrends, Retrieved from http://www.bptrends.com/publicationfiles/advisor20121023.pdf Enterprise value - ev. Investopedia, Retrieved from http://www.investopedia.com/terms/e/enterprisevalue.asp Market watch. (2014, March 19). Retrieved from http://www.marketwatch.com/investing/stock/tm/financials Tabuchi, H., & Vlasic, B. (2014, February 4). In rapid turnaround, toyota is on track to post record earnings. The New York Times. Retrieved from http://www.nytimes.com/2014/02/05/business/international/toyota-forecasts-record-profit.html?_r=0

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