Honda Motor Co., Ltd. Sayaka Watanabe ACG2021. 081

1. Annual Report Honda Motor Co., Ltd.Sayaka WatanabeACG2021. 081

2. Executive Summary Because I am interested in Honda Motor Co., Ltd, I searched it. Not only in Japan but also a lot of countries, Honda is a very famous company, and many people like the automobiles and motorcycles. I would love to purchase the stock of this company because when I saw their annual report, Honda looks like it is very good average and getting high in most areas. I think this company will be growing up more and more. http://world.honda.com/investors/annualreport/2005/pdf/ar2005.pdf

3. Introduction • Honda’s President and Chief Executive Officer: Takeo Fukui. • Honda’s home office is located at: 2-1-1 Minami Aoyama Minato-ku, Tokyo 107-85566, Japan Tel: +81-(0)3-3423-1111 • The ending date of their last fiscal year: March 31, 2005 • The company products and services: automobiles, motorcycles, power products, andfinancial services • Honda operates main locations: Japan United States Canada Mexico United Kingdom

4. Audit Report The company’s independent auditors KPMG, located in Tokyo, Japan. The independent auditors of Honda says that the financial statements have been audited fairy and generally accepted in many countries.

5. Stock Market Information • As of January 27, 2006 at close, the stock price was $57.96 share of common stock. • Between January 2005 and January 2006: High - $63.18 and Low - $44.42 • The dividends per share were $0.47. • This stock information is dated January 27, 2006 • If you have stock in Honda, you should hold it., and if you have money, you should invest more. The stock price is getting high.

6. Industry Situation and Company Plans Honda is one of the top producers of motorcycles and automobiles in the world. It also has own financing division to assist customers to purchase Honda’s products. Moreover, industry is looking good for Honda at 2005. Honda has increased sales for the past 2 years. Even though it is growing up, it would like to grow up more. Honda will advance to much more countries.

7. Income Statement The income statement is a Multi-step Income statement Gross Margin, Operating Income, and Net Income all increased from 2004 to 2005. 2004 2005 Gross Profit 8162800 8650105 Operating Income 600144 630920 Net Income 464338 486197

8. Balance Sheet In Japanese Yen AssetsLiabilitiesStockholders’ Equity 2004 8,328,768 = 5,454,368 + 2,874,400 2005 9,316,970 = 6,027,676 + 3,289,294 In general, the amounts on the balance sheet have increased from 2004 to 2005. The largest percent change is in the total assets.

9. Statement of Cash Flows • Cash provided by operating activities was grater than net Income in 2004 and 2005. • The cash flow from investing seems to be getting smaller and smaller from past years, but Takeo Fukui continue to advance to overseas. • The company's primary source of financing is the proceeds from long-term debt. • In 2004, cash amount increased a lot, but in 2005, cash amount only increased a little. Overall, between 2004 and 2005, cash has increased.

10. Accounting Policies Description of Business Inventories--- Inventories are stated at the lower of cost, determined principally by the first-in, first out method or market. Basis of Presenting Financial Statements Consolidation Policy---include the accounts of company and its subsidiaries. Use of Estimates---usually accepted accounting principle Revenue Recognition---Sales of manufactured products are recognized when persuasive evidence of an arrangement exists, delivery has occurred, title and risk of loss have passed to the customers, the sales price is fixed or determinable, and collectibles is probable. Cash Equivalents Investments in Securities--- three categories: available-for-sale, trading, or held-to-maturity Goodwill Depreciation---calculated principally by the declining-balance method based on estimated useful lives and salvage values of the respective assets. Impairment of Long-Lived Assets Product-Related Expenses Foreign Currency Translation---foreign currency financial statement amount are translated into Japanese yen on the basis of the year-end rate for all assets and liabilities and the weighted average rate for the year for all income and expense amounts. Basic Net Income per Common Share Shipping and Handling Costs New Accounting Pronouncements not Adopted Yet Reclassification Income Taxes---accounted for under the asset and liability method

11. Financial Analysis Liquidity Ratios 2004 2005 Working Capital (in Yen)318,435 260,178 Current Ratio1.09 times1.07 times Receivable Turnover11.9 times11.7 times Avg. Days’ Sales Uncollected30.7 days31.2 days Inventory Turnover7.3 times 7.4 times Avg. Day’s Inventory on Hand50 days 49.3 days

12. 20042005 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% Financial Analysis Profitability Ratios

13. Financial Analysis Solvency Ratio

14. Financial Analysis Market Strength Ratios According to CorporationInformation, Price/earnings per share was 15.17 times in 2005, and Dividend yield was 1.28% in 2005.

15. Honda Motor Co., Ltd The End