Module 10: Detailed Analysis of the Financial Reports

1. Module 10: Detailed Analysis of the Financial Reports Mairin Talerico

2. Snapshot of Toyota Limited liability, joint-stock company incorporated under Commercial Code of Japan; started in 1930s Primarily in automotive industry, but also financial services and others Sold 9.98 million vehicles in fiscal 2013 Sell in 170 different countries and regions Primary markets: Japan, North America, Europe and Asia

3. Auto Manufacturing – At a Glance TM F GM

4. SWOT Analysis Strengths Opportunities Research and Development initiatives A leader in green cars development Selling in Japan and North American markets Geographically expansive manufacturing locations Toyota Motor Credit Credit Corporation [49% US Sales had financing] Develop environmentally friendly vehicles and technologies Safe vehicles Ability to increase market share in growing economies and markets Sustainable growth and optimal supply of products globally Finance more cars and increase profits Growth through acquisitions

5. SWOT Analysis Cont. Weaknesses Threats Product recalls Always staying abreast of new technology and financial offerings Abiding by all gov’t regulations and legal proceedings Declining sales in Europe 51% US Sales don’t have financing Weak presence in emerging markets Brand reputation Worldwide auto market is highly competitive, volatile + Financial services industry Decrease profit Risk losing a major market for sales Highly competitive financial services industry

6. ASSETS

7. From Balance Sheet Note 16: Income Taxes

8. Netting of Deferred tax assets and liabilities

9. Property, Plant, and Equipment Already given in Consolidated Balance Sheet, no need to expand based on the Notes to F/S

10. Note 7: Finance Receivables …calculates total amount and shows current and noncurrent portion

11. Inventory on Balance Sheet= $18,243m

12. Liabilities

13. Short-term borrowings on Balance Sheet=$43,482m

14. Long Term Debt (& Current Portion of LT Debt) From Balance Sheet: Current Portion= $28,755 Long Term Debt= $78,020 Note 13: Short-term borrowings and long-term debt

15. Using Note 14: Product warranties and recalls and other safety measures, we can determine a portion of the “accrued expenses” liability line item “Liabilities for product warranties and liabilities for recalls and other safety measures have been combined into a single table showing an aggregate liability for quality assurances due to the fact that both are liabilities for costs to repair or replace defects of vehicles and the amounts incurred for recalls and other safety measures may affect the amounts incurred for product warranties and vice versa.” –form 20-F Accrued Expenses on Balance Sheet= $23,238  Plug

16. Liability- Income Taxes Payable On Balance Sheet, income taxes payable= $1,662 In note on Segment Data, line items are divided by financial business segment and non-financial business segment

17. Pension and Retirement Planning Defined contribution and defined benefit plans for both Japanese and foreign segments

19. Accrued pension and severance costs increase due to change in funded status. It increased from 8,146 to 9,977. • Accrued expenses (current liabilities) changed. • Noncurrent pension assets • Expand line items in AOCI

20. Income Statement

21. Net revenues Already divided into Automotive and Financial Services income. Expanded income by sale segment

22. Selling, General, Administrative Expenses Toyota’s F/S are not explicit as to what belongs in SGA R&D, advertising, pension, allowance for credit loss, stock based compensation expense, etc.  Plug

23. Income Tax Rate Revisited • The effective tax rate = 39.3%, which was higher than the statutory tax rate in Japan. • Due to deferred tax liabilities relating to undistributed earnings in affiliated companies accounted for by the equity method. • If Toyota was an all equity company with no debt, the tax rate would be… 37.6% • Note 16 Income Taxes

29. Questions?