This is an analytical report that compares the finances of two motor companies -- Honda Motors Company (HMC) and General Motors Company (GM). It looks deep into the reasons for the success of HMC as compared to GM, based on the financial statements for the year ended 31st March 2011, the financial ratios for the same period, and the financial management and decision making.
Honda Motors Company is a general automotive company founded in 1946 in Japan. It undertakes the development, manufacture and distribution of automotive and power products with North America, Europe, and Asia as major distribution outlets. Automobile products include passenger cars, multi-wagons etc. Power products comprise of tillers and portable generators. It is the leading automotive company and has been very successful as compared to its peers. General Motors Company engages in the development, manufacture, and marketing of automobiles (cars and trucks). The company operates in more than 120 countries and produces varieties of vehicle brands e.g. Isuzu, Opel, Cadillac, GMC, Chevrolet, Daewoo, Vauxhall, among others. The company’s major markets are USA, China, the UK, Russia, Brazil, Germany and Canada.
The success of Honda Motors Company is due to a variety of reasons. The services offered by this company are unique, exemplary and up to date. These services include the after sale services, the retail lending services, and the wholesale financing. The company’s respect for its customers is a key reason for the increasing sales and the high profit margin. The company’s basic theory of operation is “Respect for the Individual" and "The Three Joys" commonly articulated as The Joy of Buying, The Joy of Selling and The Joy of Creating. Respect for the Individual is simply upholding trust and integrity for top performance. The three joys however translate to a corporate sense of belonging and satisfaction. It has a better competitive edge due to its undoubted quality products. Besides, it undertakes corporate social responsibility like environmental protection and safety advocacy.
The financial statements for the period ending 31 March 2011 confirm the success of Honda Motors Company as compared to General Motors.
The profit margin for Honda Motors Company was more than twice that of General Motors. This is an empirical evidence of the company’s success. As stated above, this success is rebutted to the company’s excellent services. The company’s assets gave a return of 3.32% as compared to GM’s 2.64%, an indicator that the company’s assets perform greatly. HMC’s earnings per share in the considered period were 47.5 as compared to GM’s 38. The dividend yield was 0.975 for HMC as compared to 0.705 of GM. All these are indicators of HMC’s superior performance. For these ratios, all the calculations are made based on the information provided in the companies’ consolidated financial statements.
The consolidated financial report indicates HMC as more stable than the GM, based on analysis of the return on assets and percentage return on capital. HMC employs equity ratio, return on capital and profit margin to make critical performance decisions. For instance, profit margin ratio help widen the distribution outlets to improve sales margin which stems from larger market share ownership. The equity ratio however aids in formulating decisions relating to earnings per share and the dividend yield. With earning per share, the company easily makes decisions on market value per share and shares to be attributed to shareholders. Higher value of HMC’s equity value of 89.7 times as compared to that of GM’s 31.9 times presents HMC’s better competitive edge in the market.
GENERAL MOTORS COMPANY (GM) BALANCE SHEET. Retrieved at Source: http://finance.yahoo.com/q/bs?s=GM
Honda Motor Co Ltd. Retrieved at http://investing.businessweek.com/research/stocks/financials/ratios.asp?ticker=HMC:US
HONDA MOTOR CO., LTD. REPORTS: CONSOLIDATED FINANCIAL RESULTS FOR THE FISCAL FOURTH QUARTER AND THE FISCAL YEAR ENDED MARCH 31, 2011. Retrieved at http://world.honda.com/investors/library/financialresult/2010/Financial_Result_2010_4q_E.pdf
HONDA MOTORS CO., LTD (HMC) BALANCE SHEET. Retrieved at http://finance.yahoo.com/q/bs?s=HMC+Balance+Sheet&annual