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Example research essay topic: Net Profit Margin Earnings Per Share - 2,003 words

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This paper researches two multinational corporations that are leaders in global car industry: Toyota Motor Corporation and Ford Corporation. Both companies will be analyzed in terms of their historical development, strategies used to acquire leadership positions, contributions to development of global and domestic markets, perspectives for future development. Car Industry Toyota Motor Corporation Toyota Motor Corporation was founded by Kiichiro Toyoda who was born in 1894. According to Toyota's Website, the company was established on August 28, 1937.

Toyota Motor Corporation is the eighth largest company in the world and the second largest automaker in the world that assembles and manufactures trucks, automobiles, buses and robots. Toyota Motor is Japanese Multinational Corporation with 285, 977 employees. The company operates in three segments: Automotive Operations (design, manufacture, assembly, and sale of passenger, recreational and sport cars, trucks and minivans, and component parts and accessories (Finance Yahoo. com) Financial Service Operations (provides finance to Toyota's dealers and their customers concerning purchase or lease of Toyota cars; retail leasing, retail financing, insurance, wholesale financing, credit cars and mortgage loans (Finance Yahoo.

com) Other Operations (designs and manufactures prefabricated housing and information technology related businesses, including intelligent transport systems and an e-commerce marketplace, called Yahoo. com (Finance Yahoo. com) ). Now lets examine Toyota's activity during the previous year.

According to the Toyota Website (Toyota Company, News) on January 25, 2005 Toyota's plant in Guangqi starts to manufacture engine parts. According to Toyota News Release dd. January 17, 2005, Guangqi Toyota Engine Co. , Ltd. (GTE) started to manufacture engine parts as a part of joint venture project TMC/ Guangzhou Automobile. In addition, the plant will manufacture 2. 4 -liter gasoline AZ engines. In February 2005 Toyota Motors assembles and launches fully redesigned Vitz. According to Toyota News Release dd.

February 1, 2005, redesigned Vitz based on a Proud of My Compact development concept is the second generation of Vitz launched through Netz Toyota dealers with monthly sales target of 10, 000 units. The car is offered in three modifications (1. 0 -liter, 1. 3 -liter and 1. 5 -liter engines) with Super CVT-I, traction control, newly developed suspension and intelligent package. According to Toyota News Release dd. February 2, 2005 the company celebrates grand opening of Toyota Motor Manufacturing de Baja California (TMMBC) the first full-scale operation in Mexico. The plant has approximately 650 employees. It started production of Tacoma trucks and truck beds and plans to product 180, 000 truck beds and 30, 000 Tacoma vehicles per year.

As per Toyota News Release dd. February 24, 2005 Toyota Kirloskar Motor Private Limited (TKM) announced production of completely new type of minivan Innova. This minivan was invented as a part of the IMV (Innovative International Multipurpose Vehicle) Project. Production of five newly developed cars under this project began in Indonesia and Thailand. Innova was manufactured by TKM especially for the Indian market.

In March 2005 Toyota Corporation launches new Hilux Pickup. On March 22, 2005 Tianjin FAW Toyota Motor Co, Ltd starts production of Crown in China. In March Toyota starts new diesel engine production in Poland. In April 2005 the company announces Next-Generation Telematics Service G-BOOK ALPHA, unveils IMV Series Hilux Pickup in South Africa, and opens Camry plant in Russia. In May 2005 Toyota Corporation develops high-pressure hydrogen tanks for fuel cell vehicles, starts production of hybrid vehicles in North America, and officially opens TPCA Car Production Plant in Kolin, Czech Republic. In June 2005 Toyota Corporation develops new vehicle safety technologies.

In July 2005 the company expands North American Manufacturing Operations (New Canadian Plant) in order to manufacture RAV 4 from 2008. In August 2005 Toyota Corporation together with FAW launches Prius in Changchun, China. In September 2005 the company makes modifications in pre-crash safety system with driver-monitoring function. In October 2005 Toyota Corporation launches new model Ratios. In November 2005 the company launches new RAV 4 and Best in Japan.

Finally, in December 2005 Toyota's plant Sichuan FAW Toyota starts production of Prius in Changchun, China. On December 26, 2005 the company announces fully redesigned bB. Over the last year Toyota Motor Corporation also launches Lexus brand in Japan. Outside Japan, in the Czech Republic, the car manufacturer starts joint production of Also together with PSA Peugeot Citroen. In India, South Africa and Argentina Toyota Motor Corporation starts IMV Project (Toyota Website. Company profile.

Overview). Lets analyze Toyota Motor Corporations financial condition. Liquidity Ratios: Current Ratio Liquidity Ratios March 2006 March 2005 March 2004 March 2003 Current Assets 91, 196. 00 88, 076. 00 83, 721. 00 71, 732. 00 Current Liabilities 85, 194. 00 76, 760. 00 71, 889. 00 58, 685. 00 Current Ratio 1, 070 1, 147 1, 164 1, 222 Current Ratio indicates the ability of the company to meet short-term debt obligations. It is a test of liquidity of the company. In order to calculate current ratio, we divide current assets by current liabilities on the balance sheet (Marketwatch. com TM Balance sheet).

According to our calculations, Toyota's current ratio for the year 2006 is 1, 07 compared to 1, 22 in 2003. It means that in 2003 Toyota was in better position concerning meeting of its short-term obligations. Ratio 1, 06 means that Toyota Corporation is in relatively good position (average) concerning meeting of its short-term obligations. Liquidity Ratios: Quick Ratio Liquidity Ratios March 2006 March 2005 March 2004 March 2003 Current Assets 91, 196. 00 88, 076. 00 83, 721. 00 71, 732. 00 Current Liabilities 85, 194. 00 76, 760. 00 71, 889. 00 58, 685. 00 Current Inventory 13, 770. 00 12, 192. 00 10, 250. 00 8, 534. 00 Quick Ratio 0, 90 0, 988 1, 02 1, 076 Lets calculate Toyota's Quick Ratio. Quick ratio indicates the companys liquidity and ability to meet its obligations.

It is calculated by subtracting current inventories from current assets and dividing by current liabilities. Quick ratio shows financial weakness or financial strength of the company (the lower number means weaker position, whereas the higher number means stronger financial position) (Marketwatch. com TM Balance sheet). According to our calculations, quick ratio for Toyota Corporation decreased (0, 90 in 2006 compared to 1, 076 in 2003), therefore, financial position of Toyota Corporation became weaker compared to year 2003. Profitability Ratios: ROA Profitability Ratios March 2006 March 2005 March 2004 March 2003 Net Income 11, 681. 00 10, 907. 00 10, 995. 00 6, 247. 00 Total Assets 244, 075. 00 227, 046. 00 208, 537. 00 167, 662. 00 ROA 0, 0478 0, 048 0, 052 0, 037 Lets calculate Toyota's ROA ratio that is aimed to measure the companys success in generating income.

Return on Assets indicates dollars in income earned by the company on its assets. Return on Assets = Net Income/ Total Assets (Marketwatch. com TM Balance sheet and Income Statement). According to our calculations, ROA 2006 is quite stable compared to ROA 2005, but is weaker than ROA 2004. Profitability Ratios: ROE Profitability Ratios March 2006 March 2005 March 2004 March 2003 Net Income 11, 681. 00 10, 907. 00 10, 995. 00 6, 247. 00 Total Owners Equity 89, 711. 00 84, 389. 00 77, 383. 00 59, 243. 00 ROE 0, 13 0, 129 0, 142 0, 105 Lets calculate Toyota's ROE.

This ratio will help us to measure success of Toyota Corporation in generating income. Return on Equity indicates dollars in income earned by the company on its shareholders equity. Return on Equity = Net Income/ Total Owners Equity (Marketwatch. com TM Balance sheet and Income Statement). According to our calculations, Toyota's return on equity is weaker compared to 2004 but a bit stronger than ROE 2005. Tt means the Toyota Corporation generated more profit in 2006 with the money shareholders have invested compared to year 2005.

Profitability Ratios: Net Profit Margin Profitability Ratios March 2006 March 2005 March 2004 March 2003 Net Income 11, 681. 00 10, 907. 00 10, 995. 00 6, 247. 00 Total Revenue 179, 083. 00 172, 749. 00 163, 637. 00 128, 965. 00 Net Profit Margin 0, 065 or 6. 5 % 0, 063 or 6. 3 % 0, 067 or 6. 7 % 0, 048 or 4. 8 % Net Profit Margin indicates the dollars in income that the company earns in each dollar of sales. In order to calculate Toyota Corporation Net Profit Margin we need to divide Net Income by Total Revenue (Marketwatch. com TM Balance sheet and Income Statement). According to our calculations, Toyota's Net Profit Margin 2006 increased compared to 2005 but it is less than NPM 2004. Profitability Ratios: EPS Profitability Ratios March 2006 March 2005 March 2004 March 2003 Net Income 11, 681. 00 10, 907. 00 10, 995. 00 6, 247. 00 Basic Weighted Shares Outstanding 1, 626. 73 1, 648. 05 1, 694. 54 1, 725. 81 EPS 7. 18 6. 62 6. 48 3. 52 EPS indicates Earnings per Share.

Lets calculate Toyota Corporation Earnings per Share. EPS = Net Income / Weighted Average Common Shares. According to our calculations we notice that Earnings per Share increase compared to the previous years. It indicates that Toyota's business is more profitable enough to pay the shareholders dividends in time. Besides, higher EPS attracts more investors to acquire shares of the company. According to the results of our analysis we come to conclusion that Toyota Corporation continued its growth over the long-term period.

The company introduced number of new items and started a number of priority projects including construction and launching of new plants in Thailand, USA and Russia. Toyota Corporation developed integrated structures in conjunction with procurement, production and sales (Consolidated 4). Under conditions of recovery of Japanese economy Toyota's vehicle sales increased by 7. 5 % compared to 2004 results because of marketing efforts, cost reduction efforts and the effects of changes in exchange rates. In result of this operations, net revenues also increased and operating income decreased compared with FY 2005 results.

Ford Corporation Mass production emerged in the early 1900 s as a revolutionary production system that sought to maximize profits through the production of a standardized vehicle at a low price. In order to achieve this goal, Henry Ford designed a system that increased vehicle output from the same amount of inputs and reduced overall time of assembly. The system was based on the principle of the assembly line, which would operate on a continuous basis without disruptions from labor or from the supply of materials, parts, and components. Three innovative techniques made the principle of a moving assembly line operational. The first was the use of large-scale, highly accurate and automated machines and tools that perfected the production of interchangeable or standardized parts that could be simply attached to each other. By reducing the number of skilled workers required to produce a car, the use of specialized machines and tools diminished labor costs, potential disruptions in the assembly line, and overall time of assembly.

It also helped both to attain higher levels of precision in the production process and to lessen the need to reset machines (downtime or the time that a machine requires to function between pieces). However, one major consequence of the use of specialized machinery was a substantial increase in fixed costs, which set the first barriers to entry into the industry. Therefore, producing high volumes of parts from the same machines was central for spreading those costs and, thus, reducing the overall costs of producing a car. In this way, scale economies became essential for an auto maker to...


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