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Title Capital structure analysis of Toyota Motor Corporation
Cheng, Hong Ting (鄭匡廷); Cheong, Ka Hong (張嘉洪); Fok, Ching Ho

Author(s) (霍政豪); Li, Yuen Tung (李婉彤); Sze, Wing Yiu (施泳耀); Wong,
Wun Ching (黃渙靖)
Cheng, H. T., Cheong, K. H., Fok, C. H., Li, Y. T., Sze, W. Y., & Wong, W.
C. (2014). Capital structure analysis of Toyota Motor Corporation
Citation
(Outstanding Academic Papers by Students (OAPS)). Retrieved from
City University of Hong Kong, CityU Institutional Repository.
Issue Date 2014
URL http://hdl.handle.net/2031/7487
This work is protected by copyright. Reproduction or distribution of

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CAPITAL STRUCTURE ANALYSIS OF
TOYOTA MOTOR CORPORATION
by
Hong Ting CHENG

Ka Hong CHEONG
Ching Ho FOK
Yuen Tung LI
Wing Yiu SZE
Wun Ching WONG
Department of Economics and Finance

City University of Hong Kong
2014
EF4313 Corporate Finance
Final Project
Toyota Motor Corporation NYSE:TM
Executive Summary
Toyota Motor Corporation (TMC) is a leading multinational automotive company headquartered in Tokyo, Japan. It is
having a high brand recognition and market position. However, it also faces some risks such as the product recall in 2010
which led to a decline in consumer confidence. Besides, Toyota’s operation is subject to factors like currency, interest rate
fluctuations, economic recessions and prices of raw materials, etc.
Despite the risks it faces, based on capital structure analysis of Toyota, its performance remained stable with steady
growth. The stable achievement is reflected by indicators such as solvency ratios and profitability ratios.
For Toyota, though its debt ratio is high relative to its competitors like Honda, it still maintains a good financial position
to repay its long term debt as shown in the high interest coverage ratio and stable long term debt to total assets ratio.
Moreover, Toyota experienced a steady growth in net income since 2009 and its increased debt financing also lead to its
improvement in ROA and ROE which shows its ascending potential profit.
To conclude, even with increased debt financing, Toyota is not over-leveraged. It still possesses a high ability to meet its
long-term obligations . Also, Toyota’s product market strategy is to expand overseas market and meet the changing
market requirements, which are consistent with its capital structure changes, an increased leverage.
In the future, Toyota can increase its leverage to finance its heavy R&D. With its great ability to meets its obligations,
high liquidity and credit ratings, it is believed that Toyota’s sales and profit will surge further in coming years.
1.Company Background
1.1 Industry overview
Toyota Motor Corporation (TMC) has its main competitions in automotive industry. It had been a hard time for the
participants in this industry in the past few years. There is growing concern towards energy saving and the fuel price has
increased tremendously. So, some of the consumers have switched their demand for more fuel-efficient and small-size car.
Final Project
From KPMG’s Global Auto Executive Survey 20131, it is founded that 92% of the respondents regard fuel efficiency as
the most important automobile purchase decision criteria.(Fig.1)
As a result, some manufacturers began to focus on fuel-efficient cars. Though there was a financial crisis in 2007-09
that hurt the industry (Fig.2), the economic growth in the BRIC countries(India, China, Brazil, Russia) helped accelerate
the recovery. Moreover, some production facilities were moved to those countries where they could open new market and
enjoy low production cost. For the next few years, the emerging countries grow further, which helps recover the motor
vehicles demand in Western countries. Total industry turnover is expected to grow at 2.5% annually until 20182.
1.2 Business summary
TMC was founded in 1937 and is now the leading automotive company in the world with total net income of ¥962.1
bil. Its primary markets are in Japan, Asia, Europe and North America with more than 333,498 employees. The businesses
are mainly motor vehicle production and sales. The reasons of its leading position in the industry are strong market
position, extensive R&D, distribution networks,etc. The SWOT analysis of Toyota is as follow:
Strength Weakness
● High Brand Recognition and market position ● Frequent product defects (recalls affect image )
● Strong R&D
● Extensive production & distribution network
● Low price
Opportunities Threats
● Growing automotive industry ● Strong competition in automotive industry
● Increased new model’s demand (electric car) ● Fluctuation in exchange rate(exports declines)
● Co-operative partnership
1.3 Toyota’s marketing strategy
Cost leadership strategy
The Toyota Production System has two main concepts: Jidoka and Just-in-Time.
Jidoka is also known as “automation with human touch”. It means a machine safely stops when a problem is detected,
preventing produce the defective product and allow human correction which lowers production cost.
1 KPMG (2013). KPMG’s Global Auto Executive Suvery2013. Retrieved April 3, 2014 from
http://www.kpmg.com/KZ/ru/IssuesAndInsights/ArticlesAndPublications/Documents/KPMGs-Global-Automotive-Executive-Survey-2013.pdf
1
2
IBISWorld Industry Market Research. (2013). Global Car & Automobile Manufacturing May 15, 2013. New York, NY: Alacra Store.
Final Project
Just-in-Time (JIT) system is also known as the “lean manufacturing system”. All assembly lines will stock with certain
number of parts and manufacture only what is needed by the next process in a continuous flow. This minimizes the
inventory and reduces the inventory cost.
Differentiation strategy
Toyota has been differentiating itself with quality and technology. This created a strong brand image of high quality
and long-lasting cars for Toyota. Launching the hybrid car and operating Lexus and Toyota Corolla enlarges its
customer’s base with its products differentiated on different income levels.
1.4 Toyota’s competitors in Motor industry
General Motors is an American multinational corporation founded in 1908 with 17.4% market share and 649 thousands
sales in 2013.Chevrolet AveoDaewoo Lacetti and Holden Commodore are its major products.
Honda is a Japanese public multinational corporation founded in 1946 with 8.7% market share and 325 thousands sales in
2013. Honda Civic, Honda Accord and Honda CR-V are its major products.
1.5 Toyota’s historical performance
1937 Founded by Kiichiro Toyoda
1997 First all-electric vehicle lease available
2003 First massive production of hybrid car
2003 Toyota makes 6.78 million vehicles and become world No.2 in annual sales
2006 Toyota's group global sales of 8.808 million vehicles exceeds GM's by 128,000
2010 Recall 12 million vehicles of unintended acceleration
2012 Launched the "LS" lineup with Advanced Pre-collision System
2013 Become the world’s best-selling carmaker with 9.98 million vehicles sold
2014 6.39 million cars recalled for defective air bags.
Toyota’s sales it increased from 2004 to 2008 , then dropped greatly until 2011 caused by the financial crisis. Since
then, the sales volume has been increasing since 2012 and maintained a level above 1500USD bil.(Fig.3)
2. Capital Structure Analysis
2.1 Capital structure analysis – Liquidity

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2.1.1 Current Ratio and Net working Capital
Toyota’s Performance
In 2013, the current ratio of Toyota is 1.07 and it is the lowest current ratio in recent 5 years. In 2010, the current ratio
of Toyota is 1.22; in between 2010 to 2013, the trend of this ratio is continuously decreasing. (Fig.4)
Comparison of current ratio and net working capital
The current ratio of Honda and General Motors in fiscal 2013 is 1.3, which are 21.5% higher than Toyota. Toyota is the
only company which had decreased its current ratio in recent five years.
This effect happened as they kept on increasing short-term debt and eventually higher the current liabilities of the
company. The net working capital of Toyota is the lowest when it compare with Honda and General Motors. (Fig.5). It
shows that the liquidity of Toyota is negatively affected by the aggressive debt financing policy of the company.
2.2 Capital structure analysis - Solvency
We are going to use the 1.) Total debt to equity ratio, 2.) Long-term debt to equity ratio, 3.) Interest coverage and 4.)
Long-term debt to total assets ratio to analyze the solvency of Toyota in the previous five year as well as compare with its
major competitors who are General Motors and Honda.
2.2.1 Total debt to equity ratio
Toyota’s performance
The total debt to equity ratio of Toyota in 2013 is around 1.2. In between 2009 to 2012, the ratio is decreasing gently,
but start from 2012; we can see this ratio rise again. (Fig.6)
Comparison of Total debt to equity ratio
The total debt to equity ratio of automobile industry remains at 1 in recent five years and Honda’s total debt to equity
ratio is stick to the industry level (Fig.6). When we compare Toyota’s ratio with Honda and the industry level, it is
relatively high and it means that Toyota’s total debt is much higher than its peer groups.
2.2.2 Long term debt to equity ratio
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There is a significant drop of long term debt to equity ratio in between 2010 and 2012 (Fig.7). This is due to the car
recall issue of Toyota happened in 2010. It makes Toyota to be more conservative in debt financing. But start from 2012,
the long term debt to equity start to rise and we can foresee that Toyota will have more debt in future.
Comparison of Long term debt to equity ratio
Toyota’s long term debt to equity ratio is decreasing between 2009 and 2012. Despite the trend, Toyota remains the
position of highest long term debt to equity ratio among its competitors (Fig.8). The most recent ratio of Toyota is 0.61.
When we compare the amount of long term debt Toyota and it competitors had borrowed. We found that Toyota had
borrowed more than USD600 mil in 2013 and it is 3 times higher than Honda and General Motors (Fig.9). It shows that
the capital structure of Toyota is quite relying on the long term debt financing.
2.2.3 Interest coverage ratio
Toyota’s Performance
Interest coverage ratio is calculated as EBIT/ Total interest payment. The lower the ratio, the more the company is
burdened by the interest expense. When the interest coverage ratio is low, company is not generating sufficient revenues
to satisfy the interest expense and easily fall into bankruptcy. For Toyota, its interest coverage in the most recent fiscal
year is 72.2%, which are high among industry(Fig.10) .The trend of the interest coverage ratio is keep on increasing and
there was a sharply increment in 2012-2013 that rose from 28.51% % to 72.2%. Therefore, we can say that Toyota is
improving the interest coverage and keeping it as high as possible.
Comparison of the interest coverage ratio
From the graph below (Fig.11), we can see the interest coverage ratio of the three companies fluctuated a lot in the past
five year and actually most of the firms want to keep their ratio high among the competitors. In the year 2013, Toyota
obtained the highest interest coverage ratio between its major competitors, Honda and General Motors. Again, it shows
that Toyota has a high level of interest coverage and proves the financial fitness of Toyota is in a good condition.
2.2.4 Long-term debt to total assets ratio
It is calculate by the long-term debt divided by the total assets. The ratio of Toyota is the most recent fiscal year is 0.2,
which means that every $1 of Toyota’s assets contain $ 0.2 of their long-term debt. From the graph below (Fig.12), the
Final Project
trend of the ratio is very stable that around 0.2 in the previous five years and it slightly decreases from 0.22 to 0.2 in the
past five years.
Comparison of long-term debt to total assets ratio
The trend of the graph (Fig.13) below shows that the long-term debt to total assets ratio is quite stable over time. There is
an interesting point that Toyota and Honda’s ratio are very similar, which remain at around 0.2 consistently. This indicates
that Toyota and Honda both have $0.2 as a long-term debt for every dollar is has in assets. From this phenomenon, we can
deduce that even though Toyota is aggressively borrowing debt and increasing leverage, it does not mean Toyota is over-
leveraged. Contradictorily, this graph shows that Toyota’s leverage is stable and reasonable.
2.3 Capital structure analysis- Profitability
2.3.1 Return on equity (ROE)
The return on equity is calculated by the net income divided by the shareholders equity. The ROE of Toyota in the most
recent fiscal year is 14.45%. According to the graph below (Fig.14) the trend of the ROE is improving form the last five
years, from -4% to 14,45% and there was a dramatically increase start in the year 2012, which rose from 2.72% to
14.45%. This was also the year that Toyota started to borrow a large amount of debt.
Comparison of the return of equity
The return on equity of Toyota is slightly lower when compare to its major competitors Yet, Fig.15 shows that the scale
of the ROE growth and net income growth is in the same proportion and it proves that the drastically increment in the year
2012 to 2013 is because of the aggressively borrowing of debt and finance its investments.
2.3.2 Return on assets (ROA)
Toyota performance
The return on assets is calculated by the net income divided by the total assets. The latest ROA is 5.06%. From the
graph below (Fig.16), the ratio has a rising trend in the last five years, rose from -1.42% to 5.06%. Same as the ROE ratio,
there was also a significant increasing on ROA started in 2012 that growth form 0.94% to 5.06%. It is obvious that Toyota
is trying to improve both of their return on assets and return on equity.
Comparison of the ROA

Final Project
The return on assets of Toyota is low when comparing to the competitors and the Fig.14, 16 shows the pattern of ROA
and ROE are very similar. The scale of ROA growth and net income growth are also in right proportion. Therefore, we
can deduce that sharply rise of ROA in 2012 can also be explained by the aggressively borrowing of debt and it can prove
that Toyota achieves a great success in improving their net income by using debt to finance.
2.3 Capital structure strategy
Toyota strives to maintain its key ideas of financial strategy, growth, efficiency and stability. As the value of Toyota is
correlated with its capital structure, it is important to know if it has an efficient capital structure currently.
Capital structure reflects Toyota how to finance its overall operation and growth by utilizing different sources of funds,
and will influences its value. An efficient capital structure strikes a balance between debt and equity capital and maximize
firm’s capital. Strong and balanced capital position also help Toyota raise funds at lower cost.
As discussed, the long term debt to equity ratio of Toyota was 0.6 in 2013. It attained its highest level in 2009 to 2013,
and faced a declining trend in recent years. To determine Toyota is over-leveraged or not, we compare D/E ratio to the
competitors in which Toyota is relative higher. The ratio is lower when compared to the Auto & Truck Manufacturers
Industries(1.92). Therefore, Toyota is having an average D/E ratio and low bankruptcy risk under the industry average.
We think Toyota should be able to maintain a stable leverage position if they can plan and budget well for repaying
debt. In order to avoid facing interest expenses burden and reduced earnings, Toyota adopts a more conservative policy, as
well as maintaining an acceptable leverage level and risk level compared to industry level.
Toyota stated that it keeps on improving the ability to invest capital efficiently and is aiming to obtain the same results
with less outlay. Further improvement on their earnings structure through efficient investment that emphasizes the area in
which they want to advance, including hybrids, other eco-cars, and emerging markets can also help them to maintain an
efficient capital structure. Consequently, it is conclued that the current capital structure of Toyota is efficient.
As mentioned before, the long-term debt to equity ratio of Toyota stayed at the level of 0.6 during 2009 to 2013.
Although both long-term debt and total shareholders' debt were increasing during these five years, long-term debt had
decreased from 7015409 million yen to 6042277 million yen during 2010 to 2012, and its overall growth is slightly slower
than the equity's. Thus, this leads to a declining debt-equity ratio.

Final Project
Toyota is striving to achieve sustainable growth and stable business foundation, which can maintain their
competitiveness. If there is downturn in financial markets, Toyota's ability to raise capital will be adversely affected. To
maintain stable capital structure, it invests actively to meet the structural shifts in demand and ensures long-term
sustainable growth on various aspects.
Besides, it secures stable shareholders' equity to overcome the difficulties that may encounter in the future due to steep
increases in raw materials prices or volatility in foreign exchange rates. And use retained earnings to instantly
commercialize environment- and safety-related next-generation technologies, with emphasis on customer safety and peace
of mind. Under these policies, we can see that Toyota actually pays the effort on maintaining a stable capital structure.
Therefore, it actually has a stable debt-equity ratio currently. As Toyota is considered as market leader in the automotive
industry now, a stable debt-equity ratio would be maintained if it keeps on adopting a safe capital policy.
2.4 Credit rating
Credit rating reflects the ability of a company to pay its debt. Toyota Motor Corporation has received very high and
even the highest long term credit rating for a few years from Moody’s. Although Toyota has been continuously
downgraded by Moody’s to Aaa3 in 2011 from 2009, it maintains its stable rating at recent years. If we compare the credit
rating of Toyota to those of its competitors like Honda Motor, Nissan Motor and Ford Motor, it can be seen that Toyota’s
financial situation is very healthy. Honda is about a level lower, Nissan is even about two to three levels lower than Honda
and Ford has a poorer rating. The long term credit rating are similar to short term comparison as well.
Reasons for high credit rating
High liquidity profile is the key reason for having a high rating. Toyota has a lot of ready-to-sell investment securities
that totaled JPY3.27 trillion at FTE3/2013. Moreover, Toyota has effectively recovered from production disruptions
stemming from the earthquake and tsunami in 2011, and the huge recalls that damaged its standing in the US market in
2009. Even more, Toyota can access to a considerable amount of funds from its core banks which shows a close
relationship. At last, it has a well performance --the EBITA margin is 5.3% up in FYE3/2013 and positive margin next
year is expected to be 6% benefited by the weaker Yen and lower cost.

Final Project
Undoubtedly, Toyota has a high ability to pay its debt in short and long term. Even on 9th April this year, Toyota
announced a voluntary recall involving about 6.4 million of cars, there is no effect to its credit rating by Moody’s because
of Toyota’s strong liquidity profile and high earnings. It is more likely a reputation risk rather than a financial risk.
Also, referring to the largest recall in Oct2012, there was a surplus of the provision amount which is JPY 491.5 billion
( amount spent was just JPY 344.2 billion including all fees incurred).
2.4 Product-market strategy
Toyota’s 2012 annual report, they adopted new strategy aiming at making ever better cars. They would conduct
business that is strongly rooted in the countries in which they operate by adapting to local needs and pushing for 100%
localization. They have been striving to achieve the target which is to generate 50% of sales in emerging markets. They
planned to introduce 8 new types of subcompact cars by 2015, designed specifically for emerging markets. The Etios and
its variants are examples that have been introduced to specifically to some emerging markets like Brazil and India.
In order to boost sales of eco cars, Toyota jointly developed hybrid cars with two Chinese auto giants First Automobile
Works Corp. and Guangzhou Automobile Group Co. Apart from localizing the sales, Toyota aimed to keep production in
Japan to around 3 mil. Units annually and expand overseas so that the account for more than 60% of output in FYE3/2014
and more after that.
The focus on localizing production will mitigate the impact of foreign currency volatility, especially the USD/JPY rate
because North American market typically accounts for more than 25% of annual consolidated units sales and export
markets take up more than 50% of its output in Japan
Just in March this year, Toyota Financial Services (TFS) which is a subsidiary wholly owned by Toyota Motor
Corporation issued the industry’s first Greenbond in the amount of $1.75 billion which was originally only 1.25 billion
but upsized due to huge investors’ demand. One of the purposes of the issue is to finance vehicles that are powered by
hybrid or alternative fuel. The Etios that was just mentioned was considered to go hybrid at the end of last year, maybe it
is thus a part of the finance target. Citi Bank, as an underwriter, has successfully closed the inaugural asset-backed green
bond issuance. This transaction shows Citi’s commitment to the tenets of the Green Bond Principles, allows Toyota to
meet the demand of both consumers and investors for clean transportation and green investment opportunities
Final Project
3. Conclusions
Efficient capital structure strategy
To conclude what we have analyzed in this report, we found that the capital structure of Toyota is relying on debt
financing in certain extent. From the solvency analysis, Toyota borrows lots of money to finance its investment, and its
debt to equity ratio is also relatively high when we compare it with the industry. From the profitability analysis, it shows
that debt financing is one of the main reasons to raise the net income for the company and high interest expense is not a
burden for this company. Therefore, we can conclude that the aggressive financial policy adopted by Toyota is very
efficient. And we can foresee Toyota will keep increasing its leverage in future until it reaches certain maximum points.
Concerns and risks
Toyota is one of the most successful companies in automotive industry. It enjoys high sales volume, high profit and high
credit rating. However, it also has lots of concerns and risks need to cope with. On the one hand, Toyota need to improve
its quality control to prevent car recall issue happened. This will destroy the goodwill of the company and it is extremely
difficult to retrieve reputation and customer confidence. On the other hand, Toyota is keen on develop overseas markets; it
needs to aware of the exchange rates fluctuation, since the profit of the company will be easily affected by this factor.
Recommendations
20 years ago, electric car is only a concept and nobody believes that it can be implemented. Now, hybrid car is
substituting the diesel car, and everyone is promoting the concept environmentally friendly. Toyota should keep
developing eco car and increase the research and development expense to prepare for the transformation of automobile.
From the example of Toyota, we can see that debt financing is an efficient method to raise funds, and Toyota should keep
this policy for the company development in future.

Final Project
Appendix
Fig.1
Fig.2
Country Cars Commercial vehicles Total % change
Total 47,772,598 14,019,270 61,791,868 -12.4%
Argentina 380,067 132,857 512,924 -14.1%
Australia 188,158 39,125 227,283 -31.0%
Austria 56,620 15,714 72,334 -52.2%

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Belgium 524,595 12,510 537,354 -25.8%
Brazil 2,575,418 607,505 3,182,923 -1.0%
Canada 822,267 668,215 1,490,482 -28.4%
China 10,383,831 3,407,163 13,790,994 48.3%
Czech Rep. 976,435 6,810 983,243 3.9%
Egypt 60,249 32,090 92,339 -23.0%
Finland 10,907 64 10,971 -38.7%
France 1,819,497 228,196 2,047,693 -20.3%
Germany 4,964,523 245,334 5,209,857 -13.8%
Hungary 212,773 1,770 214,543 -38.0%
India 2,175,220 466,330 2,641,550 13.3%
Indonesia 352,172 112,644 464,816 -22.6%
Iran 1,170,503 223,572 1,394,075 9.4%
Italy 661,100 182,139 843,239 -17.6%
Japan 6,862,161 1,071,896 7,934,057 -31.5%
Malaysia 447,002 42,267 489,269 -7.8%
Mexico 942,876 618,176 1,561,052 -28.0%
Netherlands 50,620 26,131 76,751 -42.1%
Poland 818,800 60,198 878,998 -7.7%
Portugal 101,680 24,335 126,015 -28.1%

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Romania 279,320 17,178 296,498 20.9%
Russia 599,265 125,747 725,012 -59.5%
Serbia 16,337 401 16,738 43.9%
Slovakia 461,340 0 461,340 -19.9%
Slovenia 202,570 10,179 212,749 7.5%
South Africa 222,981 150,942 373,923 -33.6%
South Korea 3,158,417 354,509 3,512,926 -8.2%
Spain 1,812,688 357,390 2,170,078 -14.6%
Sweden 128,738 27,698 156,436 -49.3%
Taiwan 183,986 42,370 226,356 23.7%
Thailand 313,442 685,936 999,378 -28.3%
Turkey 510,931 358,674 869,605 -24.2%
Ukraine 65,646 3,649 69,295 -83.6%
UK 999,460 90,679 1,090,139 -33.9%
USA 2,195,588 3,535,809 5,731,397 -34.1%
Uzbekistan 110,200 7,700 117,900 -43.3%
Others 302,354 107,079 409,433 -23%
*World Motor Vehicle Production

*Source: OICA, 2015 © International Organization of Motor Vehicle Manufacturers
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Fig.3
Fig.4
1.6
Current Ratio
1.4
1.2
1
0.8
0.6
0.4
0.2
0
2009 2010 2011 2012 2013
Toyota Honda General Motors
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Fig.5
Net Working Capital
30
20
10
0
Toyota Honda General Motos
Net Working Capital
Fig.6
Total debt to equity ratio
1.4
1.2
1
0.8
0.6
0.4
0.2
0
2009 2010 2011 2012 2013
Toyota Honda Industry Level
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Fig.7
Long term debt to Equity ratio
0.7
0.68
0.66
0.64
0.62
0.6
0.58
0.56
0.54
0.52
0.5
2009 2010 2011 2012 2013 2014
Fig.8
Long term debt‐to‐equity ratio
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
Dec‐09 2010 2011 2012 2013
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Fig.9
Long Term Debt
8000000
7000000
6000000
5000000
4000000
3000000
2000000
1000000
0
2009 2010 2011 2012 2013
Fig.10
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Fig. 11
Fig.12
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Fig.13
Fig. 14
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Fig. 15
Net Income Growth

$000’s
15000000
10000000
5000000
0
2010
2011
2012
2013
Fig. 16
Return on assets ratio (ROA)
6
0
2009 2010 2011 2012 2013
‐1
‐2

Final Project
References
 KPMG (2013). KPMG’s Global Auto Executive Suvery2013.
 http://www.kpmg.com/KZ/ru/IssuesAndInsights/ArticlesAndPublications/Documents/KPMGs-Global-
Automotive-Executive-Survey-2013.pdf
 IBISWorld Industry Market Research. (2013). Global Car & Automobile Manufacturing May 15, 2013.
New York, NY: Alacra Store.
 Toyota HK, http://www.toyota.com.hk/
 Toyota Global Site 2013 Annual Report, http://www.toyota-

global.com/investors/ir_library/annual/pdf/2013/
 Trade Station Fundamental, http://www.tradestationfundamental.com/HighLights.asp?Ticker=CSCO
 Morning Star, http://www.morningstar.com/invest/stocks/86088-tm-toyota-motor-corp-adr.html
 Stock Analysis on net, http://www.stock-analysis-on.net/NYSE/Company/Toyota-Motor-Corp

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Title Capital structure analysis of Toyota Motor Corporation

Cheng, Hong Ting (鄭匡廷); Cheong, Ka Hong (張嘉洪); Fok, Ching Ho

Issue Date 2014

This work is protected by copyright. Reproduction or distribution of

Hong Ting CHENG

Department of Economics and Finance

fluctuations, economic recessions and prices of raw materials, etc.

1.1 Industry overview

the most important automobile purchase decision criteria.(Fig.1)

1.2 Business summary

Cost leadership strategy

inventory and reduces the inventory cost.

customer’s base with its products differentiated on different income levels.

1.4 Toyota’s competitors in Motor industry

1.5 Toyota’s historical performance

1937 Founded by Kiichiro Toyoda

1997 First all-electric vehicle lease available

2003 First massive production of hybrid car

2010 Recall 12 million vehicles of unintended acceleration

2012 Launched the "LS" lineup with Advanced Pre-collision System

2014 6.39 million cars recalled for defective air bags.

2. Capital Structure Analysis

2.1 Capital structure analysis – Liquidity

2.1.1 Current Ratio and Net working Capital

Comparison of current ratio and net working capital

2.2 Capital structure analysis - Solvency

major competitors who are General Motors and Honda.

2.2.1 Total debt to equity ratio

Comparison of Total debt to equity ratio

2.2.2 Long term debt to equity ratio

Comparison of Long term debt to equity ratio

2.2.3 Interest coverage ratio

improving the interest coverage and keeping it as high as possible.

Comparison of the interest coverage ratio

2.2.4 Long-term debt to total assets ratio

past five years.

Comparison of long-term debt to total assets ratio

2.3 Capital structure analysis- Profitability

2.3.1 Return on equity (ROE)

Comparison of the return of equity

2.3.2 Return on assets (ROA)

is trying to improve both of their return on assets and return on equity.

Comparison of the ROA

2.3 Capital structure strategy

than the equity's. Thus, this leads to a declining debt-equity ratio.

sustainable growth on various aspects.

2.4 Credit rating

Reasons for high credit rating

year is expected to be 6% benefited by the weaker Yen and lower cost.

2.4 Product-market strategy

and more after that.

markets take up more than 50% of its output in Japan

Concerns and risks

this policy for the company development in future.

Country Cars Commercial vehicles Total % change

Total 47,772,598 14,019,270 61,791,868 -12.4%

Argentina 380,067 132,857 512,924 -14.1%