Application Report 1: Prepare a current FY 2013-2014 1-2 page report, single spa

Question

Application Report 1: Prepare a current FY 2013-2014 1-2 page report, single spaced, that compares the finances of Honda Motors (HMC) to the finances of General Motors (GM). Why has HMC been so successful, and why has GM been lagging ? You report should include topics we have discussed in the course, such as financial statements, financial ratios, financial management decision-making, and time value of money concepts.

You can find this information in the following sources: "Wall Street Journal," "New York Times," Yahoo Finance, Bloomberg, and company web sites. The company web site will often provide you with the latest fiscal reports in the "investor relations" section.

Structure your compositon to include a summary of the recent earnings report. Cite financial numbers, such as those that appear on the earnings statements, balance sheets, and statement of cash flow. Relay financial ratios that we discussed in the previous unit, such as profit margin, dividend yield, and debt/equity ratio . Describe the significance of these numbers- what do they indicate ? Explain your report relates to our course and to practicing managers.

Explanation / Answer

According to Bloomberg Business Week some of the major difference in the finances of General Motors (GM) and Honda Motor Company come down to the way they handle their Inventory costs and their cost of goods sold. The following information will reveal in detail these differences.   
Year over year, General Motors Company has seen net income shrink from $9.2B USD to $6.2B USD despite relatively flat revenues. A key factor has been an increase in the percentage of sales devoted to the cost of goods sold from 87.79% to 91.27%.

GM

Although debt as a percent of total capital increased at General Motors Company over the last fiscal year to 45.60%, it is still in-line with the Automobiles industry's norm. Additionally, even though there are not enough liquid assets to satisfy current obligations, Operating Profits are more than adequate to service the debt. Accounts Receivable are typical for the industry, with 22.71 days worth of sales outstanding. Last, General Motors Company is among the least efficient in its industry at managing inventories, with 39.11 days of its Cost of Goods Sold tied up in Inventories.

HMC

This company's management employs a level of debt in the capital structure that appears to be in-line with industry norms. Additionally, even though there are not enough liquid assets to satisfy current obligations, Operating Profits are more than adequate to service the debt. Accounts Receivable are typical for the industry, with 26.25 days worth of sales outstanding. Last, inventories seem to be well managed as the Inventory Processing Period is typical for the industry, at 52.46 days.

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