Please help answer questions #1-13 based on information from the charts. All numbers in charts are in millions. Our main company is Honda and our competitor is Toyota. Thanks

Company	Sales	Net Income	Profit Margin	Share- Holders Equity	Return On Equity	Market Capital- ization	P/E Ratio	Earnings Growth, Past 5 Yrs	Expected Earn Growth, Next 5 Yrs
Honda	123.2	7.4	6%	145	38%	60.62	10.1		14.5
Toyota

1. What would you consider to be the most important ratios or other data to use to evaluate how successful your company has been in executing its strategy? These can be financial ratios such as gross profit margin or inventory turnover, or non-financial ratios such as load factor in the airline industry (how full are the planes?); sales per square foot in retail; quality control assessments and the like.

Liquidity

	Main Company (Honda)		Competitor (Toyota)
	2016	2017	2016	2017
Working Capital	6.77	9.88	18.5	4.57
Current ratio	1.21	1.23	1.13	1.03
Current Cash Debt Coverage Ratio	.12	.07	.27	.20
A/R Turnover	6.90	(.60)	26.84
Inventory Turnover	8.12	8.56	12.76

2. Does liquidity seem appropriate for the company, or do you foresee any liquidity problems or inefficiencies?

3. Discuss accounts receivable turnover and inventory turnover compared to the past year and to the competitor. Does the companys management of receivables and inventory appear consistent with their business strategy?

4. Does the company have options (a line of credit? Assets it could readily sell?) if faced with a cash crunch?

Solvency

	Main Company (Honda)		Competitor (Toyota)
	2016	2017	2016	2017
Debt-to-asset ratio	.36	.35	.39	.39
Cash Debt Coverage Ratio	.33	.36	.28	.28
Times Interest Earned	.63	.69

5. Does the financing mix of the company appear appropriate and manageable given their industry and business strategy?

Profitability

	Main Company (Honda)		Competitor (Toyota)
	2016	2017	2016	2017
Return on Assets	3.32	5.70	4.9	3.8
Profit Margin	7.67	6	6.36	17.96
Gross Profit Margin	22.38	21.88	18.30	17.96
Asset Turnover	.75	.83	.6	.6

6. How successful is your company in using its business strategy to generate profits? Compare to competitor.

7. Explain the major reasons that profitability changed from the prior year.

8. Do you think profits will continue at the same level or rise/decline next year? Why?

Accounting Policies and Footnotes

9. Contrast the key accounting policies to those of the competitor. (For example, is one LIFO and the other FIFO? Does one use accelerated depreciation and the other straight-line?) Which accounting policies have the most significant impact on the financial statements? What choices in policies has your company made that limit the ability to directly compare the financial position or profitability of the two companies? Would you characterize the accounting policies of your company as aggressive or conservative?

10. What, if any, intangible assets exist on the companys balance sheet? How did these arise? Will they contribute to future cash flows?

11. Are there any unrecorded economic assets or liabilities related to contingencies, pensions, leases, deferred taxes, research and development or other causes? Determine if these mean that you should add any ratios to your liquidity, solvency or profitability analysis. Evaluate the potential impact on future profitability/cash flows.

Quality of Earnings

12. Identify from a review of the income statement and footnotes whether there are any unusual items in earnings (e.g., discontinued operations, restructurings, contingent liability recognition, one-time gains).

13. Given the above and the companys accounting policies, evaluate the companys quality of earnings.