Ratio Analysis Research Paper Example | Topics and Well Written Essays - 750 words

Ratio Analysis - Research Paper ExampleIt is interesting to see that the organization increase its profit margin from only 1.9% in 2012 to 6% in 2013 and 8.9% in 2014. As per the Morning Star (n.d.) financial reports, the companys debt to equity balance was nearly stable over the 2012-14 period posting 0.57%, 0.60%, and 0.59% respectively in 2012, 2013, and 2014. Comparing to the years just before the global financial crisis, Toyota is yet to succeed a stronger leverage and equity position. The company had a price-earnings (P/E) ratio of 40.46% in 2012, and this high P/E ratio indicates that investors were expecting higher earnings growing in the future because the economy had begun overcoming the recessionary pressures. Toyotas P/E ratio declined to 15.30% in 2013 and to a further 10.30% in 2014 as the global economy regained its growth momentum, and hence investor did not expect a significant future growth in earnings. Similarly, the companys inventory turnover ratios for the fi scal years 2012, 2013, and 2014 were 11.20%, 11.17%, and 11.52% respectively. These ratios ar low as compared to that in 2011(12.19%) and a low inventory turnover ratio indicates poor inventory management or low sales. The firms current ratio was almost stable over the last three years (1.05%, 1.07%, and 1.07%) (Morning Star).Referring to Allen (2011), since these ratios are greater than 1, it is clear that Toyota is able to meet its current obligations, with a surplus of working capital (p.202). While evaluating Toyotas time interest earned over the 2012-14 period, it is identified that the organization is placed in a reveal position to meet its debt obligations effectively.Toyota recovered fast from the severe impacts of the global financial crisis 2008-09 and the organization gained notable increases in revenues in the last two fiscal years. To illustrate, Toyotas revenue fell to 18,583,653 million in 2012 due to global economic turmoil, and some major product recalls due to qu ality issues.