Honda Motor Company is a Japanese company with sales equivalent to more than $100 billion.

The company’s income statement and balance sheet for the year ended March 31, 2011, are shown in Exhibit 17-10 and 17-11. Monetary amounts are in Japanese yen (¥).

1. Prepare a common-size income statement, that is, one showing component percentages.

2. Compute the following ratios:

a. Current ratio

b. Total debt to equity

c. Gross profit rate

d. Return on stockholders’ equity (March 31, 2010 stockholders’ equity was ¥4,456 billion)

e. P/E ratio (the market price on March 31, 2011, was approximately ¥2,207 per share)

f. Dividend-payout ratio

3. What additional information would help you interpret the percentages and ratios you calculated?

Transcribed Image Text:

Net sales Cost of sales Gross profit Sllng and administrative Research and development Operating income Other income (expense): *8,937 6,497 2,440 1,383 487 570 Interest income Interest expense Equity in income of affiliates Other, net 23 Income before income taxes Income tax expense Net income Amounts per share 140 46 770 207 563 Net income (EPS) Cash dividends 296 54 Exhibit 17-10 Assets Current Assets Cash and cash equivalents Receivables 1,279 1,919 900 592 4,69D 3,297 640 2,.944 ¥11,571 Other Total current assets Property, plant, and equipment, net Investments Other assets Total assets Liabilities and Stockholders' Equity Current liabilities Short-term debt Payables Accrued expenses Current portion of long-term debt Other Total current liabilities 1,095 525 962 269 3,568 Long-term liabilities Long-term debt Other Total long-term liabilities 2,043 1,377 3,420 Stockholders' equity Common Stock Additional paid-in capital Retained eamings Other Total honda motor company shareholders' equity Noncontrolling interests Total stockholders' equity 86 173 5,667 476) 4,450 133 4,583 ¥11,571 Total liabilities and stockholders' equity Exhibit 17-11