An in-depth review of the financial and non- financial performance of Honda Motors Ltd (Japan) during 2013-2017
Added on 2020-04-07
27 Pages5892 Words383 Views
Business DevelopmentProfessional Development
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Running head: MANAGERIAL ACCOUNTINGManagerial Accounting
MANAGERIAL ACCOUNTINGExecutive SummaryThis report offers an in-depth review of the overall financial and non-financial performances of Honda Motors Ltd (Japan) in context of last five consecutive years i.e. 2013-2017. Using both qualitative and quantitative assessment techniques, the report presents a balanced scorecard for the company, in view of its present challenges and future objectives. Emphasizing the proper implementation of theoretical explanations, this report argues the strategic changes that Honda Motors needs to follow in its current operations to mitigate the challenges and attain growth opportunities in the long run. Page 2
MANAGERIAL ACCOUNTINGTable of ContentsExecutive Summary...................................................................................................................2Introduction................................................................................................................................5Methodology..............................................................................................................................6Findings......................................................................................................................................7Financial Key Performance Indicators (KPIs) and Drivers for Honda Motors.....................7Profitability........................................................................................................................7Leverage.............................................................................................................................8Liquidity.............................................................................................................................9Non-Financial Key Performance Indicators (KPIs) and Drivers for Honda Motors...........10Customer Relationship Measures in Honda Motors............................................................10Employee Management Strategies in Honda Motors.......................................................11Operational Strategies by Honda Motors.........................................................................12Quality Management Measures by Honda Motors..........................................................12Supply Chain System in Honda Motors...........................................................................13Implications and Discussion of Findings: Balanced Scorecard for Honda Motors.............14Financial...........................................................................................................................14Internal Business Process.................................................................................................15Learning and Growth.......................................................................................................16Customer..........................................................................................................................17Conclusions and Recommendations........................................................................................19Conclusions..........................................................................................................................19Recommendations................................................................................................................19Implementation Plan................................................................................................................20References................................................................................................................................22Appendices...............................................................................................................................24Page 3
MANAGERIAL ACCOUNTINGIntroductionManagement accounting, in simple terms, refers to the processing of financial data to evaluate company performances, in view of its profitability strengths and challenges. Not only does an effective management accounting system help with the conduct of a risk-averse strategic framework, but also assists in the identification and mitigation of transparency threatin the overall process. Early identification of financial risks, widening possibilities to profit maximization and better utilization of company resources are a few of the key advantages of using an effective management accounting framework (Adler, 2013). Recently, the need for an effective management accounting system has evolved with immense broadness owing to its vitality in the strategic decision making process, which is followed by any company. Theorists have also argued the lack of effective management accounting system with adequate corporate governance transparency was the cause of failure of companies such as Enron, Tyco, Worldcom and HealthSouth (Agrawal and Cooper, 2017).These arguments have certainly led to greater appeal for the connection between auditing andmanagement accounting concepts to explore deeper into the requisites of an effective strategic decision-making procedures to ensure success of modern organizations (Badolato, Donelson & Ege, 2014). It is with the same notion that in this report, the financial performances of Honda Motors Ltd (Japan) will be assessed using the various concepts of management accounting along with theapplication of balanced scorecard. The objective of this particular report is therefore to assist the non-executive board members of the company through their decision-making process by serving them with the needed facts and information regarding the organization’s financial performances. Through these techniques, the report intends to emphasize the strategic and Page 4
MANAGERIAL ACCOUNTINGperformance challenges that the company currently witness, besides developing conclusions and recommendations for its future operations. MethodologyThis study uses empirical evidences available through the financial reports of Honda Motors Ltd (Japan) for the past five consecutive years i.e. 2013-2017. The intention behind collectingdata using the financial annual reports from the company was to gain an insight to the organization’s profitability and competency aspects. These were then aligned with the external environmental risk factors as well as the developmental needs of the company from abroader perspective. In the process of analyzing the performance data for the company, both financial and non-financial success drivers were taken into consideration. From a general perspective, the financial performance indicators and success drivers of any company includeprofitability, leverage, forecasting and liquidity. Profitability depends on financial drivers such as Return on Equity (RoE) along with the Net and Gross Profit of the company. Correspondingly, leverage as an indicator can be associated with the drivers of Debt to Equity (Net Worth) ratio and the Revenue to Equity (Net Worth) ratio. The liquidity of the firm is often assessed using the current ratio and working capital turnover ratio for the organization (Bausman & CPC, 2008). While the financial success drivers’ help in quantifying the strengths and challenges for the company. On the other hand, the non-financial success drivers indicated the strategic issues that the company may be witnessing in its regular performances. In order to systematically relate these success drivers with the organization’s performances, the balanced scorecard framework was used in this report. Conceptually, balanced scorecard can be described as a matrix based framework, which intends to correlate the financial metrics of a company. This includes the outcomes achieved Page 5
MANAGERIAL ACCOUNTINGthrough the use of its resources from the customers’ perceptive besides considering its internal process, learning and growth as well as the need for creating long term shareholder value (Kaplan, 2009). Since it was propounded, the framework has evolved through several phases, giving it the current shape of a sophisticated matrix structure. As can be observed from the below presented graphical illustration, the balanced scorecard model, which is to be used in this report, comprises five dimensions. This consists of the customer’s perspectives, internal business processes, learning & growth processes, financial perspective & the missionand vision strategies of the company, assuming an interrelation between these factors. The factors involved in the process are the strategic objectives of the company, strategic elements,targets and measures used by the company to assess its performances on periodic levels and strategic initiatives taken that reflects the Key Performance Indicators (KPIs) (Sainaghi, Phillips & Corti, 2013). FindingsFinancial Key Performance Indicators (KPIs) and Drivers for Honda MotorsProfitabilityThe term ‘profitability’ refers to the ability of a particular organization to yield profit to sustain over a long term period, or at least until the attainment of its objectives as decided. It can be measured using various indicators, although the most commonly used concepts includes of Return on Equity (RoE), Earnings per Share (EPS) and Net and Gross Profit (Leach, 2010). Considering the five years performance of Honda Motors, with respect to its RoE, it can be observed that the company has witnessed substantial fluctuations. To be noted in this regard, the company since 2014 has been following the IFRS standards, changing fromUS GAAP. This was due to the fact that it caused substantial reshuffle within the reporting standards as well as in the way equity was distributed to its shareholders. According to the Page 6
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