Project Report: Financial Analysis of Tesla and Toyota - FINM1416

This project report provides a comprehensive financial analysis comparing Tesla and Toyota, focusing on Task 2 of the FINM1416 Introduction to Financial Management assignment. The report begins with an assessment of the companies' strengths and weaknesses based on financial ratios, revealing Toyota's stronger current ratio and Tesla's efficient capital structure. The DuPont analysis is then employed to evaluate profitability, efficiency, and leverage, highlighting Toyota's superior profit margin and overall financial health. The report delves into the relevance of these findings, concluding that Toyota presents a better financial position for potential car buyers. Furthermore, non-financial factors, such as the availability of a chargeable hybrid car and positive customer feedback, are considered. The analysis incorporates key financial metrics like profit margin and financial health, ultimately supporting the conclusion that Toyota is the more favorable purchasing option. The report references relevant sources to support its findings.

Running Head: Financial and Management Accounting
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Project Report: Financial and Management Accounting

Financial and Management Accounting 2
Contents
Task 2: Financial analysis.................................................................................................3
Question 1: Strength and weakness..............................................................................3
Question 2: DuPont Discussion....................................................................................3
Question 3: Explain relevance......................................................................................4
Question 4: Non financial factors.................................................................................5
References.........................................................................................................................6

Financial and Management Accounting 3
Task 2: Financial analysis:
Question 1: Strength and weakness:
Financial ratios of Tesla and Toyota has been calculated and it has been found that
Current ratio of Toyota is quite strong instead of Tesla because of the higher current
liabilities against the current assets of the business. It is strength for Toyota to maintain better
current assets as it helps the business to pay all the short term debt of the business and reduce
liquidity risk in the business. Long term solvency ratio further defines that the capital
structure has been maintained by the Tesla at efficient level. It is important for the companies
to manage an optimal capital structure to maintain the solvency risk level in the business.
Here, it is a strength of Tesla to maintain the liabilities on the basis of the available equity
and assets of the business (Chandra, 2011).
Lastly, the DuPont analysis explains that Toyota’s performance is better in order to
manage the profitability position of the business along with the better efficiency level in the
market. Here, the main weakness of Tesla is not managing the profitability at better level. this
has taken place because of the higher operating expenses and cost of goods sold of the
business. It explains that overall there are different strength and weakness of both the
companies.
Question 2: DuPont Discussion:
Analysis of each of the DuPont analysis is as follows:
Profit margin:
Profit margin is a profitability ratio which defines about total profit earned by an
organization against the total revenue in a financial year. Here, profit margin of Tesla and
Toyota is -4.95% and 9.12%. It explains that the financial health of Tesla is not at all good
because of the losses faced by the company.
Total assets turnover:
Total assets turnover ratio is an efficiency ratio which defines about total sales made
against the total assets (Higgins, 2012). Here, total assets turnover of Tesla and Toyota is
0.72 and 0.56. It explains that the efficiency level of Tesla is better as the company is able to
make the full utilization of available resources.

Financial and Management Accounting 4
Equity multiplier:
Equity multiplier is a leverage ratio which measures the total resources of an
organization that is financed through equity. Here, equity multiplier of Tesla and Toyota is -
4.71 and 2.52. It explains that the assets level of Tesla is quite higher than the total equity of
the business.
Return on assets:
Return on assets is a profitability ratio measures total profit earned by the business
against the available resources. Here, return on assets of Tesla and Toyota is -3.57% and
5.10%. It explains that the financial health of Toyota is quite good because of the better profit
earned by the business.
Return on equity:
Return on equity is a profitability ratio measures total profit earned by the business
against the available equity (Madhura, 2015). Here, return on equity of Tesla and Toyota is -
16.83% and 12.89%. It explains that the financial health of Toyota is quite good because of
the better profit earned by the business.
Question 3: Explain relevance:
On the basis of the calculations done over Tesla and Toyota’s financial health, it has
been found that both the companies are performing well in the market. Still, the overall
financial health of Toyota is good because of the proper management of the operating
expenses and other expenses of the business. The study explains that Toyota has managed the
profitability, solvency and leverage position better than the Tesla.
It has also been studied that the Net profit margin ratio of Tesla and Toyota is -4.95%
and 9.12%. It explains that profit position of Tesla is negative which defines that company is
facing higher losses in the market. Further, in case of Toyota, it has been found that the profit
generation capability of Toyota is quite better (Haney, 2009).
The overall analysis over Toyota and Tesla, it has been concluded that Toyota is
better option to buy the car because of the better market and financial position of the
company. The better financial health of the company would help the customers of the
company to be more satisfied.

Financial and Management Accounting 5
Question 4: Non financial factors:
The main non financial information which has affected the purchasing decision of the
buyer is as follows:
A chargeable hybrid car:
Toyota is offering a chargeable hybrid car which would save the environment. It
focuses over consumption of less fuel and save the natural resources on the earth. because of
this reason, Toyota car has been given more preference than the Tesla cars (Toyota, 2019).
Market position and customer’s feedback:
Further, the other reason to choose Toyota car above Tesla car is market position of
the company and the better and positive response. Customers of Toyota are quite happier and
have given positive response to buy the car of Toyota (Toyota, 2019).
The main financial information which has affected the purchasing decision of the
buyer is as follows:
Profit margin:
Profit margin is a profitability ratio which defines about total profit earned by an
organization against the total revenue in a financial year. Net profit margin ratio of Toyota is
9.12%. It explains that profit position of Toyota is quote strong in the market. It has been
found that the profit generation capability of Toyota is quite better.
Financial health:
The financial health of company has been studied on the basis of income statement
and balance sheet of the business and it has been found that the company has managed the
better assets, liability, equity, expenses position as well as revenue level in the market to
manage the financial position and performance in the market (Brigham & Houston, 2012).
On the basis of financial and non financial factors, it has been concluded that Toyota
is better option to purchase the car.

Financial and Management Accounting 6
References:
Toyota. (2019). Go to Hybrid. [online]. Retrieved from:
https://www.toyota.co.uk/hybrid/hybrid-faq/charging
Brigham, E. F., & Houston, J. F. (2012). Fundamentals of financial management. Cengage
Learning.
Chandra, P. (2011). Financial management. Tata McGraw-Hill Education.
Haney, L. H. (2009). Business Organization and Combination. BiblioBazaar, LLC.
Higgins, R. C. (2012). Analysis for financial management. McGraw-Hill/Irwin.
Madhura, L. (2015). Financial management. Tata McGraw-Hill Education.