Toyota's Profits Dip, Earthquake to Blame

Toyota has seen a significant drop in profits in its most recent quarterly report for FY2012 Q1 (1). This drop was expected due to the Japanese earthquake. Toyota's net income dropped from over 210,582 million yen to 2,859 yen, a 207,732 million yen decrease. Toyota is has been worldwide leader in and is often the leader in profits by net income (2). While Toyota's costs decreased in all areas since the this time last year, it's sales have dropped even more and it operated at a loss. These numbers show a significant drop in profit for Toyota, but it still had a profitable quarter despite the Japan crisis.


With Toyota in recovery, there has been some question to who will become the sales leader for 2011. General Motors has been suggested as a possibility for the number one position (3). It's earnings have increased this year from 2,110 million dollars US to 2,579 millions dollars US (4), supporting this prediction.


(1) http://www.toyota-global.com/investors/financial_result/2012/
(2) http://www.netadvantage.standardandpoors.com.proxyau.wrlc.org/NASApp/NetAdvantage/simpleSearchRun.do?ControlName=CompaniesSimpleSearch
(3) http://www.netadvantage.standardandpoors.com.proxyau.wrlc.org/NASApp/NetAdvantage/showIndustrySurvey.do?code=aup
(4) http://finance.yahoo.com/q/is?s=GM
(image) http://pressroom.toyota.com/images/toyota/photo//2008_10_09_Venza_41-prv.jpg

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Ford Up in Revenue, Down in Earnings

        Ford Motor Co. has seen a sudden 2% drop in earnings, even though its revenue has increased by 14% (1). Revenue is the value of what a firm received for goods sold, services performed, and other additional payments received.  If their revenue escalated by such a large amount than why is Ford seeing a drop in earnings?

            This question is answered by simple accounting equations such as net income or net loss. Subtracting the total cost of goods sold and operating expenses from the total revenue gathered throughout the quarter calculate these losses or gains. What Ford endured was a sudden increase in the cost for commodities, materials, warranty and freight costs (1). This cost increased by more than $1 billion in comparison to the previous quarter (1). Ford Chief Financial Officer Lewis Both said “the commodity costs caused Ford to lower its estimate for automotive operating margins to 5.7% from 6.5% for the full year” (1).

           To account for this decrease, Ford is also planning on lowering its capital spending to $4.6 billion down to $5-$5.5 billion (1). Mr. Booth said that Ford will restore the dividend, which has been gone since 2006, “as soon as our balance sheet can stand it” (1). Ford will continue to lower its company’s debt, which sits at $12.7 billion but was once at $33 billion in 2009 and is expecting industry sales to be higher than its previous quarters this year (1).

Sources

(1)http://online.wsj.com/article/SB10001424052970203687504576654740804146776.html#articleTabs%3Darticle

(Image) http://smallbiztrends.com/wp-content/uploads/2009/09/reduce-boost-graph.jpg

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"U.S. and China Play Chicken Over Accounting"

In recent weeks we have noticed that the finance relationship between two global rivals, USA and China, are sharpened. The main reason is the audit reports for Longtop Financial Technologies; the electronics firm that was kicked off the New York Stock Exchange in August. One of the worst-possible case outcomes is that China companies could be completely shut out of U.S. capital markets. Moreover, future accounting data on American multinationals operating in China could also be deemed untrustworthy (1).

"It's really a Cuban missile crisis that we are looking at right now," says Paul Gillis, an expert in trans-national accounting who spends most of his time in China. The U.S. Securities and Exchange Commission (SEC) which holds primary responsibility for enforcing the federal securities laws and regulating the securities industry along with the Justice Department are investigating possible investor fraud by Longtop. Although the SEC has asked China for vital documents, China has refused to provide for violation of the prohibition to provide requested documents directly abroad. This shows that China is not yet ready to work with actors such as the SEC or the PCAOB (Public Company Accounting The Oversight Board) (1). 

Although the U.S. regulators have displayed remarkable patience in dealing with foreign nations, especially China, there was no meaningful movement in negotiations with this country in recent years. Because China needs access to the US capital and China does not want to be a global financial outlier, the PCAOB predicts one or two joint inspections of China-based auditors this month (1). But according to the last information, the planned visit to Washington by their Chinese counterparts to continue the talks has been postponed (2).

Source

(1) http://online.barrons.com/article/SB50001424052748704429004576600932739440342.html?reflink=wsj_redirect

(2) http://online.wsj.com/article/SB10001424052970204524604576609183570744552.html?mod=WSJ_Accounting_leftHeadlines

Image http://djaloezakie.blogspot.com/2010/10/american-vs-china.html

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