Annual Report Nissan Motor Co., Ltd. Scott Nelson ACG2021 sec 080 Executive Summary • Overall Nissan Motor Co., Ltd. Has shown strong growth in the past few years. As can be seen in their annual report Nissan is producing steady growth through expansion and efficiency. This is a company that is a growing force in the market, and it is setting its business operations up in ways that will sustain that growth. Part A. Introduction • • • • • CEO - Carlos Ghosn Home Office - Tokyo, Japan End Date Last Fiscal Year – March 31, 2004 Primary Product/Service – Automobiles Main Geographic Area of Activity – Nissan has production facilities in the US, Mexico, Spain, Britain, and Japan, and sells its vehicles throughout the world. Part A. Audit Report • The company independently auditing Nissan Motor Co., Ltd. is Shin Nihon & Co., Ernst & Young International. • The auditors said that the company was run in a manner that is consistent with industry standard. They noted, as Nissan had earlier disclosed, that Nissan had changed its method of accounting for certain assets and liabilities. Part A. Stock Market Information $ At the close of trading September 30, 2005 each share of the companies stock was valued at $22.98. $ The stock had a 52 week high of $23.16/ share and a 52 week low of $19.25/share. $ On March 31, 2005 Nissan paid a $.29 dividend per share. • Based on personal experience with the Nissan product, its recent long term investments and its current stock strength, I feel that Nissan Stock is a good investment to buy or hold. Part B. Industry Situation and Company Plans Nissan is a major player in the fiercely competitive global vehicle market. In a recent letter to stockholders, Nissan President and CEO, Carlos Ghosn, said, “Nissan is steadily moving forward in the right direction.” He feels that the company will soon see the positive results of its investments in research and development. Part C. Income Statement 25 Billions US Dollars • The income statement is done in a multi step format. % With a 15% increase in net income, and increases in both other categories, Nissan shows strong growth. 20 15 10 5 0 M-04 M-03 Gross Profit Operating Income Net Income Part C. Balance Sheet The growth of Nissan Motor Co. is shown by the increases in its balance sheet amounts. The largest percent change can be seen in the liabilities categories, reflecting the companies recent wave of investment in long term assets. In Billions US Dollars Assets = Liabilities + Stock Holders Equity March 31, 2004 March 31, 2003 74.1469 55.0554 19.0943 61.2432 46.1740 15.0692 Part C. Statement of Cash Flows ¥ Cash flows from operations exceed net income by 80.2 billion Yen in 2002 and by 293.7 billion Yen in 2003. • The company is growing by investing in research and development of new models and through higher production volume capabilities that can satisfy higher demands. • Retained earnings are the companies main source of financing. Cash has increased over the past two years. Part D. Significant accounting Policies relating to: • Revenue Recognition - Freight on board shipping $ Cash - anything that can be made liquid in under 3 months • Short-term investments – cost of Securities sold calculated with moving average method • Inventories – are stated at cost using FIFO method • Property and Equipment – determined with the straight line method (maintenance and repair charged to cost account) These categories as well as retirement benefits, currency rates, retained earnings recognition, leases, subsidiary and affiliate acquisitions and changes in methods are all titles in the list of topic of the notes to the financial statements. Part E. Financial Analysis Liquidity Ratios • Working Capital - 664.5 million Yen • Current Ratio - 1.21 • Receivable Turnover - 2.79 • Average Days Sales Uncollected - 7.6 million Yen • Inventory Turnover - 9.78 • Average Days’ Inventory on Hand - 37.3 Part E. Financial Analysis Profitability Ratios %Profit Margin - 6.7% • Asset Turnover - .95 %Return on Assets – 6.4% %Return on Equity – 25% Part E. Financial Analysis Solvency Ratio %Debt to Equity - 283% • Nissan’s debt to equity ratio is very high indicating heavy creditor financing. This is due to a high number of recent long term investments which could cause problems in an economic slowdown because Nissan must continue to pay those who financed its investment loans regardless of income. Part E. Financial Analysis Market Strength Ratios • Price/Earnings per Share – 10.1 times $ This number shows us that every $10.08 in stock bought by investors generates $1 in earnings. % Dividend Yield – 1.3% $ This ratio measures one way in which investors make money on stocks. In this case each dollar invested will see an annual dividend of about $.01. 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