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TOYOTA MOTOR CORPORATION INTRODUCTION Toyota Motor Corporation is the worlds third largest automaker It was established in Japan on 28 August 1937 Apart from its 12 plants in Japan Toyota has 54 manufacturing companies in 27 countries employs 246700 people and markets vehicles in more than 160 countries Its capital as at March 2002 was 397 billion yen Toyota is exposed to the fluctuation in foreign currency exchange as it operates mainly in America Continental Europe and Britain It is therefore affected by the fluctuation in the value of the US dollar the Euro and to a lesser extent the British pound Toyotas consolidated financial statements which are presented in the Japanese yen are affected by the foreign exchange fluctuation as all the amounts in the various countries currencies have to be translated into yen Toyotas primary markets based on unit sales for vehicles for financial year ended March 31 2002 were Japan 40 North America 32 and Europe 13 Toyota is listed on the London New York and Tokyo stock exchanges In the normal course of doing business Toyota employs derivatives financial instruments including forward contracts and foreign currency options to manage its exposure to fluctuation in foreign currency exchange rates Toyota does not use derivatives for speculation and trading httpwwwtoyotacojpenirhtml accessed on 14th November 2002 The profitability of Toyotas operations is affected by many factors including the changes in the value of the Japanese yen against other currencies which Toyota does business The financial year for Toyota is from 1 April to 31 March IMPACT OF FOREIGN EXCHANGE RISK ON OPERATION The value of the Japanese yen has fallen generally for the past three years against the dollar and the Euro though there had been periods of fluctuations httppacificcommerceubccaxrdatahtml accessed on 14th November 2002 Changes in foreign exchange rate affect Toyotas revenue gross margins operating costs operating income net income and retained earnings Toyotas cost and liabilities are affected by
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