SLP- LEVERAGE, CAPITAL STRUCTURE, AND DIVIDEND POLICY

Toyota Company Beta Analysis

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Introduction

Organization Beta is the measure of instability or logical risk of security in the market. It tells of how an organization’s equity market changes with the overall change in the economy. In this case, the company which I decided to choose is the Toyota Company in the United States, which operates globally and also take part in the stock exchange market. Toyota Company deals with Motor vehicle, and it is known as one of the companies which produce the best vehicle. The headquarters for this company is in Texas (Shirley et al., 2014). For the last few decades, the company has been trading in the NYSE.

The reason why personally think that Toyota Company is an interesting company is that the company’s average transaction price is the highest among other organization in the industry. (Shirley et al., 2014). However, the organization is widely distributed, making it easy for any potential customer to access their product easily.

Beta of This Company’s Stock

From the recent financial records, the Toyota company beta was 0.79 (Shirley et al., 2014). Basing this on the magnitude of Beta it means that it was much higher. By this, it means that when Beta is positive, it tends to show that it works toward the market. So, that means that the Toyota company beta is positive, hence shows that it has a wide range of market over its competitors.

Stock Price Movement

From the analysis, there is some indication that the by 11th November 2017 the highest stock price was 127.1 while the lowest stock price was 103.82 as at 20th June 2017. From the five years analysis, there is a certain trend which shows that Toyota company stock is not too risky to invest in (Shirley et al., 2014). It is because while investigating about the riskiness of stock in a company then one needs to consider the logical factor and that factor which are not the logic of which from the company everything is working as per the strategy.

General Motor Analysis About the Toyota Company

The general motor is also another company which deals with issues to do with manufacture and sale of the motor vehicle (Jindal et al., 2015). It’s a company which operates globally. From the last financial year, GM Beta was 1.68 that the company is operating toward the market and at the same time, meaning that when the market index goes up by 1%, then the stock will increase by 1% and vice versa.

By this, it means that the General motor can be at risk because of an increase in the level of stock by 1%. In this case would not recommend one to go and invest in General motor because once their stock is more than that means that it can lack operating cost. Toyota remains to be the best company with high returns regarding the profit, and at the same time, there is no high risk in stock (Jindal et al., 2015). Toyota has a great market that its competitors which are around 30% billion higher than its next biggest competitors. The reason why Toyota has a better advantage more so when it comes to the way it distributes stock because of its wide geographical area which it operates in, by this takes the leads regarding those organizations with low risk more so when it comes to the issue of stock.

The fact that Toyota has a wide range where it distributes its product then that means that its revenues are more making it easy for it to produce many units at a go, and this lowers the cost of production (Jindal et al., 2015). In such a situation where the company produces many units at a go then it gives room for an organization to sell the product a cheaper cost because the cost of production is also down.

References

Jindal, S., Laveena, L., & Aggarwal, A. (2015). A comparative study of crisis management-Toyota v/s General motors. Scholedge International Journal of Management & Development ISSN 2394-3378, 2(6), 1-12.

Shirley, M. W., & Patel, N. (2014). Estimating Beta: Interpreting Regression Statistics. Cost of Capital: Applications and Examples, 234-242.