Toyota seeks government loan
Link: http://money.cnn.com/2009/03/03/autos/toyota_govt_loan.reut/index.htm?postversion=2009030307Summary
The world's top automaker Toyota Motor Corp applies for a $2.1 billion loan backed by the Japanese government to keep its finance arm competitive, since Toyota is facing an operating loss of $4.6 billion this business year. Yasuaki Iwamoto, an analyst at Okasan Securities said "Toyota is not in danger. It's out to get the lowest price for funding that the strength of its credit can get," "On the balance sheet, it doesn't matter if the funds are private or public." The cost of debt at the world's top automaker has gone up in the past year, Toyota Finance sold a five-year bond in December offering a subscriber's yield of 1.248%, up from 1.106% for debt in the same maturity sold in April 2008. However, Toyota is still in a much better position than its competitors, which have a higher percentage of loans in arrears. One great example would be Finance company GMAC, the main lender to struggling automaker General Motors Corp, has been hit by losses in its auto and mortgage units with more than billions of dollars lost. They're still surviving today due to the $6 billion government bailout in December and a ticket to tap lower-cost funding.
Connections
Chapter 15 talks about the "Analyzing Financial Statements", and this article relates to the chapter because,insiders and outsiders read the financial statement to determine if the business will be able to repay the loan. In the chapter, we also learn how to compare financial data, and work out different ratios and percentages. In the situation in our article, Toyota applied for a loan from the Japanese government. In order for the loan to go through, the government would have to analyze Toyota's financial statements to make sure they have the abilities to pay back the loan.
Reflection
Due to global economy falling, I think that the banks and government must examine each company before they put out massive loans and bailouts. Many companies are now on the border line of surviving. Government and banks should think twice before making any decisions. I believe that helping certain compaines out would help and save the economy. Yet, at the same time, they have to make sure those loans and bailouts will make a differences in the end.
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