Honda V GM Honda Motors Essay

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Until very recently, GM was not being publicly traded; after its bailout by the U.S. government, the company was required to pay down its debt and essentially purchase itself back from the taxpayers before issuing stock. This stock has now been issued, and the debt was very recently paid off, giving the company a current debt/equity ratio of .36 (GM 2011). This means that the company is primarily being financed through the ownership funds of the company rather than through borrowing, which likely means fewer short-term gains but longer financial stability. Honda, on the other hand, has a debt/equity ratio of .71, meaning that a greater percentage of the company's operations are being financed through borrowed funds rather than through ownership funds (Honda 2011). While this might lead to more short-term advantages, it is a less desirable position to be in during volatile economic and industry times.

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Finally, there is one more important measure of the fiscal health and policies of these two companies: the dividend yield. Though there are many other metrics that could be applied to the situation, this one is especially telling in terms of recent events. Honda's current dividend yield is holding steady at just above one percent, while GM has no reportable dividend yield at all -- the re-issued stock has not been in existence long enough. While Honda can be counted on to give one percent of invested money back to its shareholders each year, there is no guarantee that GM will be in a position to pay any dividends for some time......

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