Module 3 Paper Revised Subaru

Running head: SUBARU CORPORATION 1
Subaru Corporation
Caroline Tade
Arizona State University
OGL 260: Resource Allocation, Module 3
April 9, 2022
SUBARU 2
Subaru Corporation
Subaru is a globally recognized corporation mainly known for manufacturing vehicles
and manufactures some of the prevalent vehicles we know as the Subaru Forester, Subaru
Crosstrek, and the Impreza. However, before Subaru became globally known for the various cars
manufactured, Subaru originally started in 1917 in the aerospace industry when they launched
the Nakajima Aircraft Company. The aircraft company helps create technology and design for
building airplanes. In 1953, Subaru began manufacturing automobiles with the launch of Fuji
Heavy Industries Ltd, and in 2017, it became known as Subaru corporation (“Integrated Report,”
2022). Subaru's are sold all over the world, and there are over four hundred locations in Japan
and ninety locations in other countries and regions, allowing Subaru to sell over 700,117 cars a
year, generating over 22 million in revenue (“Integrated Report,” 2022). As we continue, we
look at Subaru's financial history and possible risks as Subaru focuses on future growth.
Subaru was created in 1917 with the launch of Nakajima Aircraft company, and years
later, they launched into the automotive industry. The launch into the automotive industry proved
to be more successful than in the aerospace industry, as Subaru generated 96.7% of net sales
from automotive sales and 3.1% of net sales from aerospace sales (“What is Subaru,” 2022). To
gain a better understanding of the year-to-year breakdown of Subaru's revenue, Keown, Martin,
& Petty state that you can view a company's income statement to identify the amount of profit
generated by a firm over a given period (Keown, Martin, & Petty, 2020, p. 56). When viewing
Subaru's income statement from the past five years, while sales remained high, Subaru
experienced a 2% reduction in revenue from 2017-to 2019 and underwent a 6% increase in
revenue in 2020. However, in 2021, Subaru experienced a 15% reduction in growth. This
reduction was mainly due to the supply and chain demand issues that have affected companies
SUBARU 3
worldwide. In addition, when learning more about Subaru's cash inflows and outflows, Subaru's
most significant cash outflows were spent on investing opportunities. Keown, Martin, and Petty
state that the cash statement of cash flows identifies the sources and uses of cash to explain the
change in a firm's cash balance report (Keown, Martin, & Petty, 2020, p. 72). Subaru spent over
$150 million on capital expenditures, with the highest cash outflow being in 2020, when they
spent over $200 million (“Subaru Corp,” 2022). Also, when viewing Subaru's performance over
the past five years, Subaru's return on invested capital over five years averaged 11.3%, with an
increase in return on invested capital in March of 2017 at 19%. Still, it hit an all-time low in
March of 2021 at 3.6% (“Return on Invested,” 2022). With the cash received for future products
and services, Subaru plans to work on developing new models and prototypes that help fulfill its
mission of becoming a more sustainable society. Subaru aims to increase sales by 40% for all-
electric or hybrid vehicles, reduce CO2 by 90%, and target carbon neutrality (“Integrated
Report,” 2022). With the focus on future growth and sustainability, Subaru does recognize the
possible risk that can occur but does not let that stop them from remaining at the top of the
market.
With most corporations, the risk and return on invested capital for stakeholders and
stockholders are essential to understand and consider. Losing stakeholders and shareholders can
hurt a company's growth and create issues further down the road. This is something Subaru is
aware of and has recognized as they focus on the company's future growth. Subaru's investor
relations include the business risks that could significantly influence investors' decisions and
include areas such as economic trends, changes in the market appraisal, product defects, and
dependence on specific suppliers' materials and components (Business, 2022). Understanding
Subaru's future growth and the risk associated with these new ideas allow Subaru to maintain an
SUBARU 4
all-time high. Since 2010, Subaru has grown substantially and has been at the top of the market
despite decreasing revenue in 2021. Also, Subaru has a history of strong financial performance
with a significant net cash profit, and an excellent history of free cash flow and sales growth,
allowing Subaru to maintain a limited downside of risk (Tacken, 2021).
Overall, since Fuji Heavy Industries ltd in 1953, Subaru has slowly moved up to the top
of the chart over the market. Subaru is located all over the globe selling over 700,000 cars,
totaling more than 22 million in revenue. Subaru is always looking for ways to improve and has
seen this work in their favor. Subaru has maintained an all-time high in sales for the past ten
years and is a company with limited risk. With a significant net cash position, a great history of
free cash flow, and excellent sales growth, it is easy to understand how Subaru remains high on
the market list.

SUBARU 5
References
Integrated Report (2022). Subaru Investor Relations, retrieved from,
https://www.subaru.co.jp/en/ir/library/annual-reports.html.
Keown, A. J., Martin, J. D., & Petty, J. W. (2020). Foundations of Finance: The Logic and
practice of Financial Management (10th ed). New York, NY: Pearson.
Management Risk (2022). Subaru Investor Relations, retrieved from,
https://www.subaru.co.jp/en/ir/library/annual-reports.html.
Return on Invested Capital for Subaru Corporation (2022). Finbox.com, retrieved from,
https://finbox.com/OTCPK:FUJH.Y/explorer/roic.
Subaru Corp. (2022). Wall Street Journal Market Reviews, retrieved from Dow Jones &
Company, https://www.wsj.com/market-data/quotes/FUJHY/financials/annual/cash-flow.
Tacken, D. (2021, March 3). Subaru’s Decade of Strong Performance has left the Share Price
Depressed: A recipe for Outsized Future Returns. Seeking Alpha, retrieved from,
https://seekingalpha.com/article/4410997-subaru-share-price-depressed-recipe-for-
outsized-future-gains.
What is Subaru? (2022). Subaru Investor Relations, retrieved from,
https://www.subaru.co.jp/en/ir/individualinvestors/overview.html.

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Running head: SUBARU CORPORATION 1

Arizona State University

OGL 260: Resource Allocation, Module 3

Subaru is a globally recognized corporation mainly known for manufacturing vehicles

year, generating over 22 million in revenue (“Integrated Report,” 2022). As we continue, we

experienced a 2% reduction in revenue from 2017-to 2019 and underwent a 6% increase in

dependence on specific suppliers' materials and components (Business, 2022). Understanding

allowing Subaru to maintain a limited downside of risk (Tacken, 2021).

the market list.

Integrated Report (2022). Subaru Investor Relations, retrieved from,

practice of Financial Management (10th ed). New York, NY: Pearson.

Management Risk (2022). Subaru Investor Relations, retrieved from,

What is Subaru? (2022). Subaru Investor Relations, retrieved from,

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