Harvey Norman Holdings Pvt Ltd Case Study - Accounting and Finance Assignment Help

Assignment Task:

For the latest five-year period of Harvey Norman Holdings Pvt Ltd, assess the company’s standing on their profitability, liquidity, and solvency. The table below summarises some of the relevant ratios. 

Ratio categories Example of ratios to analyse 
Profitability e.g., 1. Return on equity (ROE), and 2. Net profit margin.  
Liquidity e.g., 1. The current ratio, and 2. Acid test (also known as a quick ratio). 
Solvency e.g., 1. Debt ratio, and 2. Net interest cover.  

Note: Each ratio does not sit in a vacuum. One ratio interlinks with other ratios of different categories. Therefore, you need to draw in more than 2 ratios in each category to provide substantive reasons and discussions. Industry average and competitors’ data also form a good platform to put your discussion into perspective. For example, a large difference between current ratio and quick ratio can be explained by an inventory build-up.  

This can be confirmed by looking at inventory turnover (in days) which is longer compared to its competitors or the industry average. In that case, it could mean the company has difficulties to attract customers, which can also explain why it provides a longer credit term (receivable turnover ratio in days).  In some cases, you will need to manually calculate other ratios to provide substantive reasons and discussions for the trend captured in a published ratio. For example, a steady increase in revenue over a five-year period can be explained by a rapid expansion of the company. However, revenue per store indicates a negative growth which can be detrimental for the company. This revenue per store is a ratio that is not readily available and will need to be calculated manually, and it is dependent on the availability of the data. Some companies disclose the number of stores(outlets) they have in their annual reports.

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