Review the published financial statements from the past two years of a publicly listed company on the Australian stock exchange (Harvey Norman). Analyse the strengths and weakness of the organisations operations and performance based on the analysis of the five aspects of performance evaluation including recommendations for suggested improvement based upon this review.
The Financial statements in the annual report of any organisation will provide relevant information to both internal and external users concerned with the financial performance.
This paper makes reference to the publicly listed company Harvey Norman. This paper discuss the strengths and weakness of the company by taking data from two year’s worth of financial reporting, develops ratios for the financial data included, and then discuss the interaction between these rations. Finally, based on these strengths and weakness in financial reporting discussed, it makes suggested recommendations for improvement of the Harvey
Financial statements reveal many factors, mostly quantative information on the financial condition of a business. From these statements using careful analysis, conclusions can be drawn regarding the current as well as future financial viability of a business. Current and future information regarding the profitability, liquidity and risk of the business can be established. This paper examines the financial report from the financial year ending 2011 and 2012 for the
Harvey Norman organisation. The aim of this report is to highlight the strengths and weakness of performance based on five aspects of performance evaluation being profitability, efficiency, short-term solvency, long-term solvency, and market based ratios. The appendix contains some key ratios that are used in the analysis of key data contained in the 2011/2012 financial statement. The paper makes comparisons in a time series between the performance in 2011 compared with 2012, as well as comparing cross-sectionally between similar business in the same industry, and of a similar size. It discusses some interactions between some of the main ratios concerned. Finally from these interactions it makes some recommendations for improving the business based on the analysis.
Profitability is most commonly measured using primarily the statement of comprehensive income. In 2012 Harvey Norman has seen a decrease in the total sales revenue in comparison with 2011 by a total of 9.6% (Officer, 2012), which goes against the grain of the Australian retail statistics that show that retail had a growth of 5% over the same period (Economics,
2012). This could be due to many factors and would seem as a negative result when looking at total sales. However gross profit margin ratio shows us that gross margin has only decreased by 0.6% over the financial year, indicating, that while sales revenue has decreased,
Harvey Norman has been able to decrease their costs of sales and defer pressure to their suppliers by establishing lower cost prices.
In comparison to maintaining a healthy gross profit, Harvey Norman recorded a 4.2% decrease in net profit margin, which due to less sales revenue could be partly due to discounting pressure from consumers or other competitors and the emerging online retail
sales sector. This could also be due to expenditures in other expenses apart from normal activites, such as the depreciation of buildings, and investment in IT projects up by 215% in
2012 from 2011 (Officer, 2012).
The return on assets analysis helps both management and shareholders establish whether or not the company has used their assets to obtain a solid return or not. The financial highlights note that Harvey Norman has invested in the number of retail