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Financial Statement Analysis

1138 words - 5 pages

Accounting Quality
At the core, the annual reports must reflect a true and fair view of the company’s performance. However, the quality of the results presented is equally important. That is, the earnings reported must be reflective of the future earnings capacity of the company. This will enable investors to understand the core earnings of the firm and help in forecasting the performance of the company. If earnings is of a poor quality, it implies that the earnings are not a good indicator of the company’s performance. (Penman, 2013) The Australian corporate environment receives support from legislation and common law to ensure companies are compliant and providing timely and accurate ...view middle of the document...

9658 | 0.9520 | 0.9297 | 0.9496 | 0.9517 | |
net sales/net accounts rec | 1.2147 | 1.4414 | 1.3683 | 1.2403 | 1.3433 | |

Table No. ____ (INSERT TABLE NO)
Examining these ratios over the 5 year period indicates that during 2012-13 that HVN may have aggressively recognized revenue or underestimated returns & credit losses, but overall, the general interpretation is that HVN is not manipulating its sales.

* Change in Net Operating Assets (NOA) is expected to be due to normal growth of the business. From 2010 to 2014, HVN’s NOA has increased from $2.5 billion to $3.05 billion. The profit margin (PM) fell from 18.1% in 2010 to 15.8% in 2014, but recovered to 19.5%. This increase was complimented by an increase in the Asset Turnover (ATO) from .468 in 2013 to .485 in 2014. The increase in NOA, when examined with HVN’s profitability and ATO does not indicate any manipulation
* Depreciation and Amortization: When we compare HVN to the other major competitor in the industry, MYR, HVN’s expenses its assets over a shorter time period and this conservative approach will over time reduce the book value. However, HVN must watch out for possible gains that may arise because of this.

Depreciation Schedule : Harvey Norman VS Myer |
| | | | |
Description | | HVN | MYR |
| | | | |
Buildings | | | 20-40 yrs | 40 yrs |
Fixtures, and fittings | - | 3-12.5 yrs |
Plant and equipment, including | 3-20 yrs | 10-20 yrs |
leasehold improvements | | |

Table No. ____ (INSERT TABLE NO)

* Property Decrement (Occupancy Expenses)
Development losses in three properties and flooding at the property in Oxley, Queensland (, 2015) resulted in HVN reporting a decrement of about $60 million in 2013. Furthermore, property decrement of about $25 million in 2012 were one off events that impacted HVN’s core earnings. The 2013 property decrement was spread out over 4 years and the 2012 property decrement was spread out over 2 years. Smoothing out this expense is a better reflection of HVN’s expenses.

Occupancy Expenses | | | | | | |
| | | | | | | |
Description | | 2010 | 2011 | 2012 | 2013 | 2014 | ('000) |
Old (Original) | -228121 | -217637 | -242986 | -278627 | -233881 | |
New (After smoothing) | -243207.75 | -245355.25 | -245441.25 | -233366.75 | -233881 | |
Net reval for Aus properties | | | 25263 | 60347 | 9529 | |

Table No. ____ (INSERT TABLE NO)

Graph No. ____ (INSERT GRAPH NO)

* Operating Leases

* Goodwill/Amortisation

Based on the DuPont model...

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