Financial Analysis of Halfords: Evaluation, Investment Appraisal and Potential Acquisition

Running Head: Financial Analysis
1
Project Report: Financial analysis

Financial Analysis
2
Contents
Introduction.......................................................................................................................3
Evaluation of financial statement of Halfords..................................................................3
Invest appraisal techniques...............................................................................................5
Potential Target Company................................................................................................6
Conclusion........................................................................................................................8
References.........................................................................................................................9
Appendix.........................................................................................................................11

Financial Analysis
3
Introduction:
The report has been prepared to evaluate about the Halfords limited. Being a chief
financial officer of a company, it is required to evaluate and analyze the financial position
and performance of the company. All the financial decisions of the company are required to
be done by the chief financial officer in such a way that the funds could be raised by the
company in minimum price and invested in the project from where maximum return could be
earned. In the report, financial statement of the Halfords limited has been evaluated firstly to
recognize the profitability and the short term debt obligation position of the company.
Further, the reports lead to the investment project evaluation of the company and lastly, it has
been identified that whether the company should acquire another company for the
diversification or not.
Evaluation of financial statement of Halfords:
Halfords group plc is retailing company which operates its business in UK market and
Ireland market. The company retails the car accessories, car audio, bicycles, ripspeed, tools,
child seats etc. further, various services are also provided by the company such as Bicycle
repair, Audio installation, vehicle part, fitting etc. the company has been founded in 1892 and
currently the revenue of the company is £ 1095 million (Home, 2018). The financial and non
financial position of the company is quite competitive. Being a chief financial officer of the
company, financial statement of the company has been evaluated firstly to identify that
whether the company would be able to make profit or not. The ratio analysis study of the
company is as follows:
Profitability:
Profitability ratios express about the profit making capability of an organization. It
express that whether the company is able to make enough profits for the equity holder and
whether the resources of the company are enough (Kaplan and Atkinson, 2015). The
profitability ratio of Halfords group explains that the profitability level of the company has
been lowered in year 2017. The return on equity ratio evaluates about the total profit in
context of the total equity of the company. On the basis of Return on equity calculations, it
has been found that the return on equity in current year has been lowered due to changes in
the industry. Though, the financial performance of the company is according to the ideal ratio
(more than 15%) (Fridson and Alvarez, 2011).

Financial Analysis
4
Gross profit margin explains about the profit of the company which is generated after
deducting the cost of revenue from total revenue of the company. The gross profit margin
level of the company explains that the performance of the company is quite better. The
material price of the products has impacted on the position of the company.
Figure 1: Profitability ratio
Liquidity:
Liquidity ratios express about the short term debt payment capability of an
organization. It expresses that whether the company is able to pay the short term debt
obligation of the company or not (Brooks, 2015). The liquidity ratio of Halfords group
explains that the liquidity level of the company is quite competitive. The current ratio
evaluates about the total current assets in context of the current liabilities of the company. On
the basis of current ratio calculations, it has been found that the current ratio of the company
is quite better and competitive. The financial performance of the company is according to the
ideal ratio and the industry (Morningstar, 2018).
Acid test ratio explains about the short term debt capability of the company which
eliminates the items that could not be liquidated instantly (Hogarth and Makridakis, 2011).
The acid test ratio level of the company explains that the performance of the company is quite
better. The company is enough able to pay the payment at the time of liquidation.