Financial Management Analysis Report - Harvey Normon

Added on - 06 Jun 2020

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FINANCIAL MANAGEMENTANALYSIS
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1Debt valuation..................................................................................................................................1(1)Short term and long term debt used by firms..........................................................................1(2) Consistency of debt structure with industry...........................................................................1(3) Impact of industry on proportion of long and short term loan of business firm....................1(4) Harwey Norman cost of debt.................................................................................................1Share valuation................................................................................................................................1(1)What is your company cost of equity......................................................................................1(2) Comparison of performance...................................................................................................2(3) Company PE ratio evaluation................................................................................................3(4) Reasonable values of model...................................................................................................4(5) Additional data and information requirement for valuing company stock............................4Cost of capital..................................................................................................................................4(1)Calculation of weighted average cost of capital of company.................................................4(2) Explaination of company tax rate..........................................................................................5(3)Why is there any difference between cost of equity and debt................................................5(4) Inclusion of current liability as cost of capital.......................................................................5(5) WACC value and its application............................................................................................5(6) Projects and use of WACC....................................................................................................5(7)Defining and explaining capital structure...............................................................................6(8)Optimal capital structure and factors that can imbalance it....................................................6Market analysis................................................................................................................................6(1)Comparison of firm performance to industry.........................................................................6(2) Perception of analyst about Harvey Norman.........................................................................6(3) Items different for company...................................................................................................6CONCLUSION................................................................................................................................6
Table of IndexTable 1Company PE ratio and valuation.........................................................................................3Table 2Calculation of CAPM..........................................................................................................4Table 3Enterprise value...................................................................................................................4Table 4Debt and equity weight in capital structure as well as WACC...........................................4YFigure 1Sales revenue of Harwey Norman......................................................................................2Figure 2EPS of Harwey Norman.....................................................................................................2Figure 3Dividend chart of Harwey Norman....................................................................................3
INTRODUCTIONHarvey Normon is the one of famous retail company of furniture and electronic goods. Incurrent report capital structure of firm is analyzed and by using WACC(Weighted average costof capital). In middle section of report, detail analysis of company is done. At end of the report,market analysis is done and firm image in market is measured.Debt valuation(1)Short term and long term debt used by firmsShort term debt used by the firm are trade and other payables and interest bearing loansand borrowings. Whereas, in long term also interest bearing loans and borrowings are included.It can be observed from annual report that in accounting year 2016 to 2017 trade and otherpayables amount to 238628 and interest bearing loan is equal to 386651 (Harvey NormonHoldings Limited, 2017). On other hand, in case of non current liability under interst bearingloans and borrowing amount is 333858. Hence, both long and short term loans are used by thefirm.(2) Consistency of debt structure with industryDebt equity ratio of Harvey Norman is 0.11 which is much lower then industry capitalstructure ratio which is 0.30. This reflects that there is not consistency of capital structure of firmin comparison to industry. It can be said that firm is in better condition then industry and itscapital structure is balanced.(3) Impact of industry on proportion of long and short term loan of business firmIndustry have impact on proportion of long and short term loan that is observed in thefirm’s balance sheet. Currently, in industry already there is tough competition and in order toremain in it, it is necessary for the firm to expand its business at a rapid rate. For expansion fundis required which is arranged by taking loan from banks. In order to meet day to day expensesshort term loan is required. Hence, it can be said that industry have impact on long and shortterm loan of business firm.|P a g e
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