Financial Performance of Huawei Investment and Holding Coy Limited

This paper provides a brief overview of the financial performance of Huawei Investment and Holding Coy Limited for the past five years. It analyzes the growth strategies, activity ratios, and management's strategy for minimizing exposure to credit risks.

Running head: FINANCIAL MANAGEMENT
Financial Management
Name of the Student:
Name of the University:
Author’s Note:
Course ID:

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Executive Summary:
The first section of the paper has provided a brief overview of the financial performance of
Huawei Investment and Holding Coy Limited for the past five years. The organisation is
involved in providing information and communication technology (ICT) solutions for global
enterprises, telecom carriers and consumers. It has been analysed that Huawei has adopted
certain growth strategies by investing in a number of activities that would help in maximising its
overall profit margin in future. In terms of efficiency analysis, it has been analysed that the
organisation has experienced improvement in both inventory turnover and receivables turnover,
owing to which cash conversion cycle has been minimised in 2017. Finally, it has been evaluated
that Huawei employs effective techniques for minimising exposure to credit risk so that it could
control its cash outflows effectively.

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Table of Contents
Question 1: Huawei Investment and Holding Coy Limited............................................................3
Introduction:................................................................................................................................3
a) Overview of the financial performance of the organisation in the past five years:.................3
b) Evaluation of the management growth strategy:.....................................................................7
c) Evaluation of activity ratios and strategy of the management of assuring minimal exposure
to credit risks:............................................................................................................................10
Conclusion:................................................................................................................................14
Question 2: Nixon Group Plc........................................................................................................15
Requirement a:...........................................................................................................................15
Requirement b:...........................................................................................................................18
Requirement c:...........................................................................................................................20
References:....................................................................................................................................25
Appendices:...................................................................................................................................30

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Question 1: Huawei Investment and Holding Coy Limited
Introduction:
This section would provide a brief overview of the financial performance of Huawei
Investment and Holding Coy Limited for the past five years. The organisation is involved in
providing information and communication technology (ICT) solutions for global enterprises,
telecom carriers and consumers. The organisation has been established in 1987 in China and
currently, it has employee base around 180,000 (Huawei 2019). The section would lay stress on
the growth strategy of the management through investment activities intended to assure the
fulfilment of objectives. Finally, the report would shed light on analysing the activity ratios with
special emphasis on cash conversion cycle of Huawei for the years 2016 and 2017. In addition,
the strategy of the management of assuring minimum exposure to credit risks and the impact on
cash flow would be assessed as well.
a) Overview of the financial performance of the organisation in the past five years:
In order to analyse the financial performance of Huawei for the past five years, certain
ratios have been taken into consideration. These ratios include gross margin, operating margin,
net margin, return on capital employed, return on assets and return on equity. The detailed
explanations of these ratios are provided as follows:

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Table 1: Financial performance ratios of Huawei Investment and Holding Coy Limited for
the years 2013-2017
(Source: Huawei 2019)
Gross
margin Operating
margin Net
margin Return on
capital
employed
(ROCE)
Return on
assets Return on
equity
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
45.00%
50.00%
Financial Performance Ratios
2013
2014
2015
2016
2017
Figure 1: Financial performance ratios of Huawei Investment and Holding Coy Limited for
the years 2013-2017
(Source: Huawei 2019)

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Gross margin:
In the words of Amit and Villalonga (2014), gross margin denotes the percentage of
overall sales revenue that the organisation retains after incurring direct costs related to
production of products and services sold. In case of Huawei, the gross margin after increasing
from 41.01% in 2013 to 44.22% in 2014 has fallen to 39.45% in 2017. This is because even
though the revenue base of the organisation, the cost of sales has increased more than the former
owing to which decline in the ratio could be observed over the years.
Operating margin:
Operating margin denotes the portion of sales revenue available for covering non-
operating expenses like payment of interest, which is the reason that the lenders and investors
pay close attention (Baimwera and Muriuki 2014). For Huawei, the trend is similar like gross
margin until 2016, after which increase could be observed in 2017. Although there has been
significant increase in research and development expenses and selling and administrative
expenses in 2017, they have been offset by increased revenue and other income. As a result
improvement in this ratio could be observed in 2017.
Net margin:
Net margin signifies the amount of profit left in the hands of an organisation after
deduction of all pertinent expenses including direct costs, operating expenses, finance costs and
income tax expenses (Bandy 2014). In case of net margin, the trend is exactly the same like
operating margin owing to significant fall in finance expenses. This implies favourable
profitability position of Huawei in its operating market.

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Return on capital employed (ROCE):
ROCE is deemed to be a valuable metric so that profitability could be contrasted among
organisations depending on the amount of capital used (Banerjee 2015). For computing ROCE,
the metrics mainly used include operating profit and capital employed and the latter is obtained
by deducting current liabilities from total assets. The trend of this ratio for Huawei is similar like
operating margin and net margin, in which slight improvement could be observed in 2017 due to
increase in net profit and fall in capital employed. This implies that Huawei has started to
manage its capital employed in a better manner for generating adequate returns.
Return on assets:
Return on assets helps in indicating the profitability of an organisation relative to its
overall assets. With the help of this ratio, the managers, analysts or investors could obtain an idea
about the efficiency of the management of an organisation at utilising its assets for generating
earnings (Baños-Caballero, García-Teruel and Martínez-Solano 2014). For Huawei, the ratio is
found to be fluctuating over the years; however, it has experienced an overall increase from
9.51% in 2013 to 10% in 2017. A higher ratio is always favourable, as the organisation is making
more money from lower investment (Barr and McClellan 2018). The ratio for Huawei over the
years implies that it has generated more returns from its assets by employing lower capital
indicating an overall improvement in financial performance.
Return on equity:
Return on equity helps in gauging the financial performance of an organisation for
generating profits from the shareholders’ investments within the organisation (Bekaert and
Hodrick 2017). In case of Huawei, the return on equity after increasing from 2013 to 2015 has

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fallen again in 2016; however, increase could be observed in the year 2017. This implies that the
organisation has provided better returns to its shareholders owing to the increased net income.
b) Evaluation of the management growth strategy:
Huawei is dedicated to customer-centric innovation by catering to the customer needs
from the public sector and government, transportation, finance, energy sectors, big enterprises
and others. The management of the organisation has undertaken a number of growth strategies,
which are explained briefly as follows:
Long-term partnership:
Huawei is involved in serving 36 out of 50 leading global operators with its solutions,
services and unique products. One of the primary objectives of the organisation is to enter into
strategic partnerships in emerging markets and developing nations. With the help of this strategy,
the organisation could maintain long-term relationships with the customers in different regions
such as Europe, East Pacific, North America and China and this would benefit the company in
future projects (Bena and Li 2014).
Research and development based on customer needs in the market:
Huawei makes investments in developing research and development centres for fulfilling
the customer requirements and demands timely for upgraded products, solutions, services and
technologies. In this method, the organisation invests 48% of its capital in 35,000 research and
development centres situated in Russia, China, US, Indonesia and Sweden. More precisely, it
invests 35% of its overall revenue in research and development. Huawei has earned “R&D 100
Award” for its product named “Optix OSN 6800/OSN 3800”. In addition, the “CMM Level 5
Certification” is awarded to its research and development centres (Ebg.huawei.com 2019).

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Edge products and latest solutions:
Huawei products are utilised in network development, which include IP core network,
broadband, terminals, various software and solutions and this has helped in maintaining the top
three ranking in the above categories. This would provide a competitive edge to Huawei over its
competitors. This strategy has assisted in its latest development in long-term evolution (LTE)
along with marketing and launching the first 4G network in Oslo, Norway.
Effective operation for customers (product and supply chain):
This signifies world class programs for its supply and products such as integrated product
development and integrated supply chain. For fulfilling the customer demands and timely
product delivery, it has maintained greater level of supply chain management (Brigham and
Daves 2014).
Technology innovation:
With the help of technology, it becomes possible for the organisation in acquiring global
resources, accomplishing international responsiveness to the customers along with establishing
commercial relationships (Brigham et al. 2016). The rise in digital growth results in the number
of users, which would raise the heavy tariff on the current networks. The diversification of such
networks raises the cost; however, it lacks the growth in revenue, which is a significant concern
in the sector.
With the help of research and development, Huawei has designed some innovative ideas,
which concentrated on value-added services besides the basic calls like advertisement,
convergent billing, personal entertainment, digital home and ICT solutions. At present, it assists

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in supporting its users with such services, initiating new ideas and opportunities, which increase
its revenues gradually. The service-based traffic intelligence of Huawei technology is a kind of
management system, which assists the customers in providing better quality services along with
increasing bandwidth utilisation by 30% and thus, the services offered are valuable and unique;
thereby, raising competitive advantage (De Fiore and Uhlig 2015).
Partnership to accomplish competitive advantage:
Huawei intends to maintain effective relationships with its main players, local customers,
supplies and global customers that are crucial in the recent times. However, managing resources
is an issue faced by the organisations that directly manufacture their products and services
(Bryce 2017). For avoiding the same, with the help of proper management transformation,
Huawei has formed partnerships with organisation for obtaining support in fields like supply
chain, product, quality control, business transformation, finance and human resources. Hence, by
investing in these activities, Huawei maintains competitive advantage over its rivals.
Scope of expansion with unique products:
In the emerging economies, above 1 million users would be included in the existing
networks, which would assist in developing economic and digital conditions (Churet and Eccles
2014). However, owing to the lower average revenue per individual, the operators find it difficult
to ensure business success in these areas. On the contrary, there are issues like rise in cost in
emerging economies owing to primary infrastructure, transmission and power supply
engineering. For dealing with these issues, Huawei has designed an idea of high power coverage,
power control, solar power suppliers and power supply engineering. For instance, in Bangladesh,
Huawei, as the leading network provider, helped the nation in developing the network along with

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adding value to the services by forming Grameenphone (GP), which is a solar operated product
BTS adding in the form of a solution for power instability (Cornwall, Vang and Hartman 2016).
c) Evaluation of activity ratios and strategy of the management of assuring minimal
exposure to credit risks:
By using the activity ratios, it is possible to analyse the efficiency position of an
organisation, which are represented briefly as follows:
Table 2: Activity ratios of Huawei Investment and Holding Coy Limited for the years 2013-
2017
(Source: Huawei 2019)

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2013 2014 2015 2016 2017
-
20
40
60
80
100
120
Activity Ratios
Inventory turnover (in
days)
Receivables turnover (in
days)
Payables turnover (in
days)
Figure 2: Activity ratios of Huawei Investment and Holding Coy Limited for the years
2013-2017
(Source: Huawei 2019)
Inventory turnover (in days):
Inventory turnover (in days) denotes the time taken by an organisation in discharging its
inventory based on the market demand (Dewally and Shao 2014). In case of Huawei, inventory
turnover is observed to increase from 61 days in 2013 to 86 days in 2015; however, it has
declined to 79 days in 2016 and further to 73 days in 2017. A lower ratio in terms of days is
always favourable for an organisation, since it denotes increased market demand and it could
release its inventory at a faster rate. The situation is found to be similar for Huawei as well due to
the modifications made in its existing products and introduction of new products, which have
assisted in increasing the overall market demand.
Receivables turnover (in days):

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Receivables turnover is an accounting measure, which is utilised in quantifying the
effectiveness of an organisation to extend credit and collect debts on that credit (Ehiedu 2014). In
other words, this ratio gauges the efficiency of an organisation in using its asset base. For
Huawei, the receivables turnover (in days) has declined from 107 days in 2013 to 65 days in
2017. This denotes that the organisation has adopted a stringent debtor policy in order to increase
its cash base and availability of working capital.
Payables turnover (in days):
Payables turnover assists in measuring the time taken by an organisation to settle its
current obligations with the suppliers and the creditors (Ehrhardt and Brigham 2016). In case of
Huawei, the ratio in terms of days is witnessed to fall from 94 days in 2013 to 72 days in 2017.
This does not seem to be sound for the organisation, since the creditors and suppliers are
unwilling to extend their credit terms, possibly due to the delay made by the organisation in
settling their payments in the past. Hence, this has increased the overall cash outflows of the
organisations over the years.
Cash conversion cycle:
Cash conversion cycle could be defined as a cash flow computation attempting to
measure the time taken by an organisation in converting its investment into inventory as well as
other resource inputs into cash. More precisely, this cycle provides an overview of the amount of
time cash is tied up in inventory before the same is sold and cash is accumulated from the
customers (Foley and Manova 2015). The cash conversion cycle is computed by adding days’
inventory outstanding and days sales outstanding after which days payable outstanding is

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subtracted from the balance. The cash conversion cycle for Huawei for the years 2016 and 2017
is represented as follows:
Table 3: Cash conversion cycle of Huawei Investment and Holding Coy Limited for the
years 2013-2017
(Source: Huawei 2019)
From the above table, it could be seen that the cash conversion cycle of Huawei has
declined from 72 days in 2016 to 66 days in 2017. This clearly implies the fact that the
organisation has experienced an increase in market demand due to which it has been able to
manage its inventory at a quick rate. Moreover, the stringent debtor policy adopted by Huawei
has assisted in increasing its cash base and working capital. Despite the fact that it has to settle
its debtor payments at an earlier date, the fall in the other two variables has managed to offset the
same. Hence, the performance of Huawei has improved in 2017 in terms of efficiency compared
to the previous year.
Strategy of the management in ensuring minimal exposure to credit risks and impact on cash
flow:
Huawei has designed and enforced internally consistent policies, processes, IT systems
and quantitative tools of credit risk assessment related to credit management. The group has
formed responsible credit management entities throughout all business units and regions along

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with setting up expertise centres specialising in credit management in Asia Pacific and Europe.
Moreover, it utilises quantitative models of risk assessment for ascertaining the credit limits and
credit ratings of the customers. It has formed risk control points as well for significant activities
throughout the end-to-end selling process so that credit risks could be managed in a closed loop
(Huawei 2019).
The credit management department of Huawei is involved in regular analysis of
international credit risk exposures and accordingly, IT tools are formed so that the field offices
could be assisted to monitor risk status, project probable losses along with ascertaining bad debt
provisions, when needed. For risk minimisation, Huwaei follows an effective process, when a
customer defaults on payment or poses significantly increased risk. As a result, it has minimised
the cash outflows of the organisation owing to which it has increased its cash balance from
73,399 million CNY in 2013 to 175,347 million CNY in 2017 (Huawei 2019).
Conclusion:
After considering all the above-discussed aspects, it could be cited that Huawei has
experienced a slight decline in its profitability due to the rise in operating expenses although
revenue has increased considerably over the five-year period. On the other hand, improvements
could be observed in return on assets and return on equity, as it generated more income from less
investment in assets and equity. In addition, Huawei has adopted certain growth strategies by
investing in a number of activities that would help in maximising its overall profit margin in
future. In terms of efficiency analysis, it has been analysed that the organisation has experienced
improvement in both inventory turnover and receivables turnover, owing to which cash
conversion cycle has been minimised in 2017. Finally, it has been evaluated that Huawei

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employs effective techniques for minimising exposure to credit risk so that it could control its
cash outflows effectively.
Question 2: Nixon Group Plc
Requirement a:
Both mission and values play a significant role in achieving the vital goals and targets for
any business organisation. As a result, it is necessary for Nixon Group Plc to communicate its
mission and values to the staffs for raising their awareness. The significance of such
communication of mission and values of the organisation to the staffs is demonstrated briefly as
follows:
Staff engagement:
It is crucial to strengthen staff engagement by providing staffs with a clear mission for
involvement. According to Morden (2016), 73 % of the staffs reported to be working for a
purpose-oriented organisation are engaged in contrast to only 23% at non-purpose oriented
organisations. This clearly sheds light on the fact that communicating the values of an
organisation plays a significant role to ascertain the levels of staff engagement.
At the time the staffs feel involved at work; they feel personally committed to the
purpose, mission and values of the organisation. The engaged staffs provide emphasis on the
mission of the organisation and they would move ahead and beyond for accomplishing the same
(Graham 2014). This is the main reason for ensuring that the staffs have full understanding of the
mission statement and values of a business organisation.
Improvement in customer satisfaction and business productivity:

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In the words of Zietlow et al. (2018), 70% of the business executives feel that
embracement of the company mission improves staff productivity largely. In addition, the
researchers have further stated that more than 1/3rd of the individuals would work harder, if they
have full understanding of the benefits of their job roles towards the society. Furthermore, at the
time the staffs support the mission and values of an organisation, they are likely to communicate
the same to the customers along with boosting their overall level of satisfaction. Therefore, it is
evident that the customers would not prefer an organisation unless the same is preferred by its
staffs. In other words, the engaged staffs help in creating satisfied customers.
Accountability of the employer in developing trust:
In the research work of Karadag (2015), it has been identified that every one out of three
staffs does not have trust in their employers. In order to overcome the same, increasing the
clarity of the intentions, purpose and values of the organisation could change the same. With the
help of strong business mission statement, there is significant opportunity of developing trust
between the employers and the staffs. Hence, by pinning values, goals and principles to the
utmost level, it is possible to create accountability as an employer and an organisation.
Therefore, it is vital to assure that the mission statement communicates the identical
information to both the internal and external stakeholders. At the time the staffs notice the
message, it needs to communicate the ways through which the organisation would treat them, the
benefits to be provided to them and their expectations while working with the organisation. This
implies that the staffs could show trust in the organisation (Martin 2016).
Strong employer brand:

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The mission statement of an organisation provides an overview of the type of employer to
its potential candidates. It could be used for developing a strong employer brand so that the best
talents could be attracted (McKinney 2015). By encapsulating the culture, beliefs and values
within the mission statement, an organisation could provide an overview of its current position
and expectations to the prospective candidates. This helps in encouraging applications from
individuals sharing desire and values to share the world.
Enhancement in learning and development:
The understanding of the business mission statement helps in providing staff training
purpose. This is because it assists each individual in finding out the ways through which the
course content would benefit their personal career objectives and the broader company mission
(Salikin, Ab Wahab and Muhammad 2014). For adding additional meaning to training, it is
necessary for the organisation to communicate the ways the same is tied to the bigger purpose of
the organisation. By ensuring clarity, learning would be considered as a meaningful tool of
development, in which the individuals would like participation.
Assistance in business decision-making:
The individuals like to know about the expectations from the organisation and with sound
reasons. In other words, with the assistance of clearly defined goals, it is possible to concentrate
and accomplish the set targets (Khan 2015). Moreover, it provides the context of short-term
goals to the staffs along with aiding all the individuals in staying on track to success. The
mission statement assures strategic alignment throughout all the levels of the organisation.
Regardless of the daily tasks carried out by a staff or a team, all people are united towards the

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bigger purpose of the organisation. This picture could assist in guiding decision-making,
strategies, prioritisation and goal formulation (Vogel 2014).
Improvement in staff retention:
With the help of strong business mission statement, it is possible to enhance staff
retention. This is significant since staff turnover is a major issue for many organisations in the
recent times. By using a clearly communicated mission statement, an organisation could be able
to retain its top talent. As commented by Wang (2014), emphasising values and mission is one of
the top significant factors for retaining the best talents within an organisation.
Requirement b:
The project statement of comprehensive income of Nixon Group Plc has been prepared
by taking into consideration the figures from the actual statement (Refer to Appendices,
Appendix 4). As observed from the case study, it has been identified that Nixon Group Plc is a
global organisation operating in Middle East, Europe, Africa and America. It has been
considering a number of strategic decisions and based on certain data, the projected statement of
comprehensive income for the organisation has been prepared in 2019, which is illustrated as
follows:

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Table 4: Projected Statement of Comprehensive Income for Nixon Group Plc in March
2019
(Source: As created by author)
In order to prepare the projected statement of comprehensive income for the organisation,
there has been consideration of a number of assumptions. The assumptions mainly include the
following:
 Revenues are to be increased by 3% in Africa, 5% in Europe, 1.5% in America and 4.2%
in the Middle East
 Gross profit has been computed by keeping the gross profit percentage earned by Nixon
Group Plc in 2018
 The government taxes are low in Africa, expensive in Luxembourg, low taxes in US and
UAE.
 The interest rates are cheap in Africa, cheap as 8% in UK and expensive in Luxembourg,
high in Mexico and no interest in UAE.
It has been identified that Nixon Group Plc is aiming to maximise revenue for profit making
regions and shutting down loss-making areas. However, any closure would lead to additional 8%
admin and distribution costs. For the concerned organisation, the only loss making region is
United Kingdom in Europe, while the other regions are experiencing profit after consideration of
all assumptions for projecting the comprehensive income statement in 2019. In this case, it is
recommended to the organisation to continue with its UK segmental operations for avoiding
incurring additional expenses. This is because after the projected comprehensive income

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statement, the loss is minimised and if the revenue growth continues to remain the same, the loss
would be converted into profit automatically (Gitman, Juchau and Flanagan 2015).
For dealing with the loss incurred by the UK segment, it has to come up with new strategies
so that it could earn profit from the segment in future. Firstly, since the purchasing power of the
individuals is high in UK, the organisation could raise the selling prices of its products for
generating increased revenues from the market (Kroes and Manikas 2014). In addition, it needs
to minimise the cost of production in its UK segment in order to increase gross margin. Finally,
it needs to focus on promotional activities like social media advertising for raising the demand of
its products in the UK market.
Requirement c:
Reporting the financial performance of an organisation in country segments helps the
users of such information in analysing the nature and financial impact of the operating activities
and understanding the economic environment of the operating nations. The standard used for
segment reporting is IFRS 8 that needs the management in reporting the disaggregated business
activities separately for clear and proper evaluation by the financial statement users. It is
necessary for the management of Nixon Group Plc to report the financial information in a
manner corresponding with the way it runs the business operations without redefining the
external reporting outcomes (Sharan 2015). This needs to be ensured so that the transparency and
accountability level could be increased by the management.
The significance of reporting the financial performance of Nixon Group Plc in country
segments is enumerated briefly as follows:
Allocation of resources:

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The segmental information when disclosed to the external parties would play a pivotal
role to enhance the allocation of scarce resources in an economy. The unavailability of
information results in uncertainty in the investment market, which leads to inefficiency in the
investment market (Islam 2014). With the help of such information disclosure, the imperfections
are eliminated in the investment market and it results in proper functioning of the market. In
addition, the segmental information disclosure might affect management performance
significantly along with boosting them to act in the best interests of the society and the investors.
According to “Paragraph 2 of IFRS 8”, the main operating decision-maker of the organisation
is required to review the operating outcomes regularly for making decisions regarding resources
to be apportioned to the segment along with analysing its performance and for which there is
availability of discrete financial information (Iasplus.com 2019). Hence, with the help of
segmental reporting, Nixon Group Plc could check corporate abuses associated with matters like
unfair pricing policy, trade practices and fraud.
Investment and credit decisions:
In the words of Vernimmen et al. (2014), the role of segmental information is crucial
when it comes to credit and investment decisions. It has been observed that such information
assists the users of the financial statements in better analysis of the uncertainties related to
amount and timing of estimated cash flows along with the risks associated with an investment or
loan to an organisation operating in different markets. As mentioned in “Paragraphs 23 and 24
of IFRS 8”, it is necessary to disclose the amount of investments made for all the reportable
segments based on which the investors could undertake appropriate decisions (Iasplus.com
2019). Hence, Nixon Group Plc needs to disclose its investments in associates and other joint

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ventures for each reporting segment in order to enhance the decision-making process of the
investors.
Equilibrium in stock prices:
The segmental disclosures would tend to adjust the company stock prices based on the
released information. According to Uechi et al. (2015), segment reporting has direct effect on the
share price of an organisation in the form of non-information hypothesis. The result has been
ensured by taking into consideration the changes in expected risk and return arising from
disclosure of segment profit. Hence, with the help of segment reporting, Nixon Group Plc could
obtain a considerable minimisation in risk for the organisation disclosing segmental profit
information. Moreover, the organisation could experience a fall in its cost of equity capital as
well by disclosing segmental profit data.
True and fair view:
A significant provision of IFRS 8 is to provide a fair and true reflection of the outcomes
of financial and operating positions. There is ardent need for segmental disclosures in terms of
the fair and true criteria mentioned in IFRS 8. This has encouraged the provision for disclosing
segmental information in the legislations of various global nations like Europe, Australia and
others (Strelnik, Usanova and Khairullin 2015). Moreover, the global agencies are engaged in
advocating the segmental disclosures. In few nations, guidelines are prepared by the accounting
bodies so that the organisations disclose their segmental information in their annual reports. For
instance, an auditor might be held legally liable on certain situations, if an unqualified audit
report is issued on the financial statements that fail to disclose the existence of considerable
disparities in the segmental outcomes (Wahlen, Baginski and Bradshaw 2014).

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Separation of profitable segments:
One of the primary benefits of segmental reporting is to ensure transparency in the
financial statements of any business organisation. As Nixon Group Plc is operating in different
geographical locations, it could use segment reporting for identifying those areas that are
profitable as well as the drains on the bottom line. In this case, the segment reporting of the
concerned organisation shows that its cross-border operations are earning more profits in
comparison to its domestic operations. This necessitates the need for a change in strategic
direction of Nixon Group Plc. If conducted properly, segmental reporting would restrict the
managers from unrevealing unprofitable ventures.
Improved context:
With the help of segment reporting, the stakeholders of Nixon Group Plc could obtain a
better overview of the fluctuations, which might influence the overall numbers. In case, an
organisation discloses increased earnings than the estimated figure, segment reporting helps in
identifying those areas from which such earnings are generated (Waweru and Ngugi 2014). The
stakeholders could go through the same report to find out whether the figures are sustainable. It
is formulated to assist the investors in better understanding of the business operations along with
its potential cash flows.
Besides the investors, it is expected that segment reporting would be beneficial to staffs,
trade unions and other stakeholders. The staffs and trade unions would like to see the
performance and prospects of the organisation from the perspectives of job security and wage
negotiations and therefore, the relevancy of segmental reports might be identical as in the case of
the investors. The consumer and public interests could be promoted with the help of segmental

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disclosures in the sense that social responsibility could be strengthened by segmental profit
disclosures in terms of the elimination of price discrimination. The consumers would be
benefitted from the increased competition arising out of segmental information disclosures. In
addition, the segmental disclosures by geographical regions are likely to promote better overview
of the corporate strategy and its effects and hence, a more reliable base would be provided for the
policy-making of the government. Finally, the regulations associated with mergers and
acquisitions along with competition policy are more probable to be effective, if dependent on
additional comprehensive information.

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Appendices:
Appendix 1: Income statement of Huawei Investment and Holding Coy Limited

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Appendix 2: Balance sheet statement of Huawei Investment and Holding Coy Limited

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Appendix 3: Cash flow statement of Huawei Investment and Holding Coy Limited

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Appendix 4: Actual statement of comprehensive income for Nixon Group Plc in March 2018