Harvey Norman Cash Flow Analysis

This assignment requires a detailed analysis of Harvey Norman's cash flow statements spanning multiple periods. The data provided covers key areas such as long-term debt repayment, common stock issuance, cash dividends paid, other financing activities, net change in cash, and cash at the beginning and end of each period. Students are expected to examine trends, patterns, and significant fluctuations within these financial metrics to gain a comprehensive understanding of Harvey Norman's cash flow management.

Running Head: Finance
1
Project report: finance

Finance
2
Contents
Introduction.......................................................................................................................3
Research Methodology.....................................................................................................3
Findings and discussion on WACC..................................................................................3
Discussion and findings on Capital Structure...............................................................4
Work reflection.................................................................................................................4
References.........................................................................................................................5
Appendix...........................................................................................................................6

Finance
3
Introduction:
Harvey Norman is an Australian comapny which manufactures and deals in the
bedding, furniture, communication, computers and consumer electrical products, this
comapny operates its business in international market as well. Comapny has around 300
outlets and franchise in Australian market only. The average revenue of the comapny is AUD
$ 523 billion. The performance of the comapny is increasing rapidly. Currently, 10000 people
are working with this comapny (Home, 2017). This comapny is diversifying its market into
various new countries to enhance the revenue and grab the market shares.
Research Methodology:
The calculation of the weighted average cost of capital of the Harvey Norman Plc has
been calculated through using various spreadsheet functions and the methods which has been
given in the appendix (Finance, 2017). The capital asset pricing method has been used to
calculate the cost of equity. Risk free rate of the country has been found through the
Australian 10 years bond rate. The market return premium has been calculated through
analyzing the indices rate and return. The cost of debt of the comapny has been analyzed
through analyzing the interest rate and the tax rate of the debt and the country (Bloomberg,
2017).
Through the cost of debt and the cost of equity, weighted average cost of capital of
the comapny has been analyzed and it has been found that how much expenses would
comapny has to bear to raise the funds through equity and debt.
Findings and discussion on WACC:
The calculation of WACC of the Harvey Norman has been calculated through using
the market value and the book value of the comapny. According to the calculation, the cost of
market share and book share of the debt, equity and the assets of the comapny are almost
similar. The book value share of equity is 67% and the liability is 33% and the market value
share of equity is 67% and the liabilities are 33%, the calculations have been given into the
appendix (Australia, 2017).
According to this, it has been analyzed that the market value and the book value of the
company are almost similar. Still the book value of the shares has been taken into the
consideration while analyzing the weighted average cost of capital (AFR, 2017). Through the

Finance
4
comapny profit, it has been analyzed that the comapny is the biggest company in the industry
and thus the investors are looking forward to invest into the comapny for long term.
According to the calculations, it has been analyzed that the total beta of the comapny
is 0.9369 and the total risk free rate of the country is 2.08%. Further, it has been analyzed that
the estimated return on equity of the comapny is 8.64%.
According to the calculations, it has been found that the weighted average cost of
capital of the comapny is 8.14%. In which the cost of equity of the comapny is 8.64% and
the cost of debt of the comapny is 5.60%. And thus the total cost of the comapny is 8.14%.
Discussion and findings on Capital Structure:
Harvey Norman’s capital structure has been analyzed and it has been found that the
total debt of the comapny is quite lesser than the total equity of the comapny. The debt to
total asset ratio of the comapny is 90.7% whereas the E/V ratio of the comapny is 9.3%. The
total debt of the comapny is 33,00,00,000 whereas the total equity of the comapny is AUD
2,79,04,59,000.
Through this ratio, it has been analyzed that the debt must be raised by the comapny
to make an optimal capital mix and enjoy the lower risk and cost in terms of capital of the
comapny.
Work reflection:
Before starting the work, I have found that the calculations are quite typical and it is
not easy for me to do it in a perfect manner. The collection of data in a proper manner was
also a challenge for me. After that, I have found that the historical data can easily be got from
the yahoo finance of Google finance and the financial data of the company could be got from
the annual report or Morningstar of the comapny.
This assignment has given me a chance to raise the knowledge of me about the capital
structure and the cost of the comapny. Through this report, it has been found that the market
performance of the comapny is better. The cost of the comapny could be reduced by the
company and the company is required to set an optimal mix of capital of the comapny.

Finance
5
References:
AFR. (2017). Harvey Norman LTD. Retrieved from
http://www.afr.com/research-tools/HNN/company-profile/operational-history
Australia, R. B. (2017). Retrieved from
www.rba.gov.au:http://www.rba.gov.au/statistics/tables/#interest-rates
Bloomberg. (2017). Harvey Norman LTD. Retrieved from
https://www.bloomberg.com/quote/HNN:AU
Finance, Y. (2017). Harvey Norman Historical Prices. Retrieved from
https://finance.yahoo.com/quote/%5EAORD/history?
period1=1404153000&period2=1498761000&interval=1d&filter=history&frequency=
1d
Home (2017). Harvey Norman. Retrieved from
www.riotinto.com:http://www.riotinto.com/aboutus/about-rio-tinto-5004.aspx
Morningstar. (2017). DatAnalysis Premium. Retrieved from
http://financials.morningstar.com/cash-flow/cf.html?
t=XFRA:HNN&region=deu&culture=en-US

Finance
6
Appendix:
Market Value of Debt = $
33,00,00,000
Market Value of Equity = $
2,79,04,59,000
Market Value of the Firm = $
3,12,04,59,000
Cost of Debt = 5.60%
Cost of Equity = 8.64%
the Tax Rate = 30%
D,E, & V Known
Thus the WACC = 8.14%
Book Value Balance Sheet
Total assets Total Liabilities Equity
Amount 4,18,97,44,000.00 1,39,92,85,000.00 2,79,04,59,000.00
Weights 100% 33% 67%
Market value Balance Sheet
Total assets Total Liabilities Equity
Amounts
$
4,18,97,44,000
$
1,39,92,85,000
$
2,79,04,59,000
Weights 100% 33% 67%
Re
Using
Risk
Premium
of 7%
Estimate of Return on Equity for WACC
Significance
Risk Free
Rate 2.08%
Beta Estimate
= 0.9369 Significant

Finance
7
Risk Permium 7.0%
Using CAPM the expected return on or return on equity is: E[Re] =  + *Rm
(you might like to estimate adjusting for Rf also - off DX Data)
Estimated Re = 8.64% *
ASX
Code
Compan
y Name Item
2017-
06
2016-
06
2015-
06
2014-
06
2013-
06
HNN
Harvey
Norman Revenue
29047
42000
28259
78000
25809
61000
24353
36000
22397
16000
HNN
Harvey
Norman Cost of revenue
12356
02000
12319
33000
11268
94000
10648
92000
94422
9000
HNN
Harvey
Norman Gross profit
16691
40000
15940
45000
14540
67000
13704
44000
12954
87000
HNN
Harvey
Norman Operating expenses
HNN
Harvey
Norman
Sales, General and
administrative
92130
6929
14097
99000
13017
88000
11596
70000
12300
34000
HNN
Harvey
Norman Other operating expenses
35022
3071
-
13795
8000
-
12121
7000
-
14774
000
-
48951
000
HNN
Harvey
Norman Total operating expenses
12715
30000
12718
41000
11805
71000
11448
96000
11810
83000
HNN
Harvey
Norman Operating income
39761
0000
32220
4000
27349
6000
22554
8000
11440
4000
HNN
Harvey
Norman Interest Expense
20072
000
28706
000
32872
000
36437
000
45774
000
HNN
Harvey
Norman Other income (expense)
26226
8000
20026
5000
13747
6000
11195
0000
11931
6000
HNN
Harvey
Norman
Income before income
taxes
63980
6000
49376
3000
37810
0000
30106
1000
18794
6000
HNN
Harvey
Norman
Provision for income
taxes
18684
0000
14242
3000
10918
6000
88823
000
43469
000
HNN
Harvey
Norman Minority interest
39900
00
27350
00
81900
0
54300
0
22660
00
HNN
Harvey
Norman Other income
39900
00
27350
00
81900
0
54300
0
22660
00
HNN Harvey Net income from 45296 35134 26891 21223 14447

Finance
8
Norman continuing operations 6000 0000 4000 8000 7000
HNN
Harvey
Norman Other
-
39900
00
-
27350
00
-
81900
0
-
54300
0
-
22660
00
HNN
Harvey
Norman Net income
44897
6000
34860
5000
26809
5000
21169
5000
14221
1000
HNN
Harvey
Norman
Net income available to
common shareholders
44897
6000
34860
5000
26809
5000
21169
5000
14221
1000
HNN
Harvey
Norman Earnings per share
HNN
Harvey
Norman Basic 0.4 0.31 0.25 0.2 0.13
HNN
Harvey
Norman Diluted 0.4 0.31 0.24 0.2 0.13
HNN
Harvey
Norman
Weighted average shares
outstanding
HNN
Harvey
Norman Basic
11127
04211
11115
63813
10936
26019
10775
11100
10775
11100
HNN
Harvey
Norman Diluted
11140
84367
11115
63813
10951
59313
10784
67471
10780
64603
HNN
Harvey
Norman EBITDA
73774
7000
60101
6000
48841
8000
41513
1000
32325
1000
ASX
Code
Compan
y Name Item
2017-
06
2016-
06
2015-
06
2014-
06
2013-
06
HNN
Harvey
Norman
Cash and cash
equivalents
80224
000
13987
4000
18584
0000
14495
7000
16166
0000
HNN
Harvey
Norman Short-term investments
27499
000
26204
000
26148
000
21596
000
19072
000
HNN
Harvey
Norman Total cash
10772
3000
16607
8000
21198
8000
16655
3000
18073
2000
HNN
Harvey
Norman Receivables
64068
6000
10965
72000
11425
51000
11193
93000
10544
02000
HNN
Harvey
Norman Inventories
31596
8000
31574
6000
29838
1000
29767
0000
26878
1000
HNN
Harvey
Norman Prepaid expenses
28383
000
15578
000
12212
000
19344
000
HNN
Harvey
Norman Other current assets
19673
000
11573
000
23548
000
11339
000
86540
00
HNN
Harvey
Norman Total current assets
11124
33000
16055
47000
16764
68000
16071
67000
15319
13000
HNN
Harvey
Norman Non-current assets
HNN
Harvey
Norman
Property, plant and
equipment
HNN
Harvey
Norman Other properties
11989
21000
11675
05000
11148
47000
11248
72000
10994
92000

Finance
9
HNN
Harvey
Norman
Property and
equipment, at cost
11989
21000
11675
05000
11148
47000
11248
72000
10994
92000
HNN
Harvey
Norman
Accumulated
Depreciation
-
57380
9000
-
58670
0000
-
56224
4000
-
55581
5000
-
55058
9000
HNN
Harvey
Norman
Property, plant and
equipment, net
62511
2000
58080
5000
55260
3000
56905
7000
54890
3000
HNN
Harvey
Norman
Equity and other
investments
22970
90000
20889
39000
19731
92000
19445
92000
18842
61000
HNN
Harvey
Norman Goodwill 10000 10000
HNN
Harvey
Norman Intangible assets
75237
000
81192
000
83727
000
77888
000
58903
000
HNN
Harvey
Norman Deferred income taxes
19205
000
28395
000
HNN
Harvey
Norman Other long-term assets
79872
000
75317
000
72554
000
74170
00
12646
000
HNN
Harvey
Norman Total non-current assets
30773
11000
28262
53000
26820
76000
26181
69000
25331
18000
HNN
Harvey
Norman Total assets
41897
44000
44318
00000
43585
44000
42253
36000
40650
31000
HNN
Harvey
Norman
Liabilities and
stockholders' equity
HNN
Harvey
Norman Liabilities
HNN
Harvey
Norman Current liabilities
HNN
Harvey
Norman Short-term debt
38525
6000
45234
6000
40829
9000
46987
2000
17245
5000
HNN
Harvey
Norman Capital leases
13270
00
36400
0
13900
0
HNN
Harvey
Norman Accounts payable
18291
7000
62582
1000
68266
6000
64230
1000
51741
6000
HNN
Harvey
Norman Deferred income taxes
42541
000
42711
000
34807
000
24142
000
23817
000
HNN
Harvey
Norman Deferred revenues
37973
000
84500
0 12000
10220
00
HNN
Harvey
Norman Other current liabilities
93411
000
15777
0000
15632
3000
12590
5000
11934
7000
HNN
Harvey
Norman Total current liabilities
74342
5000
12790
12000
12830
79000
12622
32000
83405
7000
HNN
Harvey
Norman Non-current liabilities
HNN
Harvey
Norman Long-term debt
33000
0000
20000
0000
29000
0000
23809
4000
64782
1000
HNN
Harvey
Norman Capital leases
38580
00
57590
00
HNN Harvey Deferred taxes 26721 22625 19872 20818 19435

Finance
10
Norman liabilities 9000 4000 8000 5000 3000
HNN
Harvey
Norman
Other long-term
liabilities
54783
000
54479
000
49656
000
45448
000
58511
000
HNN
Harvey
Norman
Total non-current
liabilities
65586
0000
48649
2000
53838
4000
49172
7000
90068
5000
HNN
Harvey
Norman Total liabilities
13992
85000
17655
04000
18214
63000
17539
59000
17347
42000
HNN
Harvey
Norman Stockholders' equity
HNN
Harvey
Norman Common stock
38630
9000
38529
6000
38032
8000
25961
0000
25961
0000
HNN
Harvey
Norman Retained earnings
22292
00000
21251
86000
20434
63000
21090
32000
20088
80000
HNN
Harvey
Norman
Accumulated other
comprehensive income
17495
0000
15581
4000
11329
0000
10273
5000
61799
000
HNN
Harvey
Norman
Total stockholders'
equity
27904
59000
26662
96000
25370
81000
24713
77000
23302
89000
HNN
Harvey
Norman
Total liabilities and
stockholders' equity
41897
44000
44318
00000
43585
44000
42253
36000
40650
31000
ASX
Code
Compan
y Name Item
2017-
06
2016-
06
2015-
06
2014-
06
2013-
06
HNN
Harvey
Norman
Cash Flows From
Operating Activities
HNN
Harvey
Norman Other non-cash items
42514
0000
43769
1000
34044
8000
33893
5000
23921
7000
HNN
Harvey
Norman
Net cash provided by
operating activities
42514
0000
43769
1000
34044
8000
33893
5000
23921
7000
HNN
Harvey
Norman
Cash Flows From Investing
Activities
HNN
Harvey
Norman
Investments in property,
plant, and equipment
-
89366
000
-
68155
000
-
55012
000
-
66617
000
-
73578
000
HNN
Harvey
Norman
Property, plant, and
equipment reductions
28592
000
90510
00
71520
00
10459
000
42970
00
HNN
Harvey
Norman Acquisitions, net
-
25349
000 -4000
-
26080
00
-
12200
0
HNN
Harvey
Norman Purchases of investments
-
13799
1000
-
94880
000
-
35021
000
-
56132
000
-
14977
1000
HNN
Harvey
Norman
Sales/Maturities of
investments
11600
0
14770
00
13400
0
10993
000
HNN
Harvey
Norman Purchases of intangibles
-
63600
0
-
39500
0
HNN Harvey Other investing charges 16470

Finance
11
Norman 00
HNN
Harvey
Norman
Net cash used for investing
activities
-
19876
5000
-
17985
3000
-
81803
000
-
11311
7000
-
20818
1000
HNN
Harvey
Norman
Cash Flows From
Financing Activities
HNN
Harvey
Norman Long-term debt issued
72075
000
34900
0
44349
000
18780
00
10566
000
HNN
Harvey
Norman Long-term debt repayment
-
15250
000
-
45862
000
-
52000
000
-
11831
000
HNN
Harvey
Norman Common stock issued
10130
00
49680
00
HNN
Harvey
Norman Cash dividends paid
-
34496
2000
-
26688
2000
-
33366
4000
-
11154
3000
-
90297
000
HNN
Harvey
Norman Other financing activities
12071
8000
-
12554
8000
45000
000
HNN
Harvey
Norman
Net cash provided by (used
for) financing activities
-
28712
4000
-
30742
7000
-
22059
7000
-
23521
3000
-
46562
000
HNN
Harvey
Norman Net change in cash
-
60749
000
-
49589
000
38048
000
-
93950
00
-
15526
000
HNN
Harvey
Norman Cash at beginning of period
10363
1000
15322
0000
11517
2000
12456
7000
14009
3000
HNN
Harvey
Norman Cash at end of period
42882
000
10363
1000
15322
0000
11517
2000
12456
7000
HNN
Harvey
Norman Free Cash Flow
HNN
Harvey
Norman Operating cash flow
42514
0000
43769
1000
34044
8000
33893
5000
23921
7000
HNN
Harvey
Norman Capital expenditure
-
89366
000
-
68791
000
-
55407
000
-
66617
000
-
73578
000
HNN
Harvey
Norman Free cash flow
33577
4000
36890
0000
28504
1000
27231
8000
16563
9000
HNN
Harvey
Norman
Supplemental schedule of
cash flow data
HNN
Harvey
Norman Cash paid for income taxes
-
15245
4000
-
11553
5000
-
89284
000
-
78626
000
-
44764
000
HNN
Harvey
Norman Cash paid for interest
-
19420
000
-
28829
000
-
33059
000
-
36583
000
-
45945
000