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Essay / Research Paper Abstract
This 5 page paper looks at selected financial ratios for Harley Davidson in the years 2006 and 2007 to assess the performance and determine whether or not it is a good investment. The ratios examined are the net profit margin, the inventory turnover, the debt ratio and the price earrings ratio. The paper ends by calculating the weighted average cost of debt and then makes a hypothetical recommendation. The bibliography cites 3 sources.
Page Count:
5 pages (~225 words per page)
File: TS14_TEharleyinv.rtf
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Unformatted sample text from the term paper:
However, the firm has found it difficult to increase market share, although the market for the core product of heavy bikes has been increasing overall. With some years of loss
and difficulties and improvements seen in recent years any investor will want to assess the performance of the firm in order to consider the company as a potential investment target.
There are a number of ratios that can be considered to assess performance. One of the most important ratios to shareholders and
potential investors will be the net profit margin.. This measures the net profit as a percentage of the turnover. The basic calculation is the net profit the total revenue after
all costs have been deducted, sometimes before interest and tax and sometimes after tax and interest, by the turnover. This is often used as a benchmark to assess the performance
of the firm and can help to show patterns of improvement or deterioration. Looking at the net profit, after interest but before tax shows that the firm is becoming
less efficient, in 2007 the net profit margin before tax (EBT) 25.3% compared to 28% in 2006. Most of this is accounted for as a result of increasing costs, the
cost of goods sold in 2007 was 63.1% of the revenue, compared to 61.5% in 2006. In addition to this the sales and administration costs also increased from 14.5% of
revenue in 2006 to 15.7% in 2007. This is also accompanied by a fall in sales in numerical terms as well as the ratio analysis; both showing a fall,
indicating an overall decline in performance. When there are concerns regarding the performance of a firm, one area that may be considered in the inventory turnover and the inventory
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