Harrods Sporting Goods

Harrods Sporting Goods

Vishvesh Subramanian

27th September 2011

Response to Question 1

Selected Ratio FY 2004 FY 2005 FY 2006

Net Income/ Total Sales 0.045247269

0.054222726

0.039890928

Net Income/Total Assets 0.060942527

0.072337197

0.057068867

Sales / Total Assets 1.346877484

1.334075253

1.430622687

Net Income / Stockholders Equity 0.16038519

0.185479779

0.150185935

Debt / Total Assets 0.620023973

0.609999554

0.620011908

Sales / Receivables 12.50236732

20.82958558

12.61085635

Sales / Inventory 4.390811512

3.586372399

4.750808887

Sales / Fixed Assets

2.543483868

2.63373828

2.772639031

Selected Ratio FY 2004 FY 2005 FY 2006

Gross Margin 29.9 33.5 35.4

Operating Margin 9.6 11.1 12

Net Margin 4.5 5.4 4

Return on Assets 6.1 7.2 5.7

Return on Equity 16 18.6 15

Debt Turn Over 62 61 62

Response to Question 2

Over the past 3 years, the company has gone on an upward trajectory for the first two years and slides down in 2006. The cost of goods sold has remained fairly constant over the past three years. The sales revenue has seen gradual improvement over the past years. This probably is lesser than the industry average because of lesser number of branches compared to big retailers like Wal-Mart or Lowe’s. It is understandable to see a moderate increase in administrative and transaction expenses, as there are more branches that are being set up. Between financial years 2005 and 2006, there is a loss of net income. This is attributed to the extraordinary loss quoted in the year 2006. The company has managed