Report On Company Operations, Investments And Financing Answer

Question 1: Name of Firm- Business Model

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a) Objectives of firm and processes associated

The firm or company selected for establishing the operational investment and financing report is considered to be Harvey Norman Holdings. The principal objective of Harvey Norman Holdings is identified with the firm establishing strong market credentials to become a leading home appliance organisation providing affordable technological and household products to the public. Processes involved with meeting objectives of Harvey Norman Holdings mainly focuses on mixing traditional business tactics with new-age business tactics. Influence and support of technology-driven business growth is integrated with traditional techniques of marketing and promotion for Harvey Norman to establish its appeal quotient among customers in Australia.

b) Products, services offered to customers

Generic products and services are fundamentally offered to customers located in Australia where electrical and home appliances are identified as highly movable products and services. The company is also venturing in detail with regards to offering more retail services to its customers where bedding and computer products and services are perhaps identified to be undergoing a trial phase (harveynormanholdings.com.au, 2023). Product and service numbers by Harvey Norman Holdings can be further integrated with total sales value generated from facilitation of products to customers. This is numerically represented by demonstrating sales value of $ 2.807 billion in the financial year 2023 (annualreports.com, 2022).

c) Market Operations and Industry involved with

The market operations for Harvey Norman Holdings can be identified as a globally or internationally feasible company where direct business operations are facilitated alongside adopting a franchise based model of business. The geographic epicentres of business locations for Harvey Norman Holdings are present in Europe, Southeast Asia as well as New Zealand. Since, the company is mainly associated with offering retail services to the general public, it is classified to be an integral part of the tertiary sector in Australia.

Question 2: Core Business Operations

a) Details of revenue streams for previous 4 years

Revenue Stream Evaluation
Harvey Norman Holdings (000)
Items	2022	2021	2020	2019
Sales from Products	$ 28,07,329.00	$ 27,68,328.00	$ 22,94,913.00	$ 22,34,118.00
Franchisee Sales	$ 13,01,142.00	$ 13,45,782.00	$ 10,55,866.00	$ 9,43,648.00
Other Revenue	$ 3,97,186.00	$ 3,24,521.00	$ 1,94,995.00	$ 2,42,419.00
Total Sales	$ 45,05,657.00	$ 44,38,631.00	$ 35,45,774.00	$ 34,20,185.00
Product Sales to Total Sales	62.31%	62.37%	64.72%	65.32%
Franchisee Sales to Total Sales	28.88%	30.32%	29.78%	27.59%

Table 1: Revenue Stream Evaluation

b) Proportion of items with sales revenues

Items	2022	2021	2020	2019
Cost of Sales	$ 18,71,051.00	$ 18,38,365.00	$ 15,55,271.00	$ 15,10,733.00
Sales & Marketing Expenses	$ 3,96,208.00	$ 3,77,639.00	$ 3,80,099.00	$ 3,91,044.00
Administration Expenses	$ 6,67,931.00	$ 6,37,583.00	$ 5,54,753.00	$ 5,67,970.00
Financing Expenses	$ 52,148.00	$ 50,213.00	$ 59,794.00	$ 28,782.00
Profit	$ 8,17,879.00	$ 8,46,845.00	$ 4,86,023.00	$ 4,09,002.00
Total Sales	$ 45,05,657.00	$ 44,38,631.00	$ 35,45,774.00	$ 34,20,185.00
Proportions (With Total Sales)
Cost of Sales	41.53%	41.42%	43.86%	44.17%
Sales & Marketing Expenses	8.79%	8.51%	10.72%	11.43%
Administration Expenses	14.82%	14.36%	15.65%	16.61%
Financing Expenses	1.16%	1.13%	1.69%	0.84%
Profit	18.15%	19.08%	13.71%	11.96%

Table 2: Computation of Proportions

i) Cost of Sales

Cost of sales proportion to sales in 2022, 2021, 2020 and 2019 is calculated as 41.53%, 41.42%, 43.86% and 44.17%.

ii) Sales & Marketing Expenses

Sales & marketing expenses proportion includes percentile values of 8.79%, 8.51%, 10.72% and 11.43%.

iii) Administration Expenses

Administration expenses proportion contains percentage values of 14.82%, 14.36%, 15.65% and 16.61%.

iv) Financing Expenses

Financing expense proportion values are calculated as 1.16%, 1.13%, 1.69% and 0.84%.

v) Profit

Profit percentage on sales includes values of 18.15%, 19.08%, 13.71% and 11.96%.

c) Continuous improvement opportunities

The activities undertaken to ensure continuous improvement opportunities are linked with ensuring online based delivery facilities driven through mobile applications. The online based application drive is considered to be a beneficial tool where customer orientation can be maximised by a company (Zubair, Kabir & Huang, 2020).

Question 3: Investments in Working Capital and Non-Current Assets

a) Analysis of movements in working capital in the previous 4 years

Working Capital Evaluation
Harvey Norman Holdings (000)
Items	2022	2021	2020	2019
Current Assets	$ 19,06,471.00	$ 17,26,576.00	$ 12,98,331.00	$ 14,56,340.00
Current Liabilities	$ 9,89,807.00	$ 11,45,061.00	$ 7,85,444.00	$ 8,99,108.00
Working Capital	$ 9,16,664.00	$ 5,81,515.00	$ 5,12,887.00	$ 5,57,232.00

Table 3: Working Capital Movement

As per above assessment of working capital movement, it can be determined that working capital in 2022 has increased significantly in comparison to 2021, 2020 and 2019. The impact on business is further considered to be positive in 2022 as the current ratio is observed to be increasing simultaneously. Current ratio is identified as the proportion between current assets and current liabilities (Ruan et al. 2019).

b) Assessment of movement in non-current assets

Non-Current Asset Evaluation
Harvey Norman Holdings (000)
Items	2022	2021	2020	2019
Tangible Assets	$ 32,30,213.00	$ 29,05,509.00	$ 25,93,330.00	$ 25,08,951.00
Intangible Assets	$ 58,420.00	$ 63,668.00	$ 63,003.00	$ 64,631.00
Non-Current Assets	$ 53,39,932.00	$ 49,46,358.00	$ 45,30,271.00	$ 33,42,404.00
Tangible Assets to Non-Current Assets	0.60	0.59	0.57	0.75
Intangible Assets to Non-Current Assets	0.01	0.01	0.01	0.02

Table 4: Non-Current Asset Movement

The above table of non-current asset movement signifies higher emphasis being laid by Harvey Norman to focus on the value of building tangible assets in comparison to intangible assets.

c) Future prospects with respect to investments in non-current assets

The future of Harvey Norman considering investments in non-current assets is deemed favourably opportunistic as better financial rewards and recognition can be obtained. As stated by Moro Visconti & Morea (2020), an organisation could further detect strategies of monetisation to encourage monetary growth in future investments.

Question 4: Financing using a combination of Debt and Equity

a) Analysis of asset Funding through sources

Debt to Total Assets	Amount 2022	Amount 2021	Amount 2020	Amount 2019
Debt	$ 19,62,472.00	$ 16,34,854.00	$ 15,65,833.00	$ 7,01,843.00
Total Assets	$ 72,46,403.00	$ 66,72,934.00	$ 58,28,602.00	$ 49,78,744.00
Formula	Ratio 2022	Ratio 2021	Ratio 2020	Ratio 2019
Debt/ Total Assets	27.08%	24.50%	26.86%	14.10%
Equity to Total Assets	Amount 2022	Amount 2021	Amount 2020	Amount 2019
Equity	$ 42,94,124.00	$ 38,93,019.00	$ 34,77,325.00	$ 31,97,193.00
Total Assets	$ 72,46,403.00	$ 66,72,934.00	$ 58,28,602.00	$ 49,78,744.00
Formula	Ratio 2022	Ratio 2021	Ratio 2020	Ratio 2019
Equity/ Total Assets	59.26%	58.34%	59.66%	64.22%

Table 5: Funding Analysis

i) Debt

The above table suggests the proportion of debt calculated in 2022, 2021, 2020 and 2019 as 27.08%, 24.50%, 26.86% and 14.10%. Hence, it can be determined that the proportion of debt in four years is below the proportion of equity. Low proportion of debt is mainly offered priority when an organisation is more focussed on capital building through shareholders (Kumar et al. 2022).

ii) Equity

Equity proportion from the above table has been calculated as 59.26%, 58.34%, 59.66% and 64.22% respectively. This further shows that equity source of financing is perhaps offered more weightage and strategic importance by Harvey Norman Holdings to boost funding growth in asset investment.

b) Major factors influencing financing decisions regarding selection of financing source

The major factor that can be identified with Harvey Norman Holdings emphasising selection of equity source of finance as the principal avenue is perhaps linked with reduction in capital gearing risks. Additional factors associated with adoption of equity as a major source of finance include lower emphasis being laid on raising financial leverage (He, Chen & Hu, 2019).

c) Overview of shareholder rewards for investments

Facilitation of dividend payments is perhaps considered to be the best reward that is offered by Harvey Norman Holdings to felicitate their shareholders for investments held.

Question 5: Sustainability, Social and Environmental Considerations

a) Main Social and Environmental Factors affecting Harvey Norman Holdings

The main social and environmental factors affecting Harvey Norman Holdings are considered to be linked with consideration to three important pillars of sustainability that include people, place and products. Social factors affecting business dynamics for Harvey Norman Holdings are identified as improper working environment for employees as well as lack of adequate qualities for products which might hamper long-term business sustainability. Environmental factors further consist of higher production wastes and pollution as well as lack of adherence to compensate climatic changes which possess the danger of lower stability for Harvey Norman Holdings in Australia.

b) Discussion on sustainability of revenue streams and activities undertaken to maintain market position

The main revenue streams for Harvey Norman Holdings have been identified as revenues generated from customer sales as well as revenues generated from franchisee operations. The prospects of sustainability with revenues from customer sales are considered to be favourable as an incremental numeric figure can be established in 2022 as compared to 2021. However, revenue from franchisee activities is perhaps considered to portray adverse characteristics as franchisee revenues in 2022 have decreased marginally. Sales from products to customers in 2022 and 2021 are numerically represented as $ 397,186 and $ 324,521, while sales from franchisee operations include numerical values of $ 1301,142 and $ 1345,782. Major activities associated with maintaining market position includes identification of prospective customers through social media platforms and amping up promotions to boost and expand franchise operations at a global scale.

c) Overview of social and environmental concerns associated with objective of shareholder wealth maximisation

Social and environmental concerns from a shareholder perspective to maximise wealth is usually deemed to be present in a favourable state and are largely identified to be consistent as internal and external harmony is emphasised largely by Harvey Norman. As per statements and illustrations of Yan, He & Lu (2019), higher emphasis on social and environmental concerns further allows an organisation to maximise investor bankability thereby boosting financial and non-financial credibility.

• References
• annualreports.com, 2022, Harvey Norman Holdings Annual Report [online], Retrieved from: https://www.annualreports.com/Company/harvey-norman-holdings-limited [Retrieved on: 10th July, 2023]
• harveynormanholdings.com.au, 2023, About Us [online], Retrieved from: https://www.harveynormanholdings.com.au/ [Retrieved on: 10th July, 2023]
• He, Y., Chen, C., & Hu, Y. (2019). Managerial overconfidence, internal financing, and investment efficiency: Evidence from China. Research in International Business and Finance, 47, 501-510.https://www.sciencedirect.com/science/article/pii/S0275531918301867
• Kumar, S., Sharma, D., Rao, S., Lim, W. M., & Mangla, S. K. (2022). Past, present, and future of sustainable finance: insights from big data analytics through machine learning of scholarly research. Annals of Operations Research, 1-44.https://link.springer.com/article/10.1007/s10479-021-04410-8
• Moro Visconti, R., & Morea, D. (2020). Healthcare digitalization and pay-for-performance incentives in smart hospital project financing. International journal of environmental research and public health, 17(7), 2318.https://www.mdpi.com/1660-4601/17/7/2318
• Ruan, J., Wang, Y., Chan, F. T. S., Hu, X., Zhao, M., Zhu, F., ... & Lin, F. (2019). A life cycle framework of green IoT-based agriculture and its finance, operation, and management issues. IEEE communications magazine, 57(3), 90-96.https://ieeexplore.ieee.org/abstract/document/8663998/
• Yan, N., He, X., & Liu, Y. (2019). Financing the capital-constrained supply chain with loss aversion: Supplier finance vs. supplier investment. Omega, 88, 162-178..https://www.sciencedirect.com/science/article/pii/S030504831731304X
• Zubair, S., Kabir, R., & Huang, X. (2020). Does the financial crisis change the effect of financing on investment? Evidence from private SMEs. Journal of Business Research, 110, 456-463. https://www.sciencedirect.com/science/article/pii/S0148296320300758