Capital Structure: History of Leverage at Harvey Norman

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The current capital structure at Harvey Norman is 29.16%. This is a slight increase in the capital structure of the company, reversing a trend of the past four years. The recent history of leverage at Harvey Norman is as follows: 2007 2008 2009 2010 2011 32.58% 29.12% 28.49% 23.23% 29.16% The current degree of leverage at Harvey Norman marks a return to the leverage of 2008. The 2011 Annual Report reveals a number of different reasons for this increase in leverage. The first is that total liabilities borrowings increased by $150 million. This increase comes primarily from an increase in long-term interest-bearing loans and borrowings, which increased $200 million in the last fiscal year. Other changes in the net borrowings derived from bank overdraft, commercial bills, derivatives payable, lease liabilities, and non-trade amounts owing to directors, related parties and unrelated persons (2011 Annual Report, p.114). The statement of cash flows outlines some of the changes to the capital structure. The company added $164.5 million in a consolidated loan facility, and it paid out $138.1 million in dividends. There were no share buybacks during the year. The company states in the annual report (p.4) that it intends to maintain a conservative gearing ratio. The company in this section attributes its increased borrowings to projects and opportunities on which it has embarked. These investments lie within the integrated retail, franchise and property system. One of the
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