Case Study : Myer Holdings Limited

1198 WordsJun 6, 20165 Pages
Brief Description About the Company Myer Holdings Limited is an Australian department store group, which provides 11 product categories including clothes, footwear, handbags, fragrances and cosmetics, beauty, homewares, toys, electrical products, and general merchandise. 1. Reformatted Financial Statement and Financial Analysis Explanation of Ratios and Cash Flow Changes Return on equity (ROE) tells where Myer’s strength lies and if there is a room for more improvement. A company can earn higher ROE if they have higher net profit margin, high leverage, and they are using the assets effectively in order to generate more sales. ROE and ROA ratios can measure the relationship of Myer’s net income with their shareholders ' equity and the total assets respectively. From 2012 to 2013, Myer’s ROE was almost stable at 16%, and then over the period 2013-2015, it decreased from 16% to 5%. The changes in ROE reflected changes in ROA, which was almost stable over the period 2012-2013 at 12% then declined to 8% and it kept decreasing to reach 4% in 2015. ROA changes reflected on the Spread that is also decreased dramatically. Over the period 2012-2014, leverage decreased from 49.01% to 46.94% then it increased to reach 49.04% last year. Leverage is the amount of debt that Myer uses to buy more assets. An excessive amount of leverage raises the risk of failure, because it becomes more difficult for the firm to repay their debt. Furthermore, it can earn outsized returns for the
Open Document