Harley Davidson Analysis Report: Solvency and Profitability

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| Harley-Davidson, Inc. | Analysis Report: Solvency and Profitability | | | | Introduction: The purpose of this analysis report is to discuss the solvency and profitability of Harley-Davidson, Inc. (HOG) and formulate a measurement for is financial standing and profitability by comparison to the Industry in which it resides. Solvency is determined from data collected in the 2012 SEC Harley-Davidson, Inc. 10K report, and calculated based upon the solvency ratio; Solvency equals After Tax Net Profit plus Depreciation divided by Long Term Liabilities plus Short Term Liabilities. According to Investopedia.com the general rule of thumb is that a company with a solvency ratio greater than 20% is considered a financially healthy…show more content…
It could be speculated that one reason HD has such a high ratio is because they are not investing in the growth of their company and one might come to the conclusion that they are stagnant when in actuality this is not the case. When you look at their growth rates you have to take into consideration optimum performance levels. HD is deficient in every Growth Rate Ratio across the board. Revenue Growth, Earnings Per Share, Capital Spending Growth all significantly lower than that of their competitors. However, my opinion is that the reason behind this is that they are already a well-established company who are already operating at the optimum level at which their market demands. All of the other companies in HD’s shadow are trying to play catch up so they have larger percentages of growth by comparison; however they suffer in profitability as a result of their growth rate. This theory is further corroborated by analyzing all of the profitability ratios, management effectives ratios and the disparity those numbers reflect between HD and its competitors. The 5 year average for Operating Margins is 15.61% over the industry average of (-2.22%). I would once again reference that the operating margins are high because of HD’s foot hold in their industry which is also echoed in their Net Profit margin ratio of 7.86% over the industry comparison of (-0.48%). Comparisons for Pre-Tax Margin Ratios are 12.5% to the industries (-0.46%). This is a good indication

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