FINANCIAL REPORTING

Financial reporting and applications



FINANCIAL REPORTING AND APPLICATIONS

Executive Summary

The home furnishings sector includes furniture, floor coverings and household textiles. The sector is valued at retail selling price (RSP) and includes all relevant taxes. Any currency conversions included in this report have been calculated using constant 2005 annual average exchange rates.

The global home furnishing retail sector, which consists of furniture, floor coverings and household textiles, has outperformed the global retail industry overall. Year-undergrowth has been increasing steadily during the five years under consideration. Growth is expected to be maintained at a healthy rate during the years to 2010.

Growth of 7.6% in 2005 took the sector to a value of $502.9 billion. This corresponds tos a compound annual growth rate (CAGR) of 4.7%, which compares favourably withthat of the global retail industry. Home construction in North America has been expanding in recent years, and levels of construction and home ownership in China have also been increasing: these are just two drivers of growth in the home furnishing retail sector.

The most lucrative segment is sales through furniture stores, which in 2005generated $273 billion worldwide or 54.3% of the global sector. The remaining$229.9 billion in revenues were generated by home furnishing stores. Europe is by farthe most important geographical market, with $247.8 billion of 2005 revenues generated there, equivalent to 49.3% of the global total. The US accounts for a further 22.4% of the sector revenues.

Going forward, the sector is forecast to accelerate its performance. A predicted CAGR of 7.5% for 2005-2010 is expected to drive revenues to $723.1 billion by the end of 2010. This indicates that the strong home furnishings sector will continue to outperform the retail industry as a whole, which is expected to expand with a CAGRof 5.8% during the same period.

EVALUATION

Short-term liquidity

The short-term liquidity of a firm refers to the ability of a firm to make sure that the firm fulfils all its obligations, and manages to pay all its dues well on time, when due. (Gibson 2010)There are numerous things that can help to judge the short-term liquidity these factors include things like the working capital of the company, the current ratio, the quick ratio of the company, etc. The short-term liquidity of a firm contains things like objectives of management of liquidity of a company, e.g. the amount of excess funds that a company posses, the loans of the company that are due in near future, etc. When we analyze the short-term liquidity of Home Group Plc, we can say that the current ratio and the liquidity ratio (which are the most important factors to judge the liquidity of a company), have been improving over the past few years. The current ratio of Home group Plc has jumped from 1.34 to 1.87 during the past five years, this means that the five years Home Group Plc had £1.34 for every £1 of short term liability, and now, they have £1.87 for every £1 of current liability. This implies that the Home Group can easily pay off ...