Harley Davidson Financial Statements and Financial Ratios Analyzed

For this section, I have chosen several different financial ratios to review for Harley Davidson from 2015 to 2019.  In reviewing each of their financial ratios, I first start with defining the financial ratio.  Next, I supply the financial formula for calculating the specific ratio.  Finally, I offer a brief analysis of their important Financial ratios. 

Harley-Davidson Current Ratio.

Harley-Davidson’s current ratio ended 2015 at 1.45.  In the next two years, the organization’s current ratio would continue to fall ending 2017 at 1.23.  Granted, because Harley-Davidson’s current ratio is above 1.0, the organization may not be suffering, or have suffered, a liquidity crunch.  However, in the next two years, the company’s current ratio would rebound continuously and in 2019 at 1.31.  In most instances, this rebound would be a comforting thought for investors.  However, because the organization has tapped into their short-term investments, this ratio may be more of a red herring as compared to a lifesaver.

Harley-Davidson Total Asset Turnover.

Harley-Davidson ended 2015 with a total asset turnover of .6.  The firm would moderately improve its efficiency for total asset usage in 2016 which resulted in a .61 total asset turnover.  Unfortunately though in the next three years, the company’s total asset turnover would continually fall ending 2019 at .51.  This trend may indicate that the organization should liquidate some fixed assets that are not performing as expected.

Harley-Davidson Return on Assets.

In the last five years, Harley-Davidson’s return on assets would continually fall, which marks a significant trend in the organization's operations.  In 2019, the company’s return on assets was 4.02%.  However, in 2015, the organization ended the year at 7.53%.  This shows that the company is continually underutilizing its assets and in turn generating less returns per dollar of assets.  To mitigate this issue, either the organization needs to increase its revenues, which seems unlikely due to its five-year revenue reduction trend.  A more realistic approach would be for the company to again sell off underperforming assets.

Harley-Davidson Debt ratio.

In 2015, Harley-Davidson had a debt ratio of 48.5%.  From an investor’s perspective, this should be a chilling thought.  In my most humble of opinion, if an organization’s revenues are falling, they should be doing everything they could to reduce their debt load.  In Harley-Davidson’s position, the organization didn’t slightly reduce its debt ratio in the next two years ending 2017 at a 46% debt ratio.  However, in the next two years, the company would gradually increase its debt ratio to a five-year high of 48.6%.  In other words, as the organizations revenues fell, their debt load continued to climb.