Sears Holdings Corporation Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Sears Holdings Corporation Case Solution

Ratio Analysis

Financial ratios have been analyzed in order to evaluate the financial performance and health of the company.

Return on Asset

Return on Asset (ROA) ratio of the company has decreased in the current year as compared to the previous year. The return on asset in 2013 was -7.47% that decreased to -12.73% in the year 2014, which indicates that the management of the company is not using its assets efficiently in order to generate the revenue. This means that every dollar invested by the company in its assets has produced -12.73% during the year

Liquidity Ratio

The Acid-test Ratio/quick ratio of the company has also decreased in the year 2014 as compared to the previous year by 0.08.In the year 2013, the ratio was 0.19 that reduced to 0.11 indicating that the liquidity position of the company is not satisfactory as the acid test ratio indicated a reduction during the recent year. Moreover, it also showed that the company does not have enough current assets in order to pay off its current/short term obligations. The company has less liquid current assets that can be converted into cash to pay off current liabilities.

Profitability Ratios

The overall profitability of the company has shown a declining trend during the last three years as there is a constant decrease in the profitability of the company on a yearly basis. The net profit margin ratio of the company has declined from -2.10% in 2012 to -2.56% in the year 2013, which further declined to -4.83% in the year 2014. The percentage of the profit earned by the company relative to the sales during the year is not sufficient.
However, it is analysed from the overall evaluation of the company that the financial position of the company is not satisfactory, which affects the overall performance and productivity of the company in the industry.

Financial Leverage

The long-term D/E of the company has also shown reduction during the year 2014 as compared to the previous year as in 2013 it was 151.54 that reduced to 133.15 in the year 2014. This means that the company is efficiently utilizing the cheapest financing source as well as it is utilizing higher debt in order to finance its assets in comparison with shareholder equity.

Activity Ratios

The fixed asset turnover ratio of the company has decreased largely during the current year in comparison with the previous year. The fixed asset turnover ratio was 357.98% in 2013 that declined by 26.65% in the year 2014. This indicates that the company is not making sufficient revenue with the investments made in fixed assets or utilizing its fixed assets in an efficient manner in order to generate the sales. Furthermore, it also depicts that the company has made investment in the areas that do not have the capacity to generate higher level of sales that help them to enhance their productivity and growth...................

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