Question

The Hudson's Bay is listed on the Toronto Stock Exhange with at least 15% of Total Assets representing Inventory for the fiscal year of 2017.

What major line of business is the company in? What is their cost of sales?

Apply 2 ratios to the financial statements and analyze.

Answer 1

Hudson's Bay is a diversified global retailer managing high quality stores and the store offerings. They are having geographical reach in USA, Canada and Germany.

For Financial year, 17-

Their total sales was 14349 million Canadian dollars and cost of sales were 8514 million Canadian dollars. This is 59.3% of sales. Means for every dollar of sales, their direct cost (material, labour and maintenance) is 0.593 cents.

Two ratios:

1. Current ratio: it measures the ready liquidity with a company. It is a ratio of current assets to current liability. Thus, it shows for every dollar of current liability, how much current assets does a company have.

For Hudsons bay, current assets are 4302 million CAD for fiscal 17 and current liabilities are 3500 million CAD. Thus, current ratio is 1.229. Means the company is having sufficient assets to meet its short term obligations (ratio is above 1).

2. Net profit margin: It denotes the profitability of the company. Means for every 100 Dollar of sales, what is the net profit brought home by the company is shown by this ratio. It is calculated as (Net Profit*100)/Sales.

For the given company it is (- 581*100)/14349 which comes to 4.05%. It is always denoted in percent. Means for every 100$ of sales by the company, the company is losing $4.05. This is not a good sign. The company needs to do some introspection to know the reasons for loss and rectify them.