Section 1 - Company Overview

Huawei is the largest telecommunications equipment manufacturer in the

world, having overtaken Ericsson in 2012. The firm operates in the carrier,
enterprise and consumer segments of the market. Since 2013, Huawei
increased aggressively its presence on the mobile phone market, particularly
smartphones, where at the moment, the company ranks behind Samsung
and apple.
Section 2 - Ratio

Dupont Ratio
281.54%

2013; 105.27%

2013; 26.04%
2013; 8.79%
2013

311.31%

297.38%

2015; 115.85%

2014; 104.07%

2014; 29.72%

2014; 9.60%

2015; 35.43%
2015; 9.82%

2014

2015

ROE (NI / OEavg)

Profitability (NI / Sales)

Efficiency (Turnover = Sales / Assetsavg)

Leverage (Leverage = Assetsavg / OEavg)

Huawei ROE has been increasing for the last three years (from 26.04%
to 35.43%).
While each of the individual component has improved over the last three
years, the increase in the ROE was mainly due to the leverage
(Asset/Equity), which gained 30 percentage points since 2013.
The profitability has also improved consistently during the period (up to
1 point), mainly because the revenue increased by 65% during since
2013.
The Efficiency was improved in 2015 by 9 points (115.85%) following a
decline of 1 point in 2014.

LT Debt-to-Assets
7.79%

2015

9.07%

2014

LT Debt-to-Assets ratio fell to 7.80

compared to 9.44 in 2013. It suggests
that Huawei relies less on debt to fund
its growth, which positively impacted
the company profitability, as seen
above.

9.44%

2013

Section 3 Cash Conversion Cycle

CCC chart
Days Receivables Outstanding (DRO) [ARavg / (Sales/365)]
Days Inventory (DI) [Inventoryavg / (COGS/365)]
Days Payables Outstanding (DPO) [365 / (Purchases / Accts Payableavg)]
CASH CONVERSION CYCLE (DI - DPO + DRO)

75

104

87

92

78

61

81

106

100

81

2013

2014

2015

80
86

In 2015, Huaweis CCC was 87 days, 17 days shorter than the 104 days in
2014 but 12 days longer than in 2013.
In 2014, the company experienced some difficulties to sell inventory,
which stayed 20 more days in warehouse compared to the previous year.
Combining to the fact that suppliers were paid earlier than in 2013 (from
92 days to 78 days), it is clear why CCC was degraded in 2014.

In 2015, Huawei tried to decrease its cash cycle by targeting its A/R. The
company managed to get cash from customer in roughly 20 days shorter
than in 2014, gaining 17 days in the CCC.

Additional Ratio
95000

1.80
89019

90000

1.40

85000

1.20
1.00

78566

80000
75000

0.80

75180

0.60
0.40

70000
65000

1.60

0.20
1

0.00

Working Capital (CA - CL)

Current Ratio (CA / CL)
Quick Ratio [(Cash + ST Securities + AR) / CL)]

The working capital has been increasing while the current ratio and quick
ratio declined. This suggests that Huawei took more liabilities to operate
during the past year. In fact, Huaweis accrued expense for employees and
notes payable increased by 66 and 90 percentage points respectively since
2013.

Section 4 Current and Future Financial Performance

Overall, Huawei technologies has a good performance in the
telecommunication industry with a ROE higher than the average of 22.3%
(Investopedia.com). The company should be able to maintain or improve the
current REO by expanding its market for mobile phones.

FINANCIAL STATEMENT ANAYLYSIS -- Huawei Technologies

Company name: Huawei Technologies
Company ticker:
Your name (cohort): Bakayoko Vaflaly (cohort #4)
Year End (3 years)
Ratios and Other Analysis
Measures
2015 2014
2013
ROE and DuPont Ratios
35.43
%
9.82%
115.8
5%
311.3
1%

29.72
%
9.60%
104.0
7%
297.3
8%

26.04%
8.79%
105.27
%
281.54
%

4.50

3.64

3.45

81
4.27

100
4.50

106
5.98

86
4.58

81
4.68

61
3.98

(Purchases / Accts Payableavg)]

80

78

92

CASH CONVERSION CYCLE (DI - DPO +

DRO)

87

104

75

7.79%

9.07%

9.44%

89019
1.42

78566
1.44

75180
1.61

0.69

0.73

0.78

ROE (NI / OEavg)

Profitability (NI / Sales)
Efficiency (Turnover = Sales / Assetsavg)
Leverage (Leverage = Assetsavg / OEavg)

Additional Efficiency Ratios

AR Turnover (Sales / ARavg)
Days Receivables Outstanding (DRO)
[ARavg / (Sales/365)]
Inventory Turnover (COGS / Inventoryavg)
Days Inventory (DI) [Inventoryavg /
(COGS/365)]

AP Turnover (Purchases / APavg)

Days Payables Outstanding (DPO) [365 /

Additional Leverage Ratio

LT Debt-to-Assets (LT Debt, including
current portion / total Assets)

Cash Liquidity and Cash Sources &

Uses
Working Capital (CA - CL)
Current Ratio (CA / CL)
Quick Ratio [(Cash + ST Securities + AR) /
CL)]