Harley-Davidson Financial Services

FratBro23
Category:
Accounting
Price: $10 USD

Question description

Harley-Davidson was highly profitable, had one of the world’s most valuable brands, and by the end of 2008 had repurchased $4.7 billion of its common stock.  Harley-Davidson Financial Services made low-risk loans to Harley retail customers and then sold those receivables to Harley-Davidson Motorcycle Trust.  The Motorcycle Trust sold notes backed by the motorcycle receivables to institutional investors.  Harley-Davidson’s highly loyal customers rarely defaulted, so the Motorcycle Trust sold notes equal to about 93-96% of the face value of the receivables collateralizing the notes.

The subprime securitization market collapsed in late 2007 and entire securitization market effectively closed in the second quarter of 2008.  From then through June 30, 2009, the Motorcycle Trust was unable to sell notes backed by Harley-Davidson receivables.  As a result, “Finance receivables held for sale” increased from $781 million on December 31, 2008, to $2.444 billion on December 31, 2009.  To finance those receivables, Harley-Davidson increased its debt by over $2 billion.

Harley-Davidson’s pension and retiree health care funds also suffered major losses.  Possibly because of Harley’s weaker financial condition, its reserve accounts for items such as receivables and warranties seemed far less conservative at the end of 2008 than at the end of 2007.

  • Does Harley-Davidson have adequate allowance/reserve  balances in : (a) warranty and safety recall liability; (b) accounts receivable; (c) finance receivables held for investment; (d) finance receivables held for sale, and (e) inventories?  Are these balances more or less adequate than in the past?  Explain in a paragraph.


Tutor Answer

(Top Tutor) Daniel C.
(997)
School: University of Virginia
PREMIUM TUTOR
Studypool has helped 1,244,100 students
Ask your homework questions. Receive quality answers!

Type your question here (or upload an image)

1819 tutors are online

Brown University





1271 Tutors

California Institute of Technology




2131 Tutors

Carnegie Mellon University




982 Tutors

Columbia University





1256 Tutors

Dartmouth University





2113 Tutors

Emory University





2279 Tutors

Harvard University





599 Tutors

Massachusetts Institute of Technology



2319 Tutors

New York University





1645 Tutors

Notre Dam University





1911 Tutors

Oklahoma University





2122 Tutors

Pennsylvania State University





932 Tutors

Princeton University





1211 Tutors

Stanford University





983 Tutors

University of California





1282 Tutors

Oxford University





123 Tutors

Yale University





2325 Tutors