KB Home (“KBH” hereafter) is one of America’s leading homebuilders with domestic operations. It has two business segments, construction and mortgage banking. Construction segment acquires and develops land primarily for residential purposes and offer a variety of homes. Mortgage banking segment provides mortgage banking services to its domestic homebuyers and sell mortgages that the mortgage banking subsidiary originates to third-party investors.
KBH processes business strategies of efficiency, customer satisfaction and expansion through its unique “KBNxt” operational business model. Through this model, KBH are trying to achieve a leading position in its major markets.
KBH’s financial statements show fairly clear picture of its business. In revenue and expense recognition, it follows industry norm and rather be conservative. And there is weak evidence that KBH performs earnings management. However, its financial statement is quite simply disclosed that non-professional investors and readers may not get enough information to invest or analyze. As its company-acquisitions-related balance sheet and income statement items are consolidated in KBH’s original accounts, it is hard to separate the portion of acquired company in KBH’s financial position.
KBH’s sales were strongly increased in 2003 driven by increase in unit deliveries and gain in average selling price whereas expenses were relatively increased small. And other profitability ratios show quite positive results in 2003. KBH’s effectiveness and efficiencies also improved compare to 2002. Return ratios like asset turnover, ROA, RONA have been improved as well, but ROE has slightly decreased mainly because treasury stocks were increased by 2 million shares. After capitalization of operating lease, asset turnover ratio decreases slightly. But it does not give a big impact on its financial position. With its