Discuss about the Mergers Acquisitions and Corporate Restructurings.
It becomes obligatory for an analyst or the stakeholder of a company to analyze the position, stability and performance of the company in terms of finance. In this report, the performance of JB HI FI has been evaluated on the basis of the various tools and techniques. In this report, financial strength, performance, stability and profitability of the company has been evaluated. This report would brief the user about the performance of the company so that they could make a better decision about the company. Data of last 5 years has been analyzed to get better result. Mainly, the financial figures, stock price and the annual report of the company have been concerned for this report.
The company, JB HI FI LIMITED carries out its functions and the operations into the entertainment and music industry. In 1974, this company has come into existence. John Barbuto was the co founder of this company and this company has been opened at East Keilor, Victoria. In addition, this company has registered its stocks into the Australian stock exchange to trade the securities of the company (Home, 2017). Currently, JB HI FI is recognized as the biggest firms of music and entertainment industry in the Australian market. The main products and services of this company are DV Movies, video games, music CDs, games etc.
In this report, performance of the company has been evaluated so that the users could make a better decision about the company. Data of last 5 years has been analyzed to get better result. Annual report has been concerned to analyze the report in a better way.
The term “financial analysis” depict about the analysis which is done over the financial figures and financial statement of a company to analyze the performance and the stability position of a company. Various tools are used by the financial analyst to identify the position and performance of the company (Dotson & Hyatt, 2005). Ratio analysis, vertical analysis, horizontal analysis, debt analysis, equity analysis etc are the part of this analysis. Usually, this study is done to identify and evaluate the liquidity, stability and solvency position of a firm. For analyzing the financial performance of the company, ratio analysis study has been conducted:
Financial analysis’s main part is ratio analysis. Ratio analysis study depict about the various level of a company. This process depict about the liquidity, stability and solvency position of a firm (Du &Girma, 2009). This study briefs the users about the financial performance of the company. Study of ratio analysis is as follows:
The study of profitability ratios have been done to evaluate the position of the profit of the organization. Normally, these ratios are based over the financial matrices that could be used by the users to identify and evaluate the performance of the company on the basis of total expenses and the revenue of the company in a specified period. Various profitability ratios such as ROA (return on assets), ROE (return on equity), turnover of asset, earnings per share and financial leverage have been evaluated to classify the position of JB HI FI (FIRER et al, 2012).
|
2017 |
2016 |
2015 |
2014 |
2013 |
||
|
Profitability |
||||||
|
Return on equity |
Net profit/revenues |
0.0305615 |
0.0384421 |
0.0375137 |
0.0367394 |
0.03507 |
|
Return on assets |
Net profit/Equity |
0.2014052 |
0.3753086 |
0.3994169 |
0.4338983 |
0.47737 |
|
Financial leverage |
EBIT / EBIT – Interest |
1.0428016 |
1.0184332 |
1.0307692 |
1.0494505 |
1.05952 |
|
Asset turnover |
total assets / total sales *365 |
159.0876 |
91.665402 |
89.450986 |
90.097589 |
93.0154 |
|
Earnings per share |
Net income – pref div / shares outstanding |
0.3917995 |
3.1020408 |
2.4035088 |
2.2068966 |
1.84127 |
According to the above calculations, it has been evaluated that the JB HI FI’s financial position has became better from last few years. The performance of the company has become better due to the new strategies, polices and projects of the comapny (Annual report, 2017).
The study of liquidity ratios have been done to evaluate the position of the stability of the organization. Normally, these ratios are based over the financial matrices that could be used by the users to identify and evaluate the obligation position of the company on the basis of total current assets and current liabilities on a particular date (Fulin, 2011). Various liquidity ratios such current ratios, cash ratios and quick ratios have been evaluated to identify the position of JB HI FI.
|
Liquidity |
||||||
|
cash ratio |
cash equivalents + cash / current liabilities |
0.0823928 |
0.1163311 |
0.1289474 |
0.1221591 |
0.15158 |
|
Current ratio |
Current assets/current liabilities |
1.32 |
1.57 |
1.62 |
1.64 |
1.28 |
|
Quick Ratio |
Current assets-Inventory/current liabilities |
0.35 |
0.35 |
0.36 |
0.34 |
0.31 |
|
Receivable turnover |
Receivables/ Total sales*365 |
29.31 |
36.02 |
33.03 |
30.13 |
27.71 |
|
Inventory turnover |
Inventory / cost of goods sold *365 |
71.37 |
64.52 |
61.26 |
61.03 |
59.57 |
According to the above calculations, it has been evaluated that the JB HI FI’s financial position and the short term debt of the comapny has became lower from last few years. But the management of the working capital of the company is quite impressive. The position of the company has become better because of the industry position (Annual report, 2017).
The study of solvency ratios has been done to evaluate the position of the debt and equity of the organization. Normally, these ratios are based over the ability of the company that could be used by the company to manage and identify the level of the optimal capital structure of the JB HI FI Limited (Gaughan, 2010). It helps the company and the top level management of the company to enhance the position of the company on the basis of total equity and total debt on a particular date. Various solvency ratios such current cash coverage ratios, debt equity ratios and times interest earned ratios have been evaluated to identify the position of JB HI FI.
|
Solvency |
||||||
|
Times interest earned |
EBIT / Interest expenses |
24.363636 |
55.25 |
33.5 |
21.222222 |
17.8 |
|
Cash coverage ratio |
EBIT + non cash expenses / interest expenses |
269.00 |
222.00 |
202.00 |
192.00 |
179.00 |
|
Debt to Equity Ratio |
Debt/ Equity |
1.87 |
1.45 |
1.61 |
1.92 |
2.47 |
According to the above calculations, it has been evaluated that the JB HI FI’s solvency position and debt and equity relationship has became better from last few years. the management of cost and risk factor has also improved the performance of the company. Through these calculations, it has been analyzed that the performance of the company has become better (Morningstar, 2017).
The study of market based ratios has been done to evaluate the position of the stock of the company in the market. Normally, these ratios are based over the current stock price, book price and the dividend offered by the comapny. It helps the investors and the financial analyst to make a better decision about the investment and divestment from the company. Various market based ratios such as dividend yield ratios and price / earnings ratios have been evaluated to identify the position of JB HI FI in the marketplace.
|
Market based ratios |
||
|
Price / earnings ratio |
Market value per share / earnings per share |
60.90 |
|
Dividend yield ratio |
dividend / current share price |
4.99 |
According to the above calculations, it has been evaluated that the JB HI FI’s market based position and dividend and sock price relationship has became better. The management of stock price and dividend has been done by the company in a better way through managing the supply and demand of the securities (Cravens and Piercy, 2006). Through these calculations, it has been analyzed that the performance of the company has become better (Corporate shareholders, 2017).
According to the evaluation over the stability, position and profitability of the company, it has been evaluated that the JB HI FI is performing better in the industry. The profitability position, liquidity position, market position and the solvency position of the company is in the favour of the company and thus the return provided by the company would also be better (Lacalle, 2017). Thus this depict that it is a good choice for the investors to invest into the company to enhance the level of the invested amount. The investor could invest for long and short term as well in the comapny to get a better result (Dean & Yunus, 2001).
Conclusion:
To conclude, JB HI FI is the biggest company in the industry. This company is the leader of the industry and falls under FTSE 100. The performance of JB HI FI has been evaluated on the basis of the various tools and techniques for this report. Financial strength, performance, stability and profitability of the company have been evaluated to reach over a conclusion about the investment and divestment. Data of last 5 years has been analyzed to get better result. Mainly, the financial figures, stock price and the annual report of the company have been concerned for this report.
The report concludes that it is a better choice for the investors to invest into this company for long and short term as well in the comapny to get a better result. Thus this depict that it is a good choice for the investors to invest into the company to enhance the level of the invested amount.
References:
Annual Report. (2013). JB HI FIltd. Retrieved from https://www.annualreports.com/HostedData/AnnualReportArchive/J/ASX_JBH_2013.pdf as on 27th Oct 017
Annual Report. (2017). JB HI FI ltd. Retrieved from https://www.annualreports.com/HostedData/AnnualReportArchive/J/ASX_JBH_2017.pdf as on 27th Oct 017
Cravens, D.W. and Piercy, N., (2006). Strategic marketing (Vol. 7). New York: McGraw-Hill.
Dean, E. & Yunus, K. (2001). ”An overview of strategic alliances”. Management Decision, Vol. 39 Iss 3 pp. (205 – (218.
Dotson, M.J. and Hyatt, E.M., (2005). Major influence factors in children’s consumer socialization. Journal of Consumer Marketing, 22(1), pp.35-42.
Du, J. and Girma, S., (2009). Source of finance, growth and firm size: evidence from China (No. (2009.03). Research paper/UNU-WIDER.
FIRER, C. et al. (2012). Fundamentals of Corporate Finance. 5th Edition.Berkshire.McGraw-Hill Companies, Inc.
Fulin, S. (2011). Preface by SHANG Fulin. Corporate Governance of Listed Companies in China, 9-10.
Gaughan, PA. (2010). Mergers, Acquisitions, and Corporate Restructurings. John Wiley & Sons.
JB HI FI. (2017). Corporate shareholders. Retrieved from https://www.jbhifi.com.au/General/Corporate/Shareholder-Matters/Financial-Annual-Reports/ as on 27th Oct 017
JB HI FI. (2017). Home. Retrieved from https://www.jbhifi.com.au/General/Corporate/Consumer-Matters/About-Us/ as on 27th Oct 017
Lacalle, D., (2017), Credit?rating agencies. Life in the Financial Markets: How they really work and why they matter to you, pp.95-98.
Morningstar. 2017. JB HI FI. Retrieved from https://financials.morningstar.com/cash-flow/cf.html?t=JBH®ion=aus&culture=en-US as on 27th Oct 2017
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