This report has been prepared to analyze the financial strength, stability, performance and profitability of JB HI FI limited. In this report, financial tools have been taken into the context to perform this study. This report depicts that how many changes have taken place into the performance of the company from the last 5 years. For this study, financial figures and annual report of the company has been taken into the consideration.
JB HI FI limited operates its activities and the business in the industry of the music since 1974. Mainly, this organization was just a store in beginning in 1974 which has been opened by John Barbuto in East Keilor, Victoria. Further, in the year of 2000, the organization has been obtained by the equity banking and after that it has been recorded in ASX (Australian stock exchange) and right now this is considered as top companies of the Australian market and music industry (Home, 2017). This company offers numerous products to its clients such as DVD music, recorded music, games, DVD movies and TV shows. Currently because of many changes into the Australian market, performance, stability and profitability of the company is getting affected. Annual reports of the company have been studied to analyze the company deeply. For this study, financial figures and annual report of the company has been taken into the consideration.
Financial analysis of a company is a study which evaluates the projects. Budgets, business and various financial related entities of a company are used to evaluate the suitability and performance of the company (Deegan, 2013). Mainly, the financial analysis is done to investigate and analyze the organization’s liquidity, solvency and stability position. In this report, ratio analysis has been taken into the context to analyze the performance of the JB HI FI Limited.
Ratio analysis is a process of financial analysis. This process is done to analyze a quick indication about the financial performance and position of a company. It takes the concern of various key financial figures. Ratios have been categorized into various forms to make a better decision. The study of ratio analysis of JB HI FI is as follows:
Profitability ratios are a study to analyze the profit condition of the company. Basically profitability ratios are the financial metrics which is used to assess the ability of the business to generate expenses and other relevant cost during a particular time. In this report, return on assets, return on equity, asset turnover, financial leverage and earnings per share has been analyzed to identify the profitability position of the company (Elliott & Elliott, 2007).
|
|
|
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 |
Through the reports, it has been analyzed that the position of the company has been bit lower from last year. Few changes have taken place and due to which the profits of the company has become lower from 2016 and due to which the financial performance of the company has been affected (Annual report, 2017).
Liquidity ratios:
Liquidity ratios are a study to analyze the liquid position of the company. Basically liquidity ratios are the financial metrics which is used to assess the ability of the business to meet the current obligation of the company during a particular time. In this report, return cash ratio, current ratio, quick ratio, inventory turnover ratio and asset turnover ratio has been analyzed to identify the liquidity position of the company (Corporate governance, 2017).
|
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 |
(Morningstar, 2017)
Through the reports, it has been analyzed that the position of the company in terms of liquidity has became better from last years. Few changes have taken place and due to which the company has adopt the strategy of maximum utilization of minimum resources. This depict that currently the obligation of the company and risk factor of the company is lower.
Solvency ratios are a study to analyze the debt and equity position of the company. Basically solvency ratios are the financial metrics which is used to assess the ability of the business to maintain the optimal capital structure and manage the liabilities and assets in a better manner. In this report, cash coverage ratio, times interest earned and debt to equity has been analyzed to identify the solvency position of the company (Australian government, 2017).
|
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 |
Through the reports, it has been analyzed that the position of the company in terms of liquidity has became better from last years. Few changes have taken place and due to which the company has adopt the strategy of maximum utilization of minimum resources. This depict that currently the obligation of the company and risk factor of the company is lower.
Market based ratios are a study to analyze the market position of the company. Basically market based ratios are the financial metrics which is used to assess the market factor of the company such as dividend, earnings, prices etc. In this report, dividend yield ratio and price earnings ratio has been analyzed to identify the market position of the company (Elliott & Elliott, 2007).
|
Market based ratios |
|||
|
Price / earnings ratio |
Market value per share / earnings per share |
60.90 |
|
|
Dividend yield ratio |
dividend / current share price |
4.99 |
Through the reports, it has been analyzed that the market position of the company in terms of market factor is bit better in current years (Annual report, 2017). Currently, this analysis depict that making investment into this company would be in the favour of the investors.
Through the study over the financial data, annual report of JB HI FI, it has been analyzed that it is a better option to make investment into the company to enhance the level of the opportunities for the company. Through this analysis, it has been found that the company is performing better in the market and the company would offer short term as well as long term, profits and returns to the investors. Thus it is suggested to the investors to invest into the company whether for the short term or for long term.
Conclusion:
This study depict that JB HI FI is one of the top companies of Australian market. Through this analysis and the study over the annual report and financial figures of the company, it ha scene analyzed that this would offer high return to the investors. The liquidity position, solvency position, profitability position and the market position of the company depict the positive outcome.
References:
Annual Report. (2013). JB HI FIltd. Retrieved from https://www.annualreports.com/HostedData/AnnualReportArchive/J/ASX_JBH_2013.pdf as on 22nd Oct 017
Annual Report. (2017). JB HI FIltd. Retrieved from
Australian government, (2017) Company tax rates. Retrieved from https://www.ato.gov.au/Rates/Company-tax/ as on 22nd Oct 017
Deegan, C. (2013). Financial accounting theory. McGraw-Hill Education Australia.
Elliott, B., & Elliott, J. (2007). Financial accounting and reporting. Pearson Education.
JB HI FI. (2017). Corporate shareholders. Retrieved from https://www.jbhifi.com.au/General/Corporate/Shareholder-Matters/Financial-Annual-Reports/ as on 22nd Oct 017
JB HI FI. (2017). About us. Retrieved from https://www.jbhifi.com.au/General/Corporate/Consumer-Matters/About-Us/ as on 22nd Oct 017
Morningstar. 2017. JB HI FI. Retrieved from https://financials.morningstar.com/cash-flow/cf.html?t=JBH®ion=aus&culture=en-US as on 22nd Oct 2017
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