Financial Performance Analysis Of JB HI FI: Ratio, Trend, Vertical, And DU Pont Analysis

Methodology

This report depict about the financial performance of JB HI FI through conducting a ratio analysis, trend analysis, vertical analysis and horizontal analysis of the company. Last 5 years annual report of JB HI FI has been considered while prepare this report. This offers a brief description to the investors of the company about the strength of company financially and economically.  

The main propose of preparing this report is to depict about the financial performance of JB HI FI through conducting a ratio analysis, trend analysis, vertical analysis and horizontal analysis of the company. Last 5 years annual report of JB HI FI has been considered while prepare this report. This offers a brief description to the investors of the company about the strength of company financially and economically.  

The scope of this report is to analyze about the financial performance and strength of the company of last 5 years. Through this report the liquidity condition, profitability condition, efficiency, activity condition, cash flow condition, balance sheet analysis and income statement analysis has been done. DU Pont analysis has also been prepared to analyze the performance of the company. Competitive company’s annual report has also been considered to analyze the performance of JB HI FI.

For preparing this report, many financial methods have been considered to make this report more effective and get a better outcome so that the best of the decisions could be made about the financial position of the company. Liquid ratio methods, profitability ratio methods, solvency ratio methods, activity ratio methods, DU Pont analysis method, trend, vertical and horizontal analysis method etc has been considered while preparing this report.

Many assumptions have taken in a context to make the report more effective. It has been assumed that the efficiency ratios have been lowered by the company to manage the working capital of the company. It has been assumed that the JB HIB FI and its competitor’s annual report depict a loss because of bad market condition. It has also been assumed that the strength of the company would be better in future.

This report is based on many limitations. These limitations have been considered to make this report more accurate, reliable and impressive. The main limitations of this report is that it has been prepared in less time so all the points has not been considered and the less knowledge about the market is also a limitation of this report.  

The company, JB HI FI operates its business in music industry from 1974. Basically, this company was a store in 1974 opened by Mr. John Barbuto at East Keilor, Victoria. More, in 2000, the company has been acquired by equity banking and than it has been registered in Australian stock exchange and currently it falls under the top companies of the industry. Various ranges of products such as DVD music, DVD movies, recorded music, games, and TV shows are offered by this company. Currently due to many fluctuations in the market, the profitability of the company is getting lower. Annual reports of the company have been studied to analyze the company deeply.  

Assumptions

Economic analysis depict about the market condition, industry condition and a firm condition. It tells the analyst that how company is performing in the market in context of its competitors, industry and other firms of market. This economic framework has been analyzed over the company, JB HI FI ltd. Through this framework, it has been tried to understand the every activity of the company in context of the industry and market.

The annual reports of the company, brokers report about the market and industry, market analysis etc has been studied to offer the best economic framework of the JB HI FI limited. The reports in the appendix depict about the economic framework of the company. It has been identified and investigated through this report that the JB HI FI is lacking somewhere in context of the industry due to some internal issues such as employee turnover and lesser interest of investors in the company from last few years.

Harvey Norman’s annual report has also been investigated to analyze the industry condition in a better way and it has been found that the Harvey’s shares are also getting lower due to the less interest of the investors in the music industry now days. It has been found that there is not much difference in the strength of the JB HI FI and Harvey as both of these companies are facing market issues and due to which the profitability of both the companies are getting affected.  The strategies and policies adopted by the company have also been studied and it has been found that the company’s managers and executives made the best of the strategies and due to that policies and strategies only, company managed to save itself from several losses.

Income statement, balance sheet and cash flow statement of both the companies has been analyzed and many aspects of the financial statement of the company has been analyzed to understand the condition of the JB HI FI in a better way. Nonrecurring items of both the companies have been studied and has been found that both the companies are enough capable to manage it. It has also been analyzed that the policies of recovering the debt amount of JB HI FI is quite effective.  Unusual or infrequent items of both companies have been studied and have been found that there is compatibility in JB HI FI in context of infrequent items.

Revenue recognition principles of JB HI FI and Harvey has been studied and recognized that the revenues of the company is still enhancing even in a bad market and less interest of the customers and investors in the company. Depreciation and Amortizations policies of both the companies has been investigated and found that IASB standards are followed by the company to apply the practice of depreciation on the fixed assets of the company. It has also been examined that the policies and methods of depreciation have not been changed from last few years. Company does not need to make the provision of doubtful debts as from last several years the company did not face any bad debt issue.

Limitation

The gain and losses of discontinuing and continuous operations has been investigated and it has been examined that the gain of 2016 is AUD 152 million at the end of the year. Deferring expenses of both the companies have also been examined and it has been found that to future periods depict that deferred expenditure of the company is enhancing quickly from several years.

Balance sheet of both the companies have been analyzed and it has been depicted that Capitalized Interest cost must be added back by both the companies in the interest to make the financial statement of the company more attractive in perspective of the investors. The trading securities of JB HI FI in market should be recognized at fair value in income statement according to the IASB standards.  

Amortizations policies of intangible assets depict that company is applying IASB rules to distinguish the value of subtle assets of JB HI FI. Goodwill impairment values explain that the goodwill amount of JB HI FI is quite constant.

Securities Held till the maturity are reducing frequently from last years. Depreciation methods of the industry and firms are quite similar as all are applying the same methods and procedure of depreciation method. Inventories of company are quite attractive and competitive and the company is managing the obligatory inventory for reducing the working capital of JB HI FI. Deferred Tax Assets of organization is irrecoverable. It depicts that JB HI FI is in a better condition.

Liabilities of both the companies have been analyzed and depicted that liabilities have been increased in 2016 from last few years. Off Balance sheet financing like lease of the company value got increased from 2015. This has been enhanced due to more leased property. The debt amount of the company has been decreased from last year because of bad market condition. Contingent liabilities and Deferred Tax Liabilities of the JB HI FI need to be accustomed and business should take various further steps for it.

Equity of JB HI FI has been decreased by JB HI FI because of worst market condition. But the total equity has been increased due to other factors of the company.

Ratio analysis explains a company regarding financial strength and position of JB HI FI ltd. The financial strength of company has been investigated through the annual report and financial strength of business. The ratio analysis of JB HI FI is as follows:

The Short term activity ratios of the corporation represent the competence for a short period. Throughout investing the activity ratio of JB HI FI, it has been found that the business’s short term activity is enough strong. Corporation is supervising the best to convene entire short term competence of clients and marketplace. All the way through analyzing these ratios, it has been acknowledged that corporation’s policies and strategies are quite viable to condense the cost and develop the profit of JB HI FI.

Receivable turnover ratio of company depicts that in 2016 and 2015 the proportion of debtors and sales was 44.17 and 48.05. It shows that business has concentrated the time of recover the debt amount in provisions of sales for managing the working capital and cost. A creditor turnover ratio shows that proportion of creditors and sales in 2016 and 2015 the ratio was 11.11 and 20.53. It shows that company has reduced the payable time of creditors and gives the amount to creditors quickly.

Economic Framework of JB HI FI

Inventory turnover ratio of company depicts that in 2016 and 2015 the proportion of inventory and cost of goods sold was 6.02 and 35.23. It shows that business has concentrated on reducing the inventory level in provisions of cost of goods sold for managing the working capital and cost. Asset turnover ratio depicts that proportion of assets and sales revenue in 2016 and 2015 the ratio was 4.19 and 4.16. It shows that company has enhanced the assets from last years.  

The long term activity ratios of the corporation represent the competence for a short period. Throughout investing the activity ratio of JB HI FI, it has been found that the business’s long term activity is enough strong. Corporation is supervising the best to convene entire long term competence of clients and marketplace. All the way through analyzing these ratios, it has been acknowledged that corporation’s policies and strategies are quite viable to condense the cost and develop the profit of JB HI FI.

Receivable turnover ratio of company depicts that in 2016, 2015, 2014 and 2013 the proportion of debtors and sales was 44.17, 48.05, 51.61 and 54.22. It shows that business has concentrated the time of recover the debt amount in provisions of sales for managing the working capital and cost. A creditor turnover ratio shows that proportion of creditors and sales in 2016, 2015, 2014 and 2013 the ratio was 11.11, 20.53, 9.48 and 21.04. It shows that company has reduced the payable time of creditors and gives the amount to creditors quickly.

Inventory turnover ratio of company depicts that in 2016, 2015, 2014 and 2013 the proportion of inventory and cost of goods sold was 6.02, 35.23, 6.2 and 40.78. It shows that business has concentrated on reducing the inventory level in provisions of cost of goods sold for managing the working capital and cost. Asset turnover ratio depicts that proportion of assets and sales revenue in 2016, 2015, 2014, 2012, the ratio was 4.19, 4.16, 4.09 and 4. It shows that company has enhanced the assets from few years.

Profitability analysis of an organization depicts that how much profit has been gained by organization in terms of total profits in a specific period. These ratios help the company to examine its prosperity and offer concise information about company to investors.

These ratios depict that how much profit have been managed by company in a fastidious period. All the way through investigating these ratios, it has been analyzed that profitability of company is getting lower every year.

The Operating profit margin of JB HI FI depicts that the total working profit in terms of sales of a specific time period. This ratio of company in 2016, 2015, 2014, 2013 and 2012 is 9.57, 10.37, 10.87, 11.44 and 12.1 respectively. It shows that the productivity of company is getting lower year by year. The Net profit margin of company shows about the net profit ratio of company in terms of sales of a specific time period. The ratio of the company in 2016, 2015, 2014, 2013 and 2012 is 0.03, 0.037, 0.036, 0.035 and 0.033 respectively. It shows that the productivity of company is getting lower year by year.

Analysis of Income Statement, Balance Sheet and Cash Flow Statement

Return on capital employed shows the noncurrent liability in framework of total share capital and total assets of company. ROCE of company in 2016, 2015, 2014, 2013 and 2012 is 69.5, 73.5, 74.6, 94.5 and 101.8 respectively. It shows that financial power of company is getting decreased. ROE and return on total asset shows the return of JB HI FI in conditions of equity, sales and asset of company. All the way through investigating these ratios it has been analyzed that company’s concert is getting decrease continuously.

The ratios of JB HI FI show the liquid state. These are as follows:

The above ratio of JB HI FI shows that how much liquid the company is for paying all the obligation of short term through investigating the financial figure and annual report of company, the liquidity analysis has been examined over the company.

The Current ratio of JB HI FI is quite companionable and similar to the industry. The Quick ratio of JB HI FI is lesser and shows that business must improve the present assets except the inventory level.

This ratio of the company depict about debt, assets, equity and liability of the company.  Solvency ratios of JB HI FI are as follows:

The above ratios of JB HI FI shows that the debt amount in context off equity amount has been decreased by the company for managing profitability of JB HI FI. Interest converge ratio of JB HI FI shows that business is sufficient strong to disburse entire cost of debt and equity to debt holders and shareholders.

DU Pont analysis depict about the performance of the company. It has been done over the financial figures of the company and it has been analyzed that ROA is 15.32%, net profit margin is 3.84%, equity is 405 dollar, total asset turnover is 3.98 and financial leverage multiplier is 2.45 of company.

This analysis has been conducted by analyzing the cash flow statement of JB HI FI and it has been analyzed that cash flow of operating activities, financing actives and investing activities has been lowered. It shows that the cash in the hand of the company has been decreased.

Prospective analysis of a company shows about the strength and performance. It has been analyzed through the reports and income statement of the company that the sales of the company have been enhanced rapidly from last year and thus the EBIT also got affected. It has been analyzed that the revenue of the company is quite competitive.

Conclusion

Through investigating the statement, annual reports and ratio analysis, it has been suggested to investors of the company and market to not to invest for a short period into the company. Investors must spend their invested amount for a long period to improve the share dividends and value of the invested sum. The competitive company report of B HI FI shows that whole industry is facing issues and hence the future forecast has been done and found that company would gain a profitable condition in future.

Through investigating the statement, annual reports and ratio analysis, it has been concluded that in industry, the performance of the company is quite strong. Few issues have been faced by JB HI FI because of many factors of market and few internal factors. Through the reports, it has been recognized that the policies and strategies of company are quite sturdy to administer the issues of the business and company itself.

Annual Report. (2017). JB HI FIltd. Retrieved on 20 May, 2017 from

https://www.jbhifi.com.au/General/Corporate/Shareholder-Matters/Financial-Annual-Reports/

Annual Report. (2012). JB HI FIltd. Retrieved on 20 May, 2017 from https://www.annualreports.com/HostedData/AnnualReportArchive/J/ASX_JBH_2012.pdf

Australian government, (2016) Company tax rates. Retrieved on 20 May, 2017 from https://www.ato.gov.au/Rates/Company-tax/

Morning star. (2017). JB HI FI ltd. Retrieved on 20 May, 2017 from https://www.google.co.in/url?sa=t&rct=j&q=&edata-src=s&source=web&cd=2&cad=rja&uact=8&ved=0ahUKEwiXr6zqyZvTAhUFvI8KHV8iAkIQFggnMAE&url=http%3A%2F%2Ffinancials.morningstar.com%2Fincome-statement%2Fis.html%3Ft%3DJBH&usg=AFQjCNFLClBdMb2HwK3YaXsPfRiyW7TuvQ

JB HI FI. (2017). About us. Retrieved on 20 May, 2017 from https://www.jbhifi.com.au/General/Corporate/Consumer-Matters/About-Us/

Kenny, T,. (2017) the balance, Bonds and the economy. Retrieved on 20 May, 2017 from https://www.thebalance.com/bonds-and-the-economy-417070.

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