Trend Analysis of JB Hi-Fi Limited: Financial Performance and Ratios

This report provides a trend analysis of the financial performance of JB Hi-Fi Limited, including sales analysis, profit/loss analysis, asset analysis, and ratio analysis. It also includes an overview of the company's business and nature, as well as limitations and conclusions.

Running head: ACCOUNTING AND FINANCIAL MANAGEMENT
Accounting and Financial Management
Name of the student:
Name of the university:
Author Note:

1ACCOUNTING AND FINANCIAL MANAGEMENT
Table of Contents
I. LIST OF FIGURES..............................................................................................................2
II. LIST OF TABLES..............................................................................................................3
III. LIST OF FORMULAS......................................................................................................4
EXECUTIVE SUMMARY......................................................................................................5
1. INTRODUCTION...............................................................................................................6
2. COMPANY INFO AND NATURE OF THE BUSINESS...............................................6
3. TREND ANALYSIS............................................................................................................7
3.1 SALES ANALYSIS............................................................................................................8
3.2 PROFIT/LOSS ANALYSIS..............................................................................................9
3.3 ASSET ANALYSIS..........................................................................................................10
3.4 LIABILITIES AND EQUITY.........................................................................................11
4. RATIO ANALYSIS..........................................................................................................13
4.1 THE DATA.......................................................................................................................13
4.2 PROFITABILITY RATIOS...........................................................................................13
4.3 EFFICIENCY RATIOS...................................................................................................14
4.4 LIQUIDITY ANALYSIS.................................................................................................15
4.5 MARKET PERFORMANCE ANALYSIS....................................................................15
5. OVERALL ANALYSIS....................................................................................................16
6. LIMITATIONS OF ANALYSIS.....................................................................................17
7. CONCLUSION..................................................................................................................18

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References...............................................................................................................................19
Appendix.................................................................................................................................22
I. LIST OF FIGURES
Figure 1: JB Hi-Fi revenue........................................................................................ 9
Figure 2: Year Wise comparison of Income, Expenses and Operating Profit ............. 10
Figure 3: Year Wise absolute change percentage comparison of EBIT, Profit before income
tax expense, and total Profit the year..............................................................................11
Figure 4: Development of current, non-current and total assets 2016 to 2018 (base 2016)... 12
Figure 5: The development of the liabilities and the total equity with 2016 as base (100%)
…………………………………………………………………………………………….. 13
Figure 6: Development of current assets (CA) with the year 2016 as base (100%) ............ 13

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II. LIST OF TABLES
Table 1: Revenue, Expenses and the resulting Operating Profit of the years 2016 to 2018.... 5
Table 2: EBIT, Profit before income tax and total profit of the year...................................... 6
Table 3: Values of the current assets, non-current assets, and total assets of JB Hi-Fi...........8
Table 4: Values of the current liabilities, non-current liabilities, total liabilities and the total
Equity of JB Hi-Fi in the years 2016 to 2018.......................................................................... 9
Table 5: Probability ratios ...................................................................................................... 12
Table 6: Efficiency ratios ...................................................................................................... 13
Table 7: Liquidity analysis..................................................................................................... 14
Table 8: Market performance analysis................................................................................... 14

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III. LIST OF FORMULAS
Return on Equity = Net Income
Shareholders Equity
Return on Asset = Net Income
Total Asset
Gross Profit Margin = Gross profit
Net Income
Asset Turnover Ratio = Net Income
Total Asset
Accounts Receivables Ratio = Net Credit Sale
Average Accounts Receivables
Accounts Payables Ratio = Net Credit Purchase
Average Accounts Payables
Current Ratio = Current Asset
Current Liabilities
Quick Asset Ratio = Current Asset−Inventories
Current Liabilities
Dividend Pay-out Ratio = Dividend of the year
Net Income
Dividend Coverage Ratio = Net Income
Dividend of the year
Dividend Yield Ratio = Dividend per share
Market Value Per share

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EXECUTIVE SUMMARY
The report deals with the overall financial performance of JB Hi-Fi limited and accordingly
the trend analysis is performed with the help of the various parameters. The strength and the
weakness of the company is hereby identified according with the help of the ratio analysis.
As per the annual report of the last three years of the company which are the 2016, 2017 and
2018 is performed. The company’s strong performance gas been identified in a detailed
manner in this conducted study.

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1. INTRODUCTION
The aims of the assignment is to perform the financial position of the business of the
chosen company which is the JB Hi-Fi limited. The business of the company is analyzed
which are the retail products of the company. The range of the retail products of the company
is large which further deals with the large retailers of similar kind of business (Banerjee et al.,
2016). The trend analysis of the chosen company is analyzed which are the sales, profit and
loss, ratios and many other conducted in this assignment. The various business strategy
adopted by the company in order to enlarge the business of the company is analyzed (Barr &
McClellan, 2018). Finally recommendations of the overall analysis of the business is
provided according with the limitations to such study. The current position of the business of
the company is analyzed in various dimensions from the three year annual report of the
company which is 2016, 2017 and 2018 in order to understand the financial health of the
business for the last three years.
2. COMPANY INFO AND NATURE OF THE BUSINESS
JB Hi-Fi limited is the chosen company in the assignment which is a retailer company
of the consumer goods. This company deals with the products which is related to the video
games such as the Blu-rays, DVDs, home electronic appliances, mobile phones and many
more. This company is established during the year 1974 in Melbourne by John Barbuto. In
today’s modern world which is the technological era JB stores offers its clients the world’s
leading brands which are the computers, tablets, speakers, home theaters, and many more.
This company is also known for the worlds famous in terms of the gaming videos like the
PlayStation 4, Xbox one and many more gaming consoles like this, apart from that the

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movies, TV shows, and other products. This company also offers the best price of the
products at various ranges and its cheapest price attracts most of the customers which further
makes the brand much more famous (Chang et al., 2015). At present the CEO of the company
is Richard Murray where the top companies in the line ups is the Harvey Norman, Scaale,
Simon, Ikea and others competing with this company. This company sources their products
from the world leading global manufacturers which are the Sony, Samsung, LG, Apple, HP
and other leading brands who deals with this kind of products. The retail product dealt by the
company is such a business which dominates the technological era in today’s modernized
technological era.
As per the IBIS World, JB Hi-Fi’s retail department which are the domestic appliance
industry’s largest heavyweight, having an estimated of 31.1% market share in the year 2016-
17. The domestic appliance retailing industry is further expected to generate over $13.8
billion in terms of revenue in the financial year 2016-17, with an estimated growth of about
2.4% over the five years through 2016-17. IBIS World senior industry analyst, Brian Lo said
that JB Hi-Fi has made significant changes in the last five years in capturing a greater share
of the domestic appliance retailing industry in order to create a strong dominance in this
industry. The company substantially boosted its market share following the launch of its JB
Hi-Fi Home stores in the year 2012, which are the retail white goods, cooking and other
household appliances.
3. TREND ANALYSIS
In order to perform the trend analysis of the Jb Hi-Fi Company the data are
accumulated from the annual report of the financial year 2016, 2017 and 2018. The trend
analysis is technical analysis which is performed in order to understand the financial trend of
the evaluated data. Basically trend analysis of the company is done in order to understand the

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price movements and the overall momentum of the market. In this particular company trend
analysis is done to understand the income statement and the balance sheet of JB Hi-Fi limited
for the financial year 2016, 2017 and 2018.
3.1 SALES ANALYSIS
The revenue of the company has been analyzed from the income statement of the
company in the annual report of the financial year 2016, 2017 and 2018 (Cañibano, 2018).
From the above evaluation in the income statement of the Jb Hi-Fi it can be said that
the as per the evaluation of the incomes and the expenses for the last three financial year

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which is the 2016, 2017 and 2018. The profit of the company is increasing gradually which is
a satisfactory sign indicates that the company is expanding the business in the retail sectors.
Gradually the revenue of the company is increasing in terms of the operating profit of the
business. The business of the company is in peak which indicates that the operations of the
company is effective and efficient. The investment of the firm is also good which is able to
generate returns in the last three years comparison that’s why the revenue of the company is
increasing gradually. The profitability position of the business is strong as the technological
enhancement is further driving this kind of business to the next level.
3.2 PROFIT/LOSS ANALYSIS
The profit and loss statement of the company trend is analyzed where the parameters
are the EBIT which is the earnings before income and tax, profit before income tax expense
and the profit of the year for the last three financial year.

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From the above evaluation it can be interpreted that the percentage change in the
EBIT in the financial year 2017 to the financial year 2018 has increased which is a
satisfactory sign in the enhancement of the overall business of the company. In the year 2018,
the change in the profit of the year is high where the overall increase (35.27% - 13.27%) =
23% which is proportionately very high as per the profitability of the business. The reason for
such drastic change in the year 2018 is that the sell in every stores of the company has
increased gradually. The profit after tax and expenses has reduced due to the imposition of
the tax on the revenue incurred by the company (Dewachter et al., 2015). The EBIT is the
indication of the financial health of the business which indicates that financial position of the
company is strengthen due to the drastic increase in the revenue of the company.
3.3 ASSET ANALYSIS
In the balance sheet of the FB Hi-Fi Company the asset trend analysis of the financial
year 2016, 2017 and 2018 has been identified and interpreted the reason for the changes in
the asset side of balance sheet which has been analysed in a detailed process.

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In the above chart it has been shown that the base development of the total current
assets, total noncurrent asset and the total asset for the last three financial year, which is the
2016, 2017 and 2018. The financial year 2016 is take as the base year for the purpose of the
comparison in the increase and the decrease in the asset side of the balance sheet of the
company. In the financial year 2018 the total current asset has slightly increased due to the
increase in the trade receivables and the inventories under the items of the current assets. In
case of the total noncurrent asset of the company, during the financial year 2018 the
noncurrent asset has slightly reduced due to the purchase of the plant and equipment in the
financial year 2018 (Djauhari & Gan, 2015). In terms of the total asset of the company the
total asset of the company has also slightly increased due to the impact of the increase in the
total current asset of the company. Thus as the assets of the company in the financial year
2018 has increased which signifies that the company is efficient in expanding the business.

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3.4 LIABILITIES AND EQUITY
The trend analysis of the liabilities and the equities of the company has been analyzed
in a detailed way:
From the above evaluated table it can be interpreted that in the liabilities side of the
balance sheet the trend analysis is performed accordingly as per the total current liabilities,
total noncurrent liabilities, total liabilities and the total equity. In the financial year 2016 is
considered as the based year in order to understand the change in the liabilities of the balance
sheet (Lara, Osma& Penalva, 2016). The non-current liabilities of the company in the year
2018 has decreased but in terms of the total equity of the company has increased. But the
percentage change in the noncurrent liabilities is more which is the why the total liabilities of
the company has decreased. The borrowing and the loans of the company has been decreased

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which is a good sign and the equity of the company has increased which means that investors
of the company has purchased more equity. The liabilities has decreased which is a
satisfactory situation for the company and further the financial position of the company is
also good.
4. RATIO ANALYSIS
Ratio analysis is performed which is financial statement analysis of the company in
order to understand the financial position of the company in a detailed manner. This gives an
overview in a detailed manner regarding the financial health of the company. Thus the ratio
analysis plays a key role in the financial analysis of the company. The key formulas are taken
in order to find out the efficiency ratio, liquidity ratio is evaluated in order to analyze the
liquidity position of the company. The financial ratio of FB Hi-Fi Company has been
evaluated to understand the strength and the weakness of the company and the reason behind
the purpose of such a condition.
4.1 THE DATA
In order to perform the financial performance for ratio analysis the data of the
company has been taken from the annual report 2016, 2017 and 2018 (Jbhifi.com.au. 2019).
Here all the data used to evaluate the financial health of the company are authentic in nature
(Member.afraccess.com. 2019).
4.2 PROFITABILITY RATIOS
The profitability ratio of the company has been computed to analyze the profitability
position of the company.

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The profitability position of the company has been analyzed as in terms of the three
ratios which are the return on equity, return on asset, and the gross profit margin of the firm.
The gross profit of the company has remain constant for the financial year 2016 and 2017 but
during the financial year 2018 the gross profit of the company has slightly reduced due to the
increase in the cost of sales. In case of the return on equity which was higher during the
financial year 2016, the return on the equity from the investing has drastically reduced in the
financial year 2017 and 2018. In case of the ratio return on asset, which means that the return
on the invested asset of the company (Nagar & Sen, 2016). According to that the return on
asset during the financial year 2016 which much higher compared to the financial year 2017.
But in the year 2018, it has also took a drastic move which has increased accordingly to 66%.
4.3 EFFICIENCY RATIOS
The efficiency ratios are evaluated in order to find out that the efficiency of the
management of the company regarding allocation of the investment in an accurate way to
increase the overall turnover of the company.

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In case of the efficiency ratios of the company, the asset turnover ratio of the
company for the last three financial year is good as it is above the standard. During the
financial year 2016 it was pretty high and after that it has suddenly decreased as the turnover
generated out of the sales from the asset became less during the year 2017and 2018. In case
of the receivables ratio of the company the receipt was higher during the year 2016 which
indicates that the performance was satisfactory but overall the performance is satisfactory in
the last two years. In terms of the payables of the company which is measured in times in also
satisfactory which means that the company is paying the debtors in the right time as the
receivables of the company is good (Kieso, Weygandt & Warfield, 2016).
4.4 LIQUIDITY ANALYSIS
The liquidity ratios are computed in order to understand the liquidity in terms of cash
of the company (Ahmad, 2016). The two ratios are evaluated accordingly which are the
current ratio and the quick ratio.
The liquidity analysis of the company is analyzed for the last three financial year
which is the 2016, 2017 and 2018. The current ratio of the company is good which more than
the standard, but in the financial year 2016 it was higher compared to the other two year
(Vintilă & Nenu, 2016). As per the quick asset ratio of the company for the three financial
year is low than the standard which is needed to be rectified by the company in order to
improve the overall acid test ratio (Karadag, 2015).

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4.5 MARKET PERFORMANCE ANALYSIS
The market performance analysis of the company is evaluated in order to understand
the financial performance of the company or rather the financial heath of the company. It is
thus presented in the following the table:
The dividend payout ratio of the company is analyzed in order to understand the
propensity of the divided paid by the company. Out of the net income of the company the
company is able to pay out 69% of the amount of dividend to the shareholders of the
company. This signifies the revenue generated out of the investments of the company overall
is very high which is a satisfactory sign for the improvement of the company’s business. The
dividend coverage ratio signifies the amount of dividend the company is able to cover out of
its net income (Francis et al., 2015). The standard of the dividends coverage ratio of the
company is 2 which is slightly low but the company able to pay out the dividend is good.
The dividend yield ratio of the company signifies that the returns from the invested stock of
the company, higher the return of the company better is the dividend yield ratio of the
company. It can be said that in the financial year 2018 the dividend yield of the company has
increased which is a satisfactory sign which further signifies that the business of the company
in terms of investment is good.

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5. OVERALL ANALYSIS
As per the overall trend analysis is conducted, the performance of the company or the
financial health of Jb Hi-Fi limited is good (Easton & Sommers, 2018). In the current year the
profitability of the company has improved accordingly. The return on the asset of the
company has also improved which is good sign which means that the company is able to
generate a lot of revenue from the invested assets (Smith, 2017). The liquidity of the
company is also good which mean that the current assets of the company exceeds it current
liabilities as per the standards. As per the efficiency ratio it can clearly identified that the
company is able to pay of its debt in time the receivables of the company is also collected at
the same time which ensures the working capital Management of the company is good and
satisfactory (Moatti et al., 2015).
6. LIMITATIONS OF ANALYSIS
As per the limitations of the company, it can be interpreted that, it was not possible in
this assignment to perform a comparative analysis with the competitors of the company
(Theriou, 2015). As the competitors business size is different. The analysis was restricted to
three years in this assignment which is 2016, 2017 and 2018 is not possible to understand the
bigger picture in terms of the financial position of the company.

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7. CONCLUSION
Thus it can be concluded that the financial position as per the various trend analysis of
the company which is JB Hi-Fi limited. The analysis proves that the retail business of the
company is strong where the company further needs to improve in order to stay ahead among
the competitors of the company related to the same line of business (Otley, 2016). In this new
technological era the company need to come up with some of the modern gadgets in the
stores which the other company still now does not have and if the products are sold at a
attractive price, then it might be able for JB Hi-Fi limited to grab the market share (Quintana
et al., 2016). Thus it is important to expand or rather enlarge the business in order to enhance
the efficiency of the organization (Robinson et al., 2015). As per the detailed analysis it can e
said that the financial performance of the business in the current year is good and in the
financial year 2016 it was also satisfactory. Thus the ultimate conclusion which can be drawn
is that the overall financial position of the business is quite strong as per the conducted
analysis.

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Appendix
The revenue of the firm is shown in the section number 3.1 for the financial year 2016,
2017and 2018:
The absolute change of the profit is shown section 3.2 for the financial year 2017and 2018:
The total asset of the firm is shown in section 3.3 for the financial year 2016, 2017and 2018:

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The liabilities and the total equity of the firm is shown in section 3.4 for the financial year
2016, 2017and 2018:
The profitability ratios of the firm is shown in section 4.2 for the financial year 2016,
2017and 2018:
The efficiency ratios of the firm is shown in section 4.3 for the financial year 2016, 2017and
2018:

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The liquidity ratio of the firm is shown in the section 4.4 for the financial year 2016, 2017and
2018:
The market performance ratios are shown in the section 4.5 for the financial year 2016,
2017and 2018: