JB Hi-Fi Limited Annual Report Analysis

This assignment provides an in-depth analysis of JB Hi-Fi Limited's annual report for the year 2018. The report includes a comparison between the percentage change in sales revenue and inventory levels, as well as an analysis of the company's profit margin and inventory turnover ratios. The results show that the company's sales revenue increased by 21.79% during 2018, while its inventory level also rose. However, the profit margin ratio was 3.4%, indicating a good balance between revenue and expenses. The inventory turnover ratio was 7.83, suggesting that JB Hi-Fi Limited is able to convert its inventory into sales efficiently.

Accounting

Table of Contents
INTRODUCTION................................................................................................................................2
MAIN BODY.......................................................................................................................................3
PART A.......................................................................................................................................3
1. Total value of items given below at the year ended 2018.......................................................3
2. Effect on normal balance of following accounts.....................................................................3
PART B.......................................................................................................................................4
1. Revenue generated from different types by the Consolidated Group.....................................4
2. Manner in which classification of Group assets has been done..............................................5
3. Categories listed among the group's equity and ordinary shares at the financial year end with
JB................................................................................................................................................6
Hi-Fi Limited..............................................................................................................................6
4. Dividend..................................................................................................................................6
5. Dividend Payout Ratio for the current year.............................................................................6
PART C.......................................................................................................................................7
1. Subsidiaries of the JB Hi-Fi Group.........................................................................................7
2. Determining the Value of group's sales revenue for both the current as well as previous year.
Percentage change come in sales revenue for current time period.............................................8
3. Assessing Final profit of the group for current & previous year along with the percentage
changes in the profit amount earned after income tax payment..................................................8
4. Comparing and interpreting the percentage change of group sales revenue with group's final
profit............................................................................................................................................9
5. Total value of inventories in the current and previous year and percentage change come in the
inventory levels. Comparison between inventory level change and sales revenue change........9
6. Determining the profit margin and inventory turnover ratios for the financial year 2018.. .10
CONCLUSION...................................................................................................................................11
REFERENCES...................................................................................................................................12

INTRODUCTION
Accounting is a term which has been related to the process of recording, analysing, classifying,
interpreting and presenting all the information of the financial nature. It is associated with the
measurement, monitoring and communication of both the financial as well as business information
about any particular business firm to its end users for enabling them to make crucial investment
related decision. By following proper accounting standards, a company can present and
communicate its financial information. With the help of accounting, company is able to depicts its
true financial and liquidity position. The present report is based on JB Hi-Fi Limited which is a
retail company in Australia engaged in business of selling consumer goods. This company is having
its business operations in New Zealand as well. Report will discuss about overall financial
performance of JB Hi-Fi Limited for the year 2018 with the help of financial ratio analysis and
financial statement.
MAIN BODY
PART A
1. Total value of items given below at the year ended 2018.
1. Cash and cash equivalents - $72.0 million
2. Inventories - $891.1 million
3. Sales revenue - $6854.3 million
4. Other income - $1.1 million
5. Plant and Equipment - $198.0 million
6. Interest Expense (finance costs) - $16.6 million (JB Hi-Fi Limited Annual report 2018,
2018).
7. Sales and marketing expense - $695.1 million
8. Occupancy expenses - $305.7 million

9. Trade and other payables - $665.3 million
10. Borrowings (non-current) – $469.4 million
2. Effect on normal balance of following accounts.
Particulars Normal balance of each
account must be in
Side of the account is
affected in order to
decrease each item
Cash and cash equivalents
Debit Credit
Inventories
Debit Credit
Sales revenue
Credit Debit
Other income
Credit Debit
Plant and Equipment
Debit Credit
Interest Expense (finance costs)
Debit Credit
Sales and marketing expense
Debit Credit
Occupancy expenses
Debit Credit
Trade and other payables
Credit Debit
Borrowings (non-current)
Credit Debit
PART B
1. Revenue generated from different types by the Consolidated Group.
The overall revenue generated by the consolidated group is from Sales of goods ad products,
commissions and by rendering its business services.
The amount of revenue generated by JB Hi-Fi Australia during 2018
Particulars Financial Year
2018

Total Sales ($m)
Gross Profit ($m)
Gross Margin (%)
Cost of Doing Business (%)
EBIT ($m)
EBIT Margin (%)
Stores
4539.7
1006.5
22.17%
14.82%
292.3
6.44%
193
(Source: JB Hi-Fi Limited Annual report 2018, 2018)
JB Hi-Fi New Zealand has earned following revenue amount in the year 2018
Particulars Financial Year
2018
Total Sales (NZ$m)
Gross Profit (NZ$m)
Gross Margin (%)
Cost of Doing Business (%)
EBIT (NZ$m)
EBIT Margin (%)
Stores
231.5
40.9
17.66%
17.28%
(2.9)
(1.24%)
15
(Source: JB Hi-Fi Limited Annual report 2018, 2018)
The Good Guys in year 2018 is having revenue generated in following manner
Particulars Financial Year
2018
Total Sales ($m)
Gross Profit ($m)
Gross Margin (%)
Cost of Doing Business (%)
EBIT ($m)
EBIT Margin (%)
Stores
2101.3
426.1
20.28%
16.60%
60.9
2.90%
103
(Source: JB Hi-Fi Limited Annual report 2018, 2018)

2. Manner in which classification of Group assets has been done.
JB Hi-Fi Limited is having following assets as a group:
Particulars Financial Year
2018
ASSETS ($m)
Current Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
72.0
204.7
891.1
42.7
Total Current Assets 1210.5
Non Current Assets
Plant and equipment
Intangible assets
Other non current assets
198.0
1037.3
45.9
Total Non Current Assets 1281.2
Total Assets 2491.7
(Source: JB Hi-Fi Limited Annual report 2018, 2018)
3. Categories listed among the group's equity and ordinary shares at the financial year end with JB
Hi-Fi Limited.
The group equity is categories in the form of
Particulars Amount ($m)
Contributed equity
Reserves
Retained Earnings
441.7
42.7
463.2
(Source: JB Hi-Fi Limited Annual report 2018, 2018)
The ordinary shares held by JB Hi-Fi Limited at the end of the financial year 2018 is 116
million.
4. Dividend
The group’s current liability for the dividends to be distributed to its ordinary shareholders is
46.04 cent which is to be distributed on 7 September 2018. If the shareholder is owning only100
ordinary shares in JB Hi-Fi Limited, will get dividend as follows:
Dividend received = 100* 46.0 = 4600 dividends for having 100 ordinary shares.

Interim Dividend is 86 per share = 100*86 = 8600 dividend amount.
Total amount of dividend for the current year will be 4600 + 8600 = 13200
The last year final dividend paid for JB Hi-Fi limited is 1.09 AUD.
5. Dividend Payout Ratio for the current year.
Dividend Payout Ratio is defined as the amount or value of dividends which is paid by the
company out of the amount of profit earned to all its shareholders. For JB Hi-Fi Limited, the
dividend payout ratio for the financial year 2018 is calculated below:
Formula: Dividend Payout Ratio = Dividends Per Share / Earnings Per Share
Particulars Financial Year
2018
Dividends Per Share
Earnings Per Share
132
203.1
Dividend Payout Ratio = Dividends Per
Share / Earnings Per Share 0.65
(Source: JB Hi-Fi Limited Annual report 2018, 2018)
From this it can be interpreted that JB Hi-Fi Limited is distributing 65% of its total net
income earned during the financial year in the form of Dividend to its shareholders for the shares
they are holding in the company. After distributing 65% as dividend, JB is having 35% remaining
with itself which is retained earning for its business. This part of total net income can be used by the
company for its business expansion programme in the future time period.
PART C
1. Subsidiaries of the JB Hi-Fi Group.
The parent entity named JB Hi-Fi Limited is having the following subsidiary company
having 100% ownership interest are as follows:
1. JB Hi-Fi Group Pty Ltd
2. Clive Anthonys Pty Ltd
3. JB Hi-Fi (A) Pty Ltd
4. Rocket Replacements Pty Ltd
5. JB Hi-Fi Education Solutions Pty Ltd
6. JB Hi-Fi Group (NZ) Limited
7. JB Hi-Fi (NZ) Limited

8. JB Hi-Fi (B) Pty Ltd
9. The Muir Electrical Company Pty Ltd (JB Hi-Fi Limited Annual report 2018, 2018).
10. The Muir Electrical Service Co Pty Ltd
11. The Good Guys Discount Warehouses (Australia) Pty Ltd
12. Muir Group Employee Share Plan Pty Ltd
13. M.E.W. (Australia) Pty Ltd
14. The Muir Electrical Company Pty Ltd as Trustee of the Muir Investment Unit Trust
15. The Good Guys Discount Warehouses (Australia) Pty Ltd as Trustee of the various store
Trusts
16. Home Services Network Pty Ltd
2. Determining the Value of group's sales revenue for both the current as well as previous year.
Percentage change come in sales revenue for current time period.
The Value of Sales revenue for the JB Hi-Fi group in both current and previous financial
year is as follows:
Particulars FY 2018 ($m) FY 2017 ($m)
Sales Revenue 6854.3 5628
Change in the Sales revenue level = (6854.3) - (5628)
Change in the Sales revenue level = $1226.3 million
Percentage change in the sales revenue level is calculated as follows
Particular Percentage
Change
1. Sales Revenue at the beginning of the year
($m)
2. Sales Revenue at the end of the year ($m)
5628
6854.3
Change in the Sales Revenue level ($m) 1226.3
Percentage Change =
(Sales Revenue at end – Sales Revenue at
beginning)/ Sales Revenue at beginning * 100
21.79%
(Source: JB Hi-Fi Limited Annual report 2018, 2018)

3. Assessing Final profit of the group for current & previous year along with the percentage changes
in the profit amount earned after income tax payment.
For JB Hi-Fi group the amount of final profit after income tax payment for the both current
and previous financial year is as follows:
Particulars FY 2018 ($m) FY 2017 ($m)
Final Profit (After
income tax)
233.2 172.4
(Source: JB Hi-Fi Limited Annual report 2018, 2018)
Change in the Final Profit level = (233.2) – (172.4)
Change in the Final Profit level of the group = $60.8 million
Percentage change in the level of Final Profit of the group is calculated as follows
Particular Percentage
Change
1. Final Profit at the beginning of the year
($m)
2. Final Profit at the end of the year ($m)
172.4
233.2
Change in the Final Profit level ($m) 60.8
Percentage Change =
(Final Profit at end – Final Profit at
beginning)/ Final Profit at beginning * 100
35.27%
4. Comparing and interpreting the percentage change of group sales revenue with group's final
profit.
The percentage change in the level of Final Profit and Sales Revenue of the group as
calculated above is 35.27% & 21.79% respectively.
As the group sales revenue in the year 2018 is increasing from $5628 million to $6854.3
million, it has resulted in the increase in the net profit amount of the group company as well. With
the percentage change in sales revenue of 21.79%, the overall final profit amount of the group
company has increased with $60.8 million during the financial year (JB Hi-Fi Limited Annual
report 2018, 2018). This increase in sales and final profit level depicts that company is performing
in a very good and effective manner with improvement in performance level and minimization of
cost expenses related to the business operations. It can also be interpreted that as the final profit of

the company is increasing, possibility of high distribution of dividend amount to shareholders also
increases.
5. Total value of inventories in the current and previous year and percentage change come in the
inventory levels. Comparison between inventory level change and sales revenue change.
The Total Value of Inventories in both current and previous financial year of JB Hi-Fi
Limited is as follows:
Particulars FY 2018 ($m) FY 2017 ($m)
Inventory 891.1 859.7
Change in the inventory level = (891.1)- (859.7)
Change in the inventory level = $31.4 million
Percentage change in the level of inventory calculated as follows
Particular Percentage
Change
1. Inventory at the beginning of the year ($m)
2. Inventory at the end of the year ($m)
859.7
891.1
Change in the inventory level ($m) 31.4
Percentage Change =
(Inventory at end – Inventory at beginning)/
Inventory at beginning* 100
3.65%
(Source: JB Hi-Fi Limited Annual report 2018, 2018)
Comparison between the percentage change in the level of inventory and sales revenue -
Particular Inventory Level Sales Revenue
Beginning of the year ($m)
End of the year ($m)
Percentage Change
859.7
891.1
3.65%
5628
6854.3
21.79%
With the increase in the level of inventory, the amount of sales revenue of the group
company is also increasing during the year. This increasing trend has lead to more profitability
situation for JB Hi-Fi. It can also be concluded that the company has minimization its unnecessary

cost expenses with has improved its performance level as well.
6. Determining the profit margin and inventory turnover ratios for the financial year 2018.
Profit Margin Ratio – It is considered as one of the most important profitability ratio for
every business organisation. With the help of this ratio, a company can assess the net amount of
income or revenue left out of the total sales made after meeting all the business expenses.
Profit Margin Ratio can be calculated as follows:
Particular Amount ($m)
Net Income
Net Sales
233.2
6854.3
Profit Margin Ratio = Net
Income / Net Sales 3.4
Inventory Turnover Ratio – It depicts the number of time at which the company is able to
sell its inventory during a given and specified period of time. With the help of inventory turnover
ratio, JB Hi-Fi can determine and formulate strategy related to the pricing factor, manufacturing
function, marketing & promotional activity and decision related to the purchasing of new inventory.
Inventory Turnover Ratio can be calculated as follows:
Particular Amount ($m)
Sales
Average Inventory
6854.3
875.4
Inventory Turnover Ratio
= Sales / Average Inventory 7.83
CONCLUSION
From the above report it can be concluded that with proper accounting, a company can
furnish and communicate its financial information to its shareholders and other stakeholders as well.
While recording and preparing financial statements, compliance of applicable accounting standards
has to be made. The report has discussed about the overall financial position of JB Hi-Fi Limited
with the help of comparison between the percentage change in sales revenue, final profit and
inventories level. With increase in sales of 21.79% during 2018 the overall final profit of the group
company has increased to 35.27% after meeting all business expenses and tax liabilities. Report has
also disclosed analysis of two ratios viz. profit margin ratio and inventory turnover ratio with the

help of which JB Hi-Fi is able to determine the net amount of revenue earned is 3.4% out of total
sales made during the year 2018. Whereas inventory turnover ratio has presented that JB is able to
convert its inventory into sales at rate of 7.83.
REFERENCES
Books and Journals
Online
JB Hi-Fi Limited Annual report 2018. 2018. [Online]. Available through: <www.jbhifi.com.au>.