Business Valuation and Analysis

Running Head: Business Valuation and Analysis
1
Project Report: Business Valuation and Analysis

Business Valuation and Analysis 2
Contents
Introduction.................................................................................................................................3
Company analysis:......................................................................................................................3
Reformatting statement...............................................................................................................3
Ratio analysis..............................................................................................................................3
Major expenses which have affected profit margin.................................................................8
Ratio trend.................................................................................................................................10
Cash flow analysis.....................................................................................................................10
Financial risk and cash flow management.................................................................................12
Conclusion.................................................................................................................................12
References.................................................................................................................................14
Appendix...................................................................................................................................15
Reformatted income statement..............................................................................................15
Reformatted balance sheet....................................................................................................16
Ratios........................................................................................................................................20

Business Valuation and Analysis 3
Introduction:
Business valuation and analysis is a situate of various methods as well as process which is
applied by the analyst, managers and stakeholders of the company to recognized the worth,
performance, risk and return position of the company. there are various tools and methods to
recognized the value of the business and evaluate the overall position of business such as ratio
analysis, trend analysis, cash flow analysis, valuation models, economic value added etc. (Moyer,
McGuigan, Rao & Kretlow, 2011). The report mainly focuses on JB HI FI. In the report, business
valuation models have been applied over JB HI FI to determine the performance of the business.
Financial statement of the company has been presented and on the basis of that, worth of the company
has been recognized.
Company analysis:
JB HI FI is an Australian retailing company which sells the consumer goods in Australian and
New Zealand market. Main products of the company are consumer goods. “The good guys” is the
main subsidiary company of JB HI FI. Since 1974 company is operating its business in the Australian
market and diversified the market at a great extent. Headquarter of the company is Melbourne,
Australia. Financial and non financial position of the company depicts about significant position and
changes in the company in last few years (Annual report, 2016)
Reformatting statement:
Reformatting statement is an advanced form of financial statement in which investors could
just obtain operating activities worth of the company and could recognized the actual worth of the
company (Madura, 2011). Because of various items and financial aspects, actual worth of the business
is different than the stated amount in the financial statement of the company. Hence, the reformatting
of financial statement of JB HI FI has been done and given in the appendix.
Ratio analysis:
Ratio analysis is one of the financial valuation models which are used the most and quite
convenient to use. In this technique financial data is gathered from the financial statement and capital
market to evaluate the key aspect and performance of the business. The ratio analysis technique has
been applied over JB HI FI. Calculations and analysis of the same is given below:
Return on equity:
ROE is one of the profitability analysis methods that recognize the total profit generated by
the business against the total equity of the company. The ROE level of JB HI FI explains that ROE
level of the business is quite higher and explains that net profit of the company is even bigger than the

Business Valuation and Analysis 4
total equity level of the business. Current changes depict abut positive changes into the company.
Below is the graph of ROE of the company of last 5 years:
Figure 1: Return on equity
(Annual report, 2016)
Return on non operating assists:
RNOA is also recognized as one of profitability analysis methods that recognizes the total
profit generated by the business against the non operating assets of the company. The return on non
operating assets level of JB HI FI explains that RNOA level of the company has been improved at
great extent from 2013 in 2018. Current changes depict abut positive changes into the company.
Below is the graph of RNOA of the company of last 5 years:
Figure 2: Return on non operating assists

Business Valuation and Analysis 5
(Annual report, 2014)
Profit margin:
PM is a profitability ratio analysis method which recognizes the total profit generated by the
business against the total sales of the company. The profit margin level of JB HI FI explains that
various changes have taken place in the company in last few years. Current changes depict abut
average performance of the company. Below is the graph of profit margin of the company of last 5
years
Figure 3: Profit margin
(Morningstar, 2019)
Profit margin level of the company has been investigated further and on the basis of study, it
has been recognized that the increment in the demand of product would improve the profit margin of
the company. Through study, it has been found that cost of goods sold, selling and administrative
expenses and sales revenue are the main factor which could make an impact over the profit margin of
the company. Changes into this factor would affect the profitability level of the company as follows:
PM: 13.51%
PM ratio share price Δ share price change
Optimistic 10% 14.86% 24.77 15.50%
5% 14.19% 23.65 7.75%
0 13.51% 22.52 0.00%
Pessimistic -5% 12.83% 21.39 -7.75%
-10% 12.16% 20.27 -15.50%
(Morningstar, 2019)

Business Valuation and Analysis 6
Asset turnover ratio:
Asset turnover ratio is used to identify the efficiency level of a business which recognizes the
total assets maintained by the company against the total sales of the business. In case of JB HI FI, it
explains that ATO level of the company has been reduced in the current year because of various
changes in the operations and capital structure of the company. However, the current changes depict
about better performance of company. Below is the graph of ATO of the company of last 5 years:
Figure 4: Asset turnover ratio
(invetsing.com, 2019)
ATO of the company has been investigated further and on the basis of study, it has been
recognized that the changes in capital structure is the main reason behind the changes into ATO level.
Through study, it has been found that changes into capital structure, economical position and sales
revenue could make an impact over the ATO of the company. Changes into this factor would affect
the efficiency level of the company as follows:
ATO
2018-
19
2020-
2022
1.77 2.12 share price
Δ share price
change
Optimistic 10% 1.95 2.33 24.77 5.93%
5% 1.86 2.23 23.65 3.24%
0 2.12 22.52 0.00%
Pessimistic -5% 1.68 2.01 21.39 -3.60%
-10% 1.59 1.91 20.27 -7.23%