Analyzing Capital Structure and Investment Appraisal Techniques

Running head: FINANCE FOR MANAGERS
Finance for Managers
Name of the Student:
Name of the University:
Authors Note:

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Table of Contents
Introduction:...............................................................................................................................2
Task 1:........................................................................................................................................2
1. Analysing the current and historical data of capital structure used by JB-Hi-Fi:..................2
2. Utilising the policy and drawing on the practical and theory applied by the company’s
current characteristics and situation:..........................................................................................4
Task 2: Scrutinizing the proposed project of OnePack’s CEO and indicating the justification
for the different levels of sensitivity analysis............................................................................5
Conclusion:................................................................................................................................9
References and Bibliography:..................................................................................................11

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Introduction:
The capital structure that is deployed by JB Hi-Fi is relatively evaluated in the
assessment by analyzing the financial performance of the organization for the past 3 years.
The analysis of the capital structure is directly is conducted by examining the different
financial ratios such as debt ratio, equity ratio, Debt equity ratio and dividend payout ratio.
for the analysis conducted on the investment appraisal technique that is deployed for the
project presented Onepack Limited. The financial performance of the project is analyzed by
utilizing different level of investment appraisal techniques and capital budget techniques.
Moreover, sensitivity analysis is also performed for scrutinizing the financial performance of
the project under different sales revenue.
Task 1:
1. Analysing the current and historical data of capital structure used by JB-Hi-Fi:
Capital Structure and Payout Ratios:-
Particulars 2016 2017 2018
Total assets $9,92,381.000 $24,59,800.000 $24,91,700.000
Total liabilities $5,87,679.000 $16,06,300.000 $15,44,100.000
Total equity $4,04,702.000 $8,53,600.000 $9,47,600.000
Dividend per share 1.000 1.180 1.320
Earnings per share 1.538 1.860 2.031
Debt ratio 0.592 0.653 0.620
Equity ratio 0.408 0.347 0.380
Debt to equity ratio 1.452 1.882 1.629
Dividend payout ratio 65.020% 63.441% 64.993%
The calculation in the above table presents the capital structure conditions of JB Hi-
Fi for the past financial years. This data has a relatively help in detecting the efficiency
conditions of the capital structure that is deployed by JB Hi-Fi over the period of time

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(Investors.jbhifi.com.au 2019). From the relevant analysis, it is determined that the current
capital structure conditions of the organization have deteriorated slightly due to the increment
in debt accumulation in comparison to equity capital. The financial performance of the
company has reduced, as equity capital has a relatively declined in comparison to debt capital
which increased during the 3 year period. In the similar instance, dividend payout ratio of the
company also declined during the overall three year period, which indicates about the
reduction in the financial capability of the company.
2016 2017 2018
-
0.200
0.400
0.600
0.800
1.000
1.200
1.400
1.600
1.800
2.000
Capital Structure and Payout Ratios
The calculation and analysis is based on the above figure that directly indicates about
the overall performance of JB Hi-Fi over the past three financial years. The analysis directly
indicated that the overall performance of the company has relatively deteriorated over the
period of time due to the increment in overall debt obligations. From the above graph it could
be identified that the ratio of the company increased from 0.59 to 0.65 and then again reduce
to the levels of 0.62 in 2018. This directly indicated that the organization is able to effectively
manage its debt obligation and control the level of exposure that is being conducted on debt
accumulation. This is the main reason why the overall debt ratio of the company declined in
2018 in comparison to 2017. The similar impact is relatively seen on all the relevant issues