Financial Analysis of JB Hi-Fi Limited: A Case Study of Yearly Expansion

This case study delves into the yearly expansion of JB Hi-Fi Limited, a leading Australian retailer specializing in consumer electronics, home appliances, and musical instruments. The analysis examines the company's financial statements from 2012 to 2017, focusing on key financial ratios and their implications for the company's performance and future prospects. The study explores the purpose of financial statements, accounting practices employed by JB Hi-Fi, and the impact of its acquisition of The Good Guys on its financial performance. It concludes with recommendations for the company's future growth and profitability.

Introduction and overview:
The case study focuses on the yearly expansion of the company from the past year to present year with
context to the JB Hi-Fi Limited. According to the report of the Yahoo, the JB Hi-Fi Limited is having
specialization in the retailer part and the arrangement in the customer items. The company is
categorized into three parts that may involve shopper gadgets, little electronic apparatuses, melodic
instruments and kitchen embellishments. What's more, JB Hi-Fi likewise gives counselling
administrations and data innovation frameworks to its customers. Alongside marked retail outlets
crosswise over the countries i.e. Australia and New Zealand, likewise has significant online nearness that
contributes considerably to the Group's developing income and benefits.
This appraisal is segregated into four segments in which Section 1 explains the reason for money related
explanations. Quickly, this area reveals insight into the employment of money related explanations for
various partners. Area 2 gives assesses the bookkeeping rehearses used by JB Hi-Fi in setting up the
money related proclamations. Section3 estimates the budgetary proportions utilizing money related
data gave in the yearly proclamations from 2012-2017. At last, in view of the examination, Section 4
gives a proposal for the future execution and productivity of the Company.
Area 1: Purpose of the financial statements
Organizations which are recorded on ASX are required to distribute budgetary explanations on quarterly
and yearly premise. Principally monetary explanations are issued to give money related data identified
with execution, budgetary wellbeing and productivity of the Company which thus help speculators and
different partners to improve and educated contributing and financing choices (Dunn, 2013). There is a
number of partners that have an essential enthusiasm for the execution and benefit of an organization.
Figure 1 beneath diagrams the clients of the money related proclamations;
 Investors/shareholders: Investors or shareholders are by and large gatherings that have
ventures (offers of stock) in an organization. These gatherings of partners are especially keen on both
salary (profit) and pick up (share cost). Speculators require money related data with the goal that they
can settle on venture and financing choices. Moreover, investors require money related data to decide if
to keep their speculation or offer out (AccountingTools, 2014).
 Employees: In accordance with the employees, they require data so that they can execute for
pays and wages. Besides, the present business wellbeing and execution empower them to estimate
openings as far as development and vocation movement.

 Creditors: The main inquiry that leasers are worried about is whether the business is dissolvable
or not? Lenders refer to banks and money related foundations that give monetary help to organizations
with the purpose to identify the ability of the business to restore the obligation with premium. Leasers
assess the money position in order to analyse the business trade proportion. This is done for a short run.
On contrary, for the long run, they may budgetary wellbeing utilizing income proportions.
 Suppliers: Suppliers can be referred as the party in which there is an exchange of the credit of
the business and the crude material. It provides the keen value to the organization since the providers
offer crude material on credit. Suppliers have utilized the financial statements that access the capacity
of the organization in order to meet the money related obligations while it is fallen down. The premise
of their examination, they choose whether to give merchandise using a credit card.
 Customers: If there is a long haul contract between the organization and its clients then clients
are without a doubt keen on dependability and manageability of the business activities. This need is
principally featured in situations where the client is needy in the business for a claim to fame items.
 Competitor: Competitors are primarily keen on the money related data gave by different
organizations with the goal that in light of a similar they can build up their vital targets. They additionally
utilized financial statements to assess the future procedures of a noteworthy contender or future
gainfulness in order to modify their own particular techniques and future viewpoint.
 Government: Government alludes to the country and distinct experts that are keen on the
budgetary statistics for check and different administrative purposes. Government is moreover keen at
the corporate social duty to assess the part of the agency in social and financial improvement.
Segment 2: Accounting rehearses utilized by JB Hi-Fi
JB Hi-Fi Company is based on revenue driven association along these lines the organization gets ready
and report money related data as per International Accounting Standards (IAS). IAS 1 gives rules on
getting ready financial statements including necessities identified with structure, substance and ideas.
The standard sets out the use of bookkeeping ideas, for example, 'going concern, revelation and
gathering premise of bookkeeping (IAS, 2010). IAS 1.10 requires revenue driven associations to plan
financial statements enveloping asset report, the proclamation of benefit and misfortune, changes in
value explanation, notes to articulation, story segment and proclamation of income. Like other freely
recorded organizations, JB Hi-Fi additionally readies its monetary articulations as per 'Australian

Accounting Standards' and Corporations Act 2001. The company offers of its yearly record that the
United broadly beneficial cash associated explanations acclimate to worldwide Reporting standards
(IFRS) allotted by IASB (JB Hi-Fi, 2017). This guarantees equivalence as all the economic statements
during the years are readied utilizing comparable standards.
The company consider utilisation of chronicled cost tradition for making financial statements (JB Hi-Fi,
2017). Money related statements can be readied utilizing either verifiable cost or reasonable esteem
approach. The implication associated with historical cost is recorded at its unique cost rather than on
reasonable esteem. The first cost of present and settled resource won't change generally expressed in
the bookkeeping principles (IAS, 2009). The rundown gave in the JB Hi-Fi yearly show that all the
budgetary proclamations are readied utilizing authentic cost anyway change is made in recording
statements 'accessible available to be purchased monetary resources, subordinate instruments and a
certain class of settled resources'.
In spite of that IAS give clear and particular measures to recording diverse records, however, getting
ready budgetary articulations also need a definite level of bookkeeping appraisal as well as judgments. It
is essential that organization legitimately unveil any judgment which is made identified through
assessments and suppositions (IAS, 2009). The company unveils every one of the presumptions and
assessments made by the administration by considering Notes to Financial Statement (JB Hi-Fi, 2017).
Henceforth, it be can be said that the company plans money related explanations in accordance with IAS
and Australian Standards.

Net Profit Margin (NPM) bit by bit expanded throughout the years and in the year of 2017 witnessed a
fall to 3.06%. By comparing the Asset turnover and Return on Assets (ROA), it can be seen that there is
an enhancement of proportion till 2015 and later it declined. The decrease isn't driven by poor
execution yet chiefly because of a higher increment in deals contrast with benefits and aggregate

resources. In the year of 2017, the Group accomplished record-breaking offers of $5.6 billion mirroring a
development of 42.3% contrast with the earlier year because of solid interest for extensive screen TVs,
rambles and cell phones (JB Hi-Fi, 2017).
The organization's ease technique and highlight on client gain paid off as NPAT extended by using
13.three%. Working benefits have been very a lot controlled and according with in advance years. On
the opposite side, upload up to resources developed by over 82% contrasted with earlier years because
the business enterprise completed the procurement of accurate man which introduced 102 new stores
to company portfolio. The decline in the cash return on offers is an end result of mild development in
internet operating earnings because the enterprise changed its prevailing method of acquiring the good
man (JB hello-Fi, 2017).
Earnings for equity step by step decreased at some stage in the years as the business enterprise issued
new offers to carry capital up keeping in mind the quit intention to complete the securing of the good
man. Simply in 2017, the enterprise issued 1 for six.60 ace charge qualification offers to soak up to $394
million thru fee financing. Issuing gives to fund acquisitions delivered about low money associated and
working have an effect on (JB hello-Fi, 2017; (JB hello-Fi, 2016).
Liquidity proportions

0.082
0.116
0.129 0.123
0.152
0.000
0.020
0.040
0.060
0.080
0.100
0.120
0.140
0.160
2017 2016 2015 2014 2013
Cash ratio
1.322
1.572 1.622 1.642
1.274
0.000
0.200
0.400
0.600
0.800
1.000
1.200
1.400
1.600
1.800
2017 2016 2015 2014 2013
Current ratio
0.351 0.349
0.363
0.339
0.311
0.280
0.290
0.300
0.310
0.320
0.330
0.340
0.350
0.360
0.370
2017 2016 2015 2014 2013
Quick ratio
8.804 8.241
6.887
6.016 6.127
0.000
1.000
2.000
3.000
4.000
5.000
6.000
7.000
8.000
9.000
10.000
2017 2016 2015 2014 2013
Average Receivables turnover (days)
58.36
60.57
59.94
59.18
60.05
57.00
57.50
58.00
58.50
59.00
59.50
60.00
60.50
61.00
2017 2016 2015 2014 2013
Average Inventory turnover (days)

Both the liquidity proportions i.e. current proportion and trade proportion step by step decreased out
the current years because of the continuous acquisition of the company i.e. Good Guys. In the year of
2016, the Company contributed $52 million on contributing exercises that additionally incorporates
foundation of new stores crosswise over Australia and New Zealand. In the year of 2017, money
outpouring on contributing exercises additionally expanded to $885.5million which incorporates venture
on store migrations, opening and IT anticipates (JB Hi-Fi, 2017).
This can be taken into account that Normal receivable turnover days has increased from 6 to 8 days. This
shows that company has utilized its income by giving products using a loan. Also, change can be seen in
exchange and non-exchange receivable. Exchange receivables increased from $31.5M to $54.2M on
contrary, non-exchange receivables increase from $67M to $143.1M (JB Hi-Fi, 2017). There is also the
poor administration of credit as discounts on receivables are offered to the providers on buys. There is
also increase from 59 to 60 days from the year 2014 to 2016 but it shows downfall in the year of 2017.
This has occurred due to solid request in extensive screen TVs, music frameworks and cell phones.
Solvency ratio:
In 2017 the normal receivable turnover can be influenced from 6 days to 8 days that indicates that the
company can expand its income of commercial company through providing the merchandise use of the
mortgage or loan. Other than that trade receivable spike can increase from $31.five million to $54.2
million of each 2017 whilst non-change receivables progressed from $67 million to $143.1 million (JB Hi-
Fi, 2017). This shows that there are increases in the discounts on the receivables that are offered to the
sellers at every buying an increment in the receivable turnover. This has shown expansion from 59 days
earlier year i.e. 2014 to 60 days in the further year i.e. 2016 but then dropped the entire manner all the
way down to fifty 8 days in 2017 due to strong request in widespread show display screen TVs, track
frameworks and cell telephones.
The Company is facing various obligations in 2017 that is the reason the company needs to back up the
procurement of the good guy anyway part of the securing with the assessing the value of the financing

that ensures that the company to keep the monetary and use of the operations at a very low phase. It
settled down the charge scope at 3.2 times and intrigue cover at 28.8 times (JB Hi-Fi, 2017).
The rise in 2016 is because of the term responsibility of $500M taken to fund the
securing of the Good Guys (JB Hi-Fi, 2016). The company would take care of
expense of capital by the mean of new stores in the year of 2017.
Market ratios:
The pattern in EPS as well as DPS throughout the years shows stable development. EPS enhanced from
117.7cps of every 2013 to 184cps out of 2017 while profit for every offer additionally expanded slowly
finished the years from 72cps of every 2013 to 118cps out of 2017. This shows JB Hi-Fi takes after
'consistent development profit strategy' in light of the fact that even in 2013 when the money return on
deals was marginally low the organization paid profit higher than earlier year. The offer value execution
in the course of the most recent five years shows that the cost has swollen by over 140%. This shows the
company has possessed the capacity to give adequate comes back to their financial specialists as capital
picks up anyway as of late there has been a significant drop in cost.
Segment 4: Recommendation and Conclusion
In light of the money related examination, it can be broken down that JB Hi-Fi has possessed the
capacity to accomplish wonderful development as far as income and profit over the most recent couple
of years. The Company's online store ended up being a defining moment amidst serious rivalry. JB Hi-Fi
was getting the Good Guys which influenced money return on deals as net trade surge out contributing
exercises expanded generously. The securing is financed through both duty and cost besides widespread
financing is completed through issuing new offers. The employer expects that the new shops will create
profits on the way to meet the value of capital. The organization’s profit and EPS history seem to
delineate consistent improvement in the course of the latest 5 years. The offer cost swollen by means of
over a hundred and forty% even though as of late there was a drop as speculators question the
procurement of the company such as Good Guys. In general, the budgetary execution and
productiveness of the company are through all debts expanding along with the acquisition and opening
of new stores it can be concluded that JB Hi-Fi has a desirable alternative for the hypothesis.

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