Financial Analysis of The Reject Shop

COmpany Selected- The Reject Shop
Financial analysis of The Reject Shop
Financial analysis
Name of the Author
University Name-

Table of Contents
Introduction.................................................................................................................................................1
Description of the Reject Shop................................................................................................................1
Core activities of the Reject Shop............................................................................................................1
Competitive advantage............................................................................................................................1
Industry...................................................................................................................................................2
Financial analysis of The Reject Shop..........................................................................................................2
Liquidity ratio...........................................................................................................................................2
Current ratio........................................................................................................................................2
Quick ratio...........................................................................................................................................3
Profitability ratio......................................................................................................................................3
Net profit margin.................................................................................................................................3
Return on equity..................................................................................................................................4
Return on assets-.................................................................................................................................4
Gross profit margin..............................................................................................................................4
Solvency ratio......................................................................................................................................4
Debt to equity......................................................................................................................................5
Efficiency ratio.........................................................................................................................................5
Creditors turnover ratio.......................................................................................................................5
Inventory Turnover ratio.....................................................................................................................6
Assets turnover ratio...........................................................................................................................6
Market ratio (General investment proposal analysis).............................................................................6
Dividend payout ratio..........................................................................................................................7
Evaluation of the key points found in this financial analysis.......................................................................7
Analysis to compare the Share price movement of Reject Shop with all ordinary index.............................7
Computation of the value of the stock of the Reject Shop Company......................................................8
Computation of the dividend growth rate of Reject Shop...................................................................9
Recommendation......................................................................................................................................10
Conclusion.................................................................................................................................................10
References.................................................................................................................................................11

Appendix...................................................................................................................................................13

Introduction
With the changing business structure, every organization should use proper financial
analysis tool to analysis the financial performance of company. The ratio analysis, Du Pont
analysis, share price valuation analysis and top down analysis and bottom up analysis could be
used to evaluate the financial performance of company. This report has been prepared on The
Reject Shop Company and its financial information from the annual report has been selected.
This report divulges the financial performance of company, use of dividend growth model and
share price analysis of company. The ratio analysis has been selected as financial performance
analysis tool to evaluate whether the company has strong and weak financial performance in
business. The analysis is used to identify whether the Reject Shop Company is fundamentally
financially healthy or not.
Description of the Reject Shop
It is an Australian discount variety store chain which is indulged in retail service and currently
operates 340 stores Australia wide. This Company has increased its capital investment by 20%
since last three years. It is analyzed that currently, the Reject Shop Company has decreased its
share price by 61% and resulted to AUD $ 4.90. Currently, CEO of company is Ross Sudano
who undertakes all the key managerial decisions and all the employees accustomed to take their
actions as per the orders given by him. The revenue of company has increased to AUD $ 80
million which is 20% higher as compared to last five year data. It reflects that company has
created value on its investment (The Reject Shop, 2016).
Core activities of the Reject Shop
The Reject Shop Company is an Australia discount variety retail store chain which provides
retail activities to the people in Australia. It sales all type of goods and services from its retail
stores (The Reject Shop, 2016).