Capital Structure and Payout Policy Analysis of JB HI FI

This report analyzes the capital structure and payout policy of JB HI FI, an Australian consumer goods company. The report evaluates the dividend payout ratio of the company and its relevance to the net profit of the company. The report also includes a literature review on payout policy and its impact on investment opportunities.

Running Head: Finance for business-Masters
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Project Report: Finance for business

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Contents
Introduction.......................................................................................................................3
JB HI FI............................................................................................................................3
Payout policy....................................................................................................................3
Literature review...............................................................................................................4
Conclusion........................................................................................................................5
References.........................................................................................................................6

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Introduction:
Capital structure analysis is an evaluation which is done periodically to evaluate
the debt and equity of the company which is used by the companies to manage the business.
The objective of the evaluation is to analyze the combination of equity and debt of the
company. The capital structure is evaluated by the companies and the financial analyst to
evaluate the total cost of capital of the company as well as the risk level of the company.
Payout policy analysis has been further evaluated. Payout policy of a company is related with
the cash distributions to the shareholders of the company. Payout policy determines that how
much amount should be paid to the shareholders of the company in context with the net profit
of the company. In the report, JB HI FI’s payout policy has been evaluated and it has been
found that how much dividends are paid by the company in context with the net profit of the
company.
JB HI FI:
JB HI FI is an Australian company which deals in consumer goods. The main products
of the company are CDs, DVDs, large home appliances, Blu-ray discs, hardware, electronic
products, video games etc. currently, company is operating its business through 303 stores.
Headquarter of JB HI FI is at Chadstone shopping centre in Melbourne. The financial
performance of the company is quite strong and the company is offering good dividends to its
shareholders (Home, 2018). The main mission and vision of JB HI FI is to offer quality
products to the international customers.
Payout policy:
Payout policy of JB HI FI has been evaluated. The annual report of the company briefs
that the dividend payout ratio of the company is continuously enhancing. In year of 2013, the
total net profit of the company was $ 116.4 million out of which $ 65.3 has been paid by the
company to its shareholders. The payout ratio of the company was 56.10. Further, it has been
found that the dividend payout ratio of the company in 2014, 2015 and 2016 are 60.12%,
63.88% and 61.24% (About us, 2018). In addition, in 2017, the total net profit of the
company was $ 192.2 million out of which $ 191.1 has been paid by the company to its
shareholders. The payout ratio of the company is 99.43% (Annual Report, 2018).
Calculation of dividend payout ratio

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2013 2014 2015 2016 2017
Net profit (Amt in $ million) 116.4 128.4 136.5 152.2 192.2
Dividends paid to shareholders
(Amt in $ million) 65.3 77.2 87.2 93.2 191.1
Dividend payout ratio 56.10% 60.12% 63.88% 61.24% 99.43%
(Desai and Jin, 2011)
Figure 1: Dividend distribution
(Annual Report, 2017)
The above dividend distribution ratio or payout ratio of the company briefs that the
company is using most of its net profit and capital to pay the dividend to the stockholders. It
briefs that the company is following relevant dividend policy to pay the dividends (Warrad et
al, 2012). Relevant dividend policy briefs that an organization should pay most of its net
profit and capital as dividend amount to the shareholders of the company. It would aid the
company to maintain the dividend amount of the company and the investors would also be
attracted and motivates towards the business.
Literature review:
Gill, Biger and Tibrewala, (2010) has explained that the payout policy is related with
the cash distributions to the shareholders of the company. Payout policy determines that how

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much amount should be paid to the shareholders of the company in context with the net profit
of the company. Further, it has been added by the Boudry, (2011) that payout policy includes
share dividend as well as the buy back of shares. The annual report of JB HI FI briefs that the
payout policy of the company is quite strong. Thus the investment position and the
investment opportunity of the company are also better. In addition, the annual report briefs
that the company is using relevant dividend policies to manage the payout policy of the
company (Abor and Bokpin, 2010). Relevant dividend policy briefs that an organization
should pay most of its net profit and capital as dividend amount to the shareholders of the
company. It would aid the company to maintain the dividend amount of the company and the
investors would also be attracted and motivates towards the business (Imran, 2011).
The payout ratio of the JB HI FI briefs that the company is using most of its net profit
and capital to pay the dividend to the stockholders. It briefs that the financial performance
and the stock performance of the company is quite better. Due to the better payout policy and
the management of the company, the stock price of the company has also been enhanced. The
yahoo finance (2018) briefs that after announcing the dividend amount and the annual report
of the company, the stock price of the company has been enhanced. The main reason behind
the increment is better payout policy of the company as well as the better position of the
company (Morningstar, 2018).
Ardestani, Rasid and Mehri, (2013) further added into his study that payout ratio plays
a crucial role in an organization. The better the payout ratio of an organization would be the
better the investment of the company would be. As the investors would feel more attracted
towards the company and thus the position and the performance would enhance.
Conclusion:
To conclude, Payout policy of a company is related with the cash distributions to the
shareholders of the company. Payout policy of JB HI FI determines that the company has
paid 99.43% net profit amount as dividend amount to the shareholders of the company. JB HI
FI’s payout policy has been evaluated and it has been found that the payout policies of the
company is quite better and thus the market position and the investors position of the
company is also better.

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References:
Abor, J. and Bokpin, G.A., 2010. Investment opportunities, corporate finance, and dividend
payout policy: Evidence from emerging markets. Studies in economics and finance, 27(3),
pp.180-194.
About us. 2017. JB HI FI. [Online]. Available at:
https://www.jbhifi.com.au/General/Corporate/Consumer-Matters/About-Us/ [Retrieved on
10th April 2018].
Annual Report. 2017. JB HI FI. [Online]. Available at:
https://www.jbhifi.com.au/Documents/2017%20Annual%20Report.pdf [Retrieved on 5th
April 2018].
Ardestani, H.S., Rasid, S.Z.A. and Mehri, R.B.M., 2013. Dividend payout policy, investment
opportunity set and corporate financing in the industrial products sector of Malaysia. Journal
of applied finance and banking, 3(1), p.123.
Boudry, W.I., 2011. An examination of REIT dividend payout policy. Real Estate
Economics, 39(4), pp.601-634.
Desai, M.A. and Jin, L., 2011. Institutional tax clienteles and payout policy. Journal of
financial economics, 100(1), pp.68-84.
Gill, A., Biger, N. and Tibrewala, R., 2010. Determinants of dividend payout ratios: evidence
from United States. The Open Business Journal, 3(1).
Home. 2017. JB HI FI. [Online]. Available at: https://www.jbhifi.com.au/ [Retrieved on 5th
April 2018].
Imran, K., 2011. Determinants of dividend payout policy: A case of Pakistan engineering
sector. The Romanian Economic Journal, 41, pp.47-60.
Morningstar. 2017. JB HI FI. [Online]. Available at:
http://www.morningstar.com/stocks/XASX/JBH/quote.html [Retrieved on 5th April 2018].
Warrad, L., Abed, S., Khriasat, O. and Al-Sheikh, I., 2012. The effect of ownership structure
on dividend payout policy: Evidence from Jordanian context. International Journal of
Economics and Finance, 4(2), p.187.

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Yahoo Finance. 2017. JB HI FI. [Online]. Available at:
https://au.finance.yahoo.com/quote/JBH.AX/ [Retrieved on 5th April 2018].