Financial Analysis of JB Hi-Fi Company

This report analyses the financial performance of JB Hi-Fi Company using ratio analysis and strategic management. It includes liquidity risk, profitability, and strategies to drive growth.

RUNNING HEAD: Financial analysis of JB Hi-Fi Company
1
Name of the student-
Topic- : Strategic business plan of Company
University name

Strategic business planning of company
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Table of Contents
Introduction...........................................................................................................................................3
Present description of JB HI-FI Company.........................................................................................3
Director’s details of company................................................................................................................4
Strategic management of JB Hi-Fi Company..........................................................................................4
Financial summary of JB Hi FI Company................................................................................................5
Chief executive Report of company.......................................................................................................6
Liquidity risk of company.......................................................................................................................6
Strategies to drive growth.....................................................................................................................7
Financial reporting frameworks.............................................................................................................7
Auditors detail of JB Hi-Fi Company......................................................................................................7
Key managerial compensation report...................................................................................................7
Consolidated income of company.........................................................................................................8
Possible alternative to be followed by JB Hi-Fi Company......................................................................9
Comprehensive analysis s of JB Hi-Fi Company...................................................................................10
Cash flow statement analysis of company...........................................................................................16
Business risk of company.....................................................................................................................17
Investment advice to investors for their investment...........................................................................17
Conclusion...........................................................................................................................................19
References...........................................................................................................................................20
.

Strategic business planning of company
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Introduction
Organization is accompanied with the complex set of activities in which various
functions are performed to accomplish set objectives and goals. In this report, investment
analysis and associated business factors of organizations are analysed. This report reflects the
true understanding on the financial and non-financial information of company. This report
has shown how investors could evaluate the financial performance of public limited
company. In this report, Australian company named JB HI-FI Company has analysed to
identify the trend of its financial performance. This JB HI-FI company has been using
strategic management in its business to increase the overall outcome of the business.
Nonetheless, this strategic management of JB HI-FI Company is accompanied by planning,
control and observation of all the internal and external factors of the business. This company
has increased its overall revenue by 22% since last five years. The increment in share price
and overall revenue reflects that company is booming in international market and increased
the overall business. It is considered that if investors want to invest their money for creating
value on their investment then they should invest their money in organization which has high
amount of profit and offering high return on capital employed to their shareholders.
Nonetheless, after evaluating the five years annual report of JB Hi-Fi Company, it is
considered that investors should invest their funds in the business functioning of JB Hi-Fi
Company in long run. However, investing money in small period of time of JB Hi-Fi
Company will destruct the value of the capital of the investors (JB HI-FI, 2017).
Present description of JB HI-FI Company
JB HI-FI Company is an international company which is engaged in performing an
effective business to sell the entire electronic home appliance around the globe. The present

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stock price of the JB HI-FI Company is JBH (ASX) A$ 25.73 +1.63 (+6.76%). The main
headquarter of company is in Melbourne, Australia. All the employees of the company are
accustomed to act as per the directions and instructions of Richard Murray. In this report
analysis has been made by evaluating the annual report of JB HI-FI Company and its other
financial details in determined approach. All the directors and promoters of company are
more inclined towards investing money in the business functioning of JB Hi-Fi Company and
expanding the business.
Director’s details of company
Strategic management of JB Hi-Fi Company
It is evaluated that Strategic management of JB Hi-Fi Company is accompanied with
analysing, considering and assessment of all the internal and external factors of business.
This Strategic management is used by management department to analyse all the available
resources of business to increase the overall outcome of organization. This Strategic

Strategic business planning of company
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management help company to increase the synergy of company and increase the overall
profit in determined approach. It is considered that Strategic management of JB Hi-Fi
Company has increased the main focus of company towards developing core competency in
two specific filed such as cost leadership and product differentiation strategy. This
management of JB Hi-Fi Company is accompanied with three principles such as unique
business strategy, market trade off and implementing corporate strategic alliance. JB Hi-Fi
Company has entered into various strategic alliances with other organizations to increase its
overall outcomes. For instance, increasing the overall marketing advertisement strategy,
company has used computing systems and social media such as Facebook and Twitter. In
addition to this, company has also arranged various training and development program for its
employees to increase their employability. This type of training program under strategic
management process makes them more employable towards the sophisticated business
process system of organization. Nonetheless, in management theory and practice, operational
and strategic management is most valuable part of the business success. It is considered that
operational strategic program helps company to manage its value chain activities and increase
the overall productivity. On the other hand, strategic management implemented by JB Hi-Fi
Company increases the efficiency of the business and helps in creating the core competency
of business (JB HI-FI, 2017).
Financial summary of JB Hi FI Company
This summary has shown that company has total turnover of $ 5.6 billion and 40% of
its sales account to its net profit after tax amount. This has shown that company has high
business sustainability throughout the time.

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Chief executive Report of company
This company has high profit potential growth and opening several stores around the globe.
The investment in New Zealand channel has increased is overall profit and return of its
capital employed (Laudon and Traver, 2013).
Liquidity risk of company
It is evaluated that JB Hi-Fi Company has low level of liquidity risk which has shown
that company could reduce the investment in its working capital. In addition to this, as per the
economic factors of company, there could be so many changes in the business (Warren,
2016).

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Strategies to drive growth
This JB Hi-Fi company has been continue to expand its business on international level
and expanded its business in New Zealand as well. In addition to this, there is significant
opportunity of investing in diversifying market which management department of JB Hi-Fi
Company has been considering.
Financial reporting frameworks
JB Hi-Fi Company has established harmonization in complying with the IFRS rules
and standards and GAAAP accounting standards to prepare and file its accounting and
financial statement. This helps company to mitigating its domestic and international reporting
issues (Chand, Patel, and White, 2015)
Auditors detail of JB Hi-Fi Company
The main auditor of company is Deloitte who have given unqualified audit report.
This firm has also given the report that company has completed with all the rule sand
regulation of government (Dinnie, 2015).
Key managerial compensation report
These key managerial persons are the persons who control and run the business of
organization. It is evaluated that if company could follow effective business functioning then
it will have to reduce the compensation amount to its key managerial persons.

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Company has increased overall payment to its key managerial persons by 29% which
shows that company had to increase the cost of the production by 29% at the same time. This
type of strategic program will not only destruct the business policies to develop core
competency in cost leadership strategy but also destruct the business structure of organization
(Draft, 2015).
Consolidated income of company
The consolidated income of company has increased in one year and return offered by
company to its shareholders has also increased throughout the time. It is evaluated that profit
of company is completely based on the overall turnover which shows that company has
increased its overall output throughout the time. The average growth of company since last

Strategic business planning of company
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two years is average 20% which is very good indicator for the sustainability of the
organization (Elad, 2016).
Possible alternative to be followed by JB Hi-Fi Company
After considering the annual report of company and financial analysis of company, it
is considered that company should increase its overall outcomes and should focus on
investing more money in its other sub units. It is evaluated that JB Hi-Fi Company has
followed double entry system while preparing its financial accounts. Nonetheless, all the
accounts and reporting framework of company is based on the accounting standards of IFRS
rules and regulations. It is suggested that company needs to make changes in its inventory
management system to reduce the blockage of funds. Company should focus on following
LIFO methods to manage its inventory. Furthermore, company has also failed to disclose the
true and fair value of its assets. As per the IAS-136 rules and regulations, company should
implement impairment test on each and every reporting period to showcase the true and fair
view of its assets. It is observed that all the impairment loss of company should be deducted
from the available cash generating units of organization. In addition to this, company should
follow conservative investment policies as it should be more inclined towards plugging back
all of its money in its business. Apart from that, company should also establish proper level
of harmonization in its domestic and international accounting frameworks to have standards
reporting frameworks around the globe. Company has high payment of tax due to its
international business transactions. Therefore, JB Hi-Fi Company should enter into double
taxation avoidance agreement to reduce its overall payment. This level of changes in its
business functioning will increase the overall outcome and efficiency of organization.
Furthermore, strategic management of JB Hi-Fi Company has focused on developing core
competency in cost leadership as well. This level of strategic planning and effective business

Strategic business planning of company
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performance will help company to grow effectively. In addition this, JB Hi-Fi Company has
to reduce the remuneration payment of its key managerial persons to reduce the overall cost
of the production (Garrett, Hoitash and Prawitt, 2014).
Comprehensive analysis s of JB Hi-Fi Company
This report has reflected the key understanding on the annual report and financial
analysis of JB Hi-Fi Company. The annual report and other financial details of the particular
company has been analysed to evaluate trend and business growth of company. It has been
using its strategic and financial management. In this report, some of the questions related to
financial details of JB Hi-Fi Company have been taken into consideration. JB Hi-Fi Company
has used strategic management functioning to increase its overall output to make effective
output of the business (Kundakchyan and Zulfakarova, 2014). Strategic management is
considered as formulation and implementation of the major objectives and initiative takes by
company’s top management on the behalf of owners for management of the scarcity of the
resource to make more profitable outcome in organization. In JB Hi-Fi Company, this
strategic management is used by top management to run the effective business functioning of
company on domestic and international level. This appraisal of the project using ratio
analysis project technique has been used to analyse whether the JB Hi-Fi Company is running
the profitable business throughout the time. This ratio analysis will help clients to understand
the business trend growth of business throughout the time. It is evaluated that since last five
years, JB Hi-Fi Company has increased its overall output and increased the brand image of
company in determined approach. This analysis will in evaluating the financial performance
of company and how company could make proper changes by injecting more money in its
business. JB HI FI company has implemented growing business.
Liquidity ratio of JB Hi-Fi Company

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This ratio reflects how company could pay off its short term and long term debt thorough its
current assets (Shouman, El Shenawy and Khattab, 2016)
It is considered that JB Hi-Fi Company has decreased its current ratio by .70 points since last
five years. Quick ratio has increased to .35 in 2017 which is .4 points higher since last three
years. This liquidity ratio has shown that company has blocked more funds in its working
Description
JB Hi-Fi
Limited
Liquidity
( Formula) 2017 2016 2015 2014 2013
Cash ratio
cash equivalents
+ cash / current
liabilities
0.082392
8 0.1163311
0.128947
4 0.1221591 0.15158
Current
ratio
Current
assets/current
liabilities
1.3
2
1.5
7
1.6
2
1.6
4 1.28
Quick
Ratio
Current assets-
Inventory/current
liabilities
0.3
5
0.3
5
0.3
6
0.3
4 0.31

Strategic business planning of company
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capital and preparing itself from the sluggish market condition. In addition to this, I will keep
the company safe from all the internal and external business factors. For instance, in case of
high demand of the products and services, company could easily increase the overall
production (Cucchiella, D’Adamo and Gastaldi, 2015).
Profitability
It is reflected that JB Hi-Fi Company has reduced its overall profit throughout the
time. Company has maintained effective operating profit of 35% to 30% since last four years.
It is considered that if company could increase 20% in 2017 from 30% in 2013. It is
evaluated that return on capital employed has also went down due to the business factors. In
addition to this, the main impact of business is seen on the change of net profit (Cucchiella
and D’Adamo, 2015).
Description Formula JB Hi-Fi Limited
Profitability
2017 2016 2015 2014 2013
Return on
equity
Net
profit/revenues 0.0305615 0.0384421 0.0375137 0.0367394 0.03507
Return on
assets
Net
profit/Equity 0.2014052 0.3753086 0.3994169 0.4338983 0.47737
Financial EBIT / EBIT - 1.0428016 1.0184332 1.0307692 1.0494505 1.05952

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leverage Interest
Asset
turnover
total assets /
total sales *365 159.0876 91.665402 89.450986 90.097589 93.0154
Earnings
per share
Net income -
pref div / shares
outstanding 0.3917995 3.1020408 2.4035088 2.2068966 1.84127
Solvency
It reflects that company has maintained effective capital structure. It is considered that
if company could increase the overall investment by increasing the overall debt funding then
it will reduce the overall cost of the capital. Company has increased its debt funding It has
maintained 4.06 debt to equity in 2017 (Brigham and Ehrhardt, 2013). It will increase the
overall investor’s inclination toward the business of JB Hi-Fi Company. It is observed that if
company want to beat the sluggish market factors then it has to reduce the overall financial
leverage (Cucchiella, Gastaldi and Trosini, 2017).
Details Formula 2017 2016 2015 2014 2013
Times
interest
earned EBIT / Interest expenses
24.36363
6 55.25 33.5
21.22222
2 17.8
Cash EBIT + non-cash expenses / 269. 22 20 192. 179.

Strategic business planning of company
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coverag
e ratio interest expenses 00 2.00 2.00 00 00
Debt to
Equity
Ratio Debt/ Equity
1.
87 1.45 1.61
1.
92
2.
47
After evaluating the annual report of JB Hi-Fi company, it is evaluated that interest
coverage ratio of company has increased due to the less interest expenses and increased
overall profit. On the other hand, company has also decreased its debt to equity which has
resulted to low level of financial leverage. It is considered that if company wants to decrease
its overall cost and increase its overall funding then it could do it by issue of more debt funds
in market. The interest coverage ratio of company has gone down to 1.87 in 2017 which is1
base points lower as compared to last four year data (Smit and Trigeorgis, 2017).
Efficiency ratio
It is considered that JB Hi-Fi Company has increased its business efficiency by
blocking fewer funds in its business. It is evaluated that company has increased its debtor’s
turnover to 29.37 in 2017 which shows its efficiency to reduce the operating cycle chain. In
addition to this, creditor’s turnover ratio has increased to 11.9 in 2017 which is very high as
compared to last four years data. Inventory turnover ratio of company has also increased to
71.37 which are 2 points higher as compared to last four years data (Brigham and Ehrhardt,
2013).
Details Formula 2017 2016 2015 2014 2013

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Receivable
turnover Receivables/ Total sales*365
2
9.31
3
6.02
3
3.03
3
0.13
27.
71
Inventory
turnover
Inventory / cost of goods sold
*365
7
1.37
6
4.52
6
1.26
6
1.03
59.
57
After analysing the annual report of company, it is determined that investors could
create value on the investment then they should invest their money in JB Hi-Fi Company for
long run. In addition to this, it is found that JB Hi-Fi Company has also increased the
business efficiency which shows that in coming years, company will offer higher profit to
investors. The main benefit which JB Hi-Fi Company has been using is related to its cyber
computing system. This ERP system has increased the overall profit and efficiency of the
business. This cyber computing system enterprises resources planning is included under the
strategic management business of company. It will increase the overall outcomes and
increase the synergy of company. Nonetheless, strategic management program has helped
organization to increase the overall outcomes and turnover. This could be analysed by
evaluating the annual report of company (Petty, et al. 2015).
Business strategic management analysis of JB Hi-Fi Company
It is observed that business strategic management analysis of JB Hi-Fi Company has
shown that company has several rivals in market which are offering same products and
services in market. However, JB Hi-Fi Company has created core competency in product

Strategic business planning of company
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differentiation strategy which has helped company to keep one step ahead from other
competitors in market. In addition to this, JB Hi-Fi Company in 2014 followed cost
leadership strategy to increase its overall turnover. This increased the overall attractiveness of
its products and services to its clients and resulted to increase in its overall turnover by 12%
in 2017. This Business strategic management analysis of JB Hi-Fi Company could be used to
analyse the efficiency of the business, use of scarcity of resources in organization and
operation plan prepared by JB Hi-Fi Company (McKinney, 2015).
This above given analysis has shown that JB Hi-Fi Company has increased its overall
efficiency of the business and created value on its investment. In addition to this, financial
risk of company is also very low which showcases that company could raise more funds by
issue of debts in market.
It is evaluated that JB Hi-Fi Company has strong brand image of company and business
sustainability of company is also increased throughout the time (McKinney, 2015).
Cash flow statement analysis of company
JB HI FI LTD (JBH) Statement of CASH FLOW
Fiscal year ends in June. AUD in millions except per
share data.
2017-
06
2016-
06
2015-
06
2014-
06
2013-
06
Cash Flows From Operating Activities
Other non-cash items 191 185 180 41 156
Net cash provided by operating activities 191 185 180 41 156
Cash Flows From Investing Activities
Investments in property, plant, and equipment -49 -52 -42 -36 -35
Property, plant, and equipment reductions 0 0 0 1 1
Acquisitions, net -837 -2 -3 -4
Net cash used for investing activities -886 -52 -44 -38 -38
Cash Flows From Financing Activities
Long-term debt issued 450 54
Long-term debt repayment -30 -40 -26
Common stock issued 396 6 3 22 1

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Repurchases of treasury stock -13 -5 -26
Cash dividends paid -119 -93 -87 -77 -65
Other financing activities -11 0 -1 0 -1
Net cash provided by (used for) financing activities 716 -131 -130 -28 -91
Effect of exchange rate changes 0 0 0 1 1
Net change in cash 21 3 6 -24 28
x 52 49 43 67 40
Cash at end of period 73 52 49 43 67
Free Cash Flow
Operating cash flow 191 185 180 41 156
Capital expenditure -49 -52 -42 -36 -35
Free cash flow 142 133 137 5 121
Supplemental schedule of cash flow data
Cash paid for income taxes -98 -66 -60 -61 -40
Cash paid for interest -9 -4 -6 -7 -9
This above table has shown that that company has positive free cash flow in its business
which has increased the potential viability of money and increased the benefits of its cash
flow. In addition to this, company has been paying high amount of interest and tax to its
company (Bekaert and Hodrick, 2017).
Business risk of company
There are number of business factors which are affecting the business functioning of
organization. However, with the increasing growth of this industry, competition is increasing
and company has faced high destruction in its selling throughout the time. In addition to this,
company by using its cyber computing enterprises resources planning, has been reducing its
technological risk throughout the time (Deresky, 2017).
Investment advice to investors for their investment
After evaluating all the key details and analysis of annual report of company, it is
considered that JB Hi-Fi Company has increased its overall turnover by average 20% since
last 5 years. It indicates that company has good business sustainability and showcase high

Strategic business planning of company
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level of return to its investors. It is considered that liquidity risk of company is very low due
to its high investment in its working capital. Company has maintained good profitability
throughout the time. If investor wants to invest their money in the business of JB Hi-Fi
Company then they should focus on investing money for long run. However, in short term,
company has low level of return to offer to investors. For instance, in 2016, JB Hi-Fi
Company has offered 10% return to its investors which is very low. On the other hand,
investors who have invested their money in JB Hi-Fi Company for long run are given average
22% return which is good indicators for the effective business. It has shown that investors
could easily create value on their investment if they invest their money in long run in the
business functioning of JB Hi-Fi Company. On the other hand, the business risk, liquidity
risk and Beta of company is also very low which indicates that company has very low level
of fluctuation in its business return which is good indicators for the investors to invest their
capital in JB Hi-Fi Company (Zeff, et al., 2016).
Division performance of company is also very effective which has shown that
company has increased its overall turnover since last one year. In addition to this, company
increased its turnover by 10% which increases the overall return throughout the time.

Strategic business planning of company
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EBIT of company has also increased to 6.33% in 2017 from 5.895 which have shown that
company increased its overall value and offered 4 % earning to its shareholders in market.
After evaluating all the details and analysis of the financial performance of company,
it is considered that investors should invest all the capital in the business of JB Hi-Fi
Company for long run. In addition to this, investing money in short run in the business of JB
Hi-Fi Company will provide less return to investors which will be less as compared to present
value factors of the business. In addition this, it is observed that investors should consider the
present value of the investment before investing money in particular investment proposal.
Nonetheless, investors should invest their money in the equity capital of company. It is
analysed that if they invest their capital in debt funding of company then they could take only
12% return on their investment. On the other hand, investing money in equity capital will
allow them to take at least average 20% return on their investment (JB HI-FI, 2017).
Conclusion
After evaluating all the details and analysis of the annual report of company, it could
be inferred that JB Hi-Fi Company has created value on their invested capital. In addition to
this, there are several diversified investment plan which top management of company has
undertaken for the benefit of company. On the other hand, investors could also create value
on their investment if they invest their capital in the equity share capital of company. It is
considered that investing money in the debt funding of the company will result to the
destruction of the invested capital of company. JB Hi-Fi Company has increased its overall
profit and increased its profitability throughout the time. If investors could use proper
strategic plans and procedure then they could easily create value on their investment in
determined approach. For instance, investing money in short run will destruct the value of

Strategic business planning of company
20
their investment and on the other hand, investing capital for the long run will create value on
their invested capital.

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21
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