Financial and Non-Financial Analysis of JB Hi Fi

This report provides a financial and non-financial analysis of JB Hi Fi, an Australian-based ASX listed company operating in the gaming industry. It includes liquidity ratios, profitability ratios, leverage ratios, investor ratios, and efficiency ratios to evaluate the company's financial performance. Recommendations for further decisions are also provided.

WEALTH REPORT

Executive summary
Financial and non financial analysis of a company decides the wealth accumulation of the firm and whether the company is
financially strong to order high returns of capital invested by shareholders. In this report Shareholders of JB Hi Fi will reported
on the financial wealth of JB Hi Fi. JB Hi Fi is an Australian Based ASX listed company operating in Gaming Industry. Through
the financial and on financial analysis the shareholders will be told about the financial and non financial strengths as well as
weakness of the company after which recommendation for further decisions will be made.
Analysis
Liquidity Ratios
Current Ratio (Current Assets / Current Liabilities) 0.802745009 0.858390654
Quick Ratio (Current Assets - Inventories)/ Current Liabilities 0.711887477 0.760890927
Cash Ratio Cash and Cash equivalent / Current Liabilities 0.07134755 0.102412927
Efficiency Days
Days of Sales Outstanding (DSO) (Average Receivables /Net Revenue)x365 63 71
Days of Inventory on Hand (DOI) (Average Inventory /Cost of Sales)x365 15 19
Days of Payables (DOP) (Average Payables /Cost of Sales)x365 93 87
Cash Conversion Cycle (CCC) DSO + DOI - DOP -15 2
Profitability Ratios %
Gross Profit Margin (GPM) (Gross Profit / Revenue) 19% 22%
Operating Profit Margin (OPM) (Operating Profit / Revenue) 19% 22%
Net Profit Margin (NPM) (Net Income / Revenue) 12% 14%
Return on Capital Employed (ROCE) (operating profit/ Average Total Capital employed) 17% 19%
Return on Equity (ROE) (Net Income / Average Equity) 24% 27%
Net Profit Margin (NPM) (Net income / Average total assets) 79% 78%
Leverage Ratios
Debt-to-Equity Ratio (D/E) (Total Debt / Total Equity) 1.02 1.02
Debt-to-Assets Ratio (Total Debt / Total Assets) 0.36 0.35
Gearing (Total debt / (Total debt+Total Equity) 0.50 0.50
Interest Coverage (EBIT / Interest) 8.96 8.56
Investor Ratios
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EPS Net profit attributable to ordinary shareholders / WANS 0.80 0.88
Dividend Yield Dividend per share / share price 3.00 3.25
Dividend Payout Dividend per share / EPS 37.64 37.09
Price-Earnings Share price / EPS 12.55 11.41
Table 1: Ratio Analysis of JB Hi Fi
(Source: Self generated)
From the financial analysis of the firm the financial aspect as well as financial growth of the firm in the recent years will be
analyzed. There are liquidity ratios, profitability ratio, leverage ratio, investor ratio and efficiency ratio which will define the
financial aspect of the firm in in an evident manner (Vogel, 2016). The liquidity ratio of the company shows that the company
has increased its cash assets where as quick ratio has been stable and the current ratio has declined of the firm in the recent days.
The effect ratio also shows that the effect of the company has been stable there has been no big difference but the Cash
Conversion Cycle is going into negative which means it is generating revenue from customer before payment to supplier which is
a positive sign for the company. The profitability of the company shows that revenue of the company increased by the expense
have also increased which has decreased the net profit margin. As the company’s capital employed is in negative the results
shows negative return on capital; employed. Although the return of equity has also decreased this is not a positive sign for the
company. The debt to equity ratio shows that the amount of equity capital within the firm has increased in the recent days. The
inverter ratio shows that the company has low dividend yield and excessive dividend payout ratio which is not a positive sign for
the company’s financial stability (Dewachter et al. 2015).
Interpretation
The company has seen a stable liquid condition but the profitability of the company has decreased in the recent year which has
also affected the investor ratios. This is because of the increasing competition within the Australian GamingIndustry and through
the growth of Myer in the market (Vogel, 2014).
The companies operate all over different parts in Australia and are considered as an Gaming giant. The firm is known for its high
quality products and service and holds good brand value within the market. The management of the firm is very much focused on
bridging the business on the online venture and broaden the range of products to the online segment. The employees within the
company are also managed through effect there are various rewards and benefits system made within the firm to benefit the
employees and to keep them motivated for future better operations (Blum and Dacorogna, 2014).
The company has been doing well in the market in terms of sales but the company will now look forward of cutting expenses to
increase profit. Due to non optimization of expense the company has incurred low profits leading to such financial results. The
company will look to increase online business to increase their operational size and financial results which benefits its
stakeholders wealth.
Conclusion
Concluding in the light of above context the report shows negative results for the shareholders food the firm it can be said that in
the future the market competition will get intense and JB Hi Fi will have to redefine their strategy to increase profit to increase
dividend payout to the shareholder and maximize their wealth. The company is recommended to cut down on their cost and
expense to increase their profitability. The stakeholders on the other hand are recommended to lower the investment amounts to
make sure that if the company incurs loss the damage of capital funds to the shareholder is low.
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References
Blum, P. and Dacorogna, M., 2014. DFA‐Dynamic Financial Analysis. Wiley StatsRef: Statistics Reference Online.
Dewachter, H., Iania, L., Lyrio, M. and de Sola Perea, M., 2015. A macro-financial analysis of the euro area sovereign bond
market. Journal of Banking & Finance, 50, pp.308-325.
Vogel, H.L., 2014. Entertainment industry economics: A guide for financial analysis. Cambridge University Press.
Vogel, H.L., 2016. Travel industry economics: A guide for financial analysis. Springer.
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