Financial Analysis and Wealth Report on JB Hi-Fi Limited

This report provides a comprehensive financial analysis of JB Hi-Fi Limited, a leading Australian retail company specializing in consumer electronics. The analysis covers both financial and non-financial aspects, including short-term solvency, efficiency, profitability, and market value ratios. The report examines the company's core business areas, geographic locations, industry trends, business strategies, and management structure. It assesses the company's strengths, such as its customer-focused approach and cost control strategy, and interprets the financial data to assess its growth prospects and investment potential. The report concludes with a recommendation for prospective shareholders, supported by references to relevant financial literature. The report highlights the company's strong financial performance, efficient management of operations, and consistent profitability, making it an attractive investment opportunity. The report also considers external factors such as the entry of Amazon into the Australian market and how the company's management plans to deal with such situations.

Wealth Report

Resource A: Financial Analysis Report Content
Table of Contents
Executive Summary...................................................................................................................1
Analysis......................................................................................................................................1
Interpretation..............................................................................................................................3
References..................................................................................................................................4

Executive Summary
Background of the company
The company that has been chosen for analysis is JB Hi-Fi Limited. This company deals in
retail business of electronic consumer goods. The company is based in Australia with its
stocks trading in Australian Exchange. It is one of the leading companies of Australia in retail
business.
Purpose of the report
This report will help evaluate the company for a prospective shareholder in terms of its
financial and non-financial aspects. The annual report and other important documents of the
company would be studied in detail to understand the current financial position of the
company. Also aspects like its competitive advantage, industry performance, and
organizational structure will indicate about the growth prospects of the company.
Analysis
Financial aspect
Based on the study of the financial report of JB Hi-Fi Limited over the past few years, we can
see the following:
Short term solvency ratio
Ratios Formula 2017 2016
Current ratio Current assets /
Current liabilities
1.32 1.57
Quick ratio Current assets-
inventory / Current
liabilities
0.35 0.345
The comparison of the quick ratio and the current ratio from that of the previous year indicate
that there has not much change in these ratios. However the current ratio has decreased
slightly as the current liabilities of the company for 2017 has increased.
Efficiency Ratio

Inventory Turnover
ratio
COGS/ Inventory 5.11 5.65
Accounts receivable
turnover ratio
Sales/ Accounts
Receivable
28.62 40.35
Account payable
turnover ratio
COGS/ Accounts
Payable
6.78 9.08
Sales to asset ratio Sales/ Total Assets 2.29 3.98
Return on asset Net profit before tax/
Total assets
0.10 0.21
The comparison of the efficiency ratio from the past year indicate that the company is
receiving its receivable later and an improvement is required for realisation of the proceeds of
the sale. Also the inventory of the company is taking longer to be converted into sales.
Profitability Ratio
Gross profit margin Gross profit /sales 0.21 0.21
Net profit margin Net profit / Sales 0.03 0.03
This comparison from the previous year indicate that there has been no change in the profit
margin of the company.
Market Value Ratio
P/E ratio Market value per
share/ Earnings per
share
12.77 12.56
Earnings per share Profit on each
allocated common
stock
1.84 1.48
The comparison of the market value ratio from last year indicate that there has not been a
considerable change since last year.
Non-financial aspect

Core business areas and geographic location- The company has diversified into many
business areas over the years. Initially the company only dealt with the sale of DVD, CD, Hi-
Fi equipment and vinyl records. But gradually as the demand for vinyl records decreased, the
company shifted its focus to other consumer goods like household electronics, mobile phone,
electronic hardware, video games and Blu-rays. The company has its operations all over
Australia through stores and online portal.
Improvement in the financial results- Over the years, the financial performance of the
company has improved with the current revenue being AUS Dollar 4 billion.
Trend of the industry- The consumer electronics industry is one of the growing industry as
the invention and improvement in technology is leading to higher demand from the
consumers.
Current business strategy- The current business strategy used by the company is low cost
strategy to attract the maximum number of customers and for market penetration. There are
other retailers in consumer goods which provide a tough competition to the company. Thus in
order to deal with such situation, the company offer lowest price in the industry.
Current and future market potential- The current retail market of the consumer goods have
many small players providing similar services. In the new future, Amazon which is the
leading retailer of world is entering Australian market. This will affect the market share of JB
Hi-Fi Limited.
Strength of the company’s management team- The strength of the company’s management
team lies in the dedication and expert knowledge in their business area. Even with the news
of Amazon hitting the Australian market in the next quarter, the management has forecasted a
20% increase in earnings and sales growth for the year 2018. Richard Murray, the chief
executive officer of the company indicate the future proof expansion strategy of the company.
Remuneration trends from last year to this year- The remuneration trend of the company
indicates paying according to the industry standards. The employee of the organization is
well motivated and satisfied with their job which help them serve the customers better.
Current management structure- the current management structure of the company indicate the
presence of an independent board of directors which assist in making important and strategic
decisions of the company. Also various committee help in adherence to industry standards
and legislations.

Non-wage related benefits for the employees- The employees are provided with number of
benefits which make them participate in the profits of the company.
Interpretation
With the help of above analysis, it can be interpreted that the company has a strong base for
growth with high focus on customer service and cost control strategy. Its leadership position
characterised by the organic growth makes it attractive among the investors. The company
values its stakeholders and provide sufficient dividend to the shareholders for their
investments. The company beats the earnings forecasts of the analysts and investors by
providing a higher growth each year.
The financial analysis of the company in comparison with the last year also indicate a strong
position of the company. The current ratio of the company is greater than one which indicate
that the company can easily meet its current liability needs with the help of the current assets.
The values of the efficiency ratios are high enough to indicate efficient management of the
business operations. The profitability ratio has been consistent and low according to the low
cost strategy followed by the company in order to provide maximum price benefits to the
customers.
Due this strong growth prospects, the shares of this company is recommended to a
prospective shareholder.

References
Kotāne, I. (2013). THE ASSESSMENT OF FINANCIAL AND NON-FINANCIAL
INDICATORS IN EVALUATING THE PERFORMANCE OF A COMPANY. Latgale
National Economy Research, 1(5), 129. doi: 10.17770/lner2013vol1.5.1156
Polimenis, V., & Neokosmidis, I. (2016). The modified dividend–price ratio. International
Review Of Financial Analysis, 45, 31-38. doi: 10.1016/j.irfa.2016.01.019
Rees, B. (1995). Financial analysis. London: Prentice Hall.
Sinha, R. (1998). Company Cross-Holdings and Investment Analysis. Financial Analysts
Journal, 54(5), 83-89. doi: 10.2469/faj.v54.n5.2215
Steenkamp, J., & Gielens, K. (2003). Consumer and Market Drivers of the Trial Probability
of New Consumer Packaged Goods. SSRN Electronic Journal. doi: 10.2139/ssrn.380180