Essay about Jb Hi-Fi Financial Analysis - 2747 Words

JB Hi Fi Ltd Company Analysis Report Executive Summary The impact of a company’s financial statement depends mainly on the company’s business strategy; both transactional and operational, its industry profile and the nature of its competitive environment. This report analyses 15 ratios of JB Hi-Fi’s financial performance and suggests a recommendation for investors. JB Hi-Fi Limited (JBH) is a specialty discount retailer of branded home entertainment products. The groups products fall into consumer electronics, car sound systems, music, Digital Versatile Disc’s (DVD’s) and white-goods. JB Hi-Fi Limited achieved revenue growth of 17%, EBIT growth of 23% and NPAT growth of 26% for the year ended in 30 June 2010†¦show more content†¦Hence, JBH has more inventories and less liquidity than other companies in retail industry. In order to increase liquidity it needs to increase its cash by converting assets into cash (sales). Additionally, as a quick sell retail company, JBH does not give large credit sales to its customers, instead most of sales are made by cash or cash equivalent. This gives the company less account receivables and bad debts. As such a lower quick ratio than industry average is common and should not raise any liquidity issues. 2.2.1 Activity The Activity ratios help to determine the company’s ability to convert different sectors of the balance sheet into cash or sales (Potter, Libby, Libby amp; Short; 2010). The ratios used under this test are; Days inventory, Days Receivable, Fixed Asset Turnover, Total Asset Turnover and Days Payable. Table 2: Days inventory Method 1 | Formula | Equation | Ratio | Inventory turnover (2010) | | | 8.16 | Inventory turnover (2011) | | | 7.27 | Average days to sell inventory (2010) | | | 44.7 | Average days to sell inventory (2010) | | | 50.2 | Average days to sell inventory (2010) | | | 50.2 | Table 3: Days inventory Method 2 | Formula | Equation | Ratio | Inventory turnover (2010) | | | 6.48 | Inventory turnover (2011) | | | 6.22 | Average days to sell inventory (2010) | | | 56.3 | Average days to sell inventory (2011) | | | 58.7 | Table 4: Days receivable, Fixed assetShow MoreRelatedJb Hi-Fi Financial Analysis Essay3058 Words   |  13 PagesFinancial Analysis The question asks us to compare and evaluate JB Hi-Fi’s calculated ratio report, with that of the retail industry ratio report (Potter, Libby, Libby, Short p. 1133). 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