Jb Hi-Fi Financial Analysis Essay

2741 Words Apr 29th, 2012 11 Pages
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 group's 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
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collection period (2010) | | | 8.27 | Avg. collection period (2011) | | | 7.51 | Fixed assets turnover (2010) | | | 11.0 | Fixed assets turnover (2011) | | | 11.3 |

2.2.2 Comparison and Evaluation of Activity:

1) Days inventory: | JB HiFi (Two methods) | Industry Ratio | 44.7days(2010) 50.2days(2011)56.3 days(2010) 58.7days(2011) | 50 days |

‘Days inventory’ indicates the average time it takes the company to produce and deliver inventory to customers (Potter, Libby, Libby & Short; 2010). The ‘days inventory’ of the JBH is lower than the industry average in FY10 and levels off as industry average in FY11, which indicates JBH’s capital is not tied up in inventory (first method). However, JBH holds a great portion of its current assets as inventory. To counter act this position JHB’s inventory management is sufficiently efficient to help the firm generate cash quickly.

However, JBH should be alarmed that two different methods in calculating days inventory give the same increasing trend, which means JBH takes longer time to sell inventory in FY11 than FY10.

2) Days receivables: | JB HiFi | Industry Ratio | 8.3days(2010) 7.5days(2011) | 25.78 days |

‘Days receivable’ gives the measurement of the average number of days it takes for the company’s customers to pay their bills (Potter, Libby, Libby & Short; 2010). The collection circle is almost one third of the industry

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