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JB HIFI LTD BALANCE SHEET AS AT JUNE 2009 - Essay Example

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Contents Abstract 2 Financial Analysis 3 Profitability Ratios 3 Liquidity and efficiency Ratios 4 Gearing Ratios 6 Conclusion 7 References 8 Abstract Ratio analysis is a very accurate and reliable tool when it comes to analyzing the financial outlook of an entity…
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JB HIFI LTD BALANCE SHEET AS AT JUNE 2009
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JB HIFI LTD BALANCE SHEET AS AT JUNE 2009

These analysis form an integral part of the financial statement analysis, especially from the investors point of view, who always strive to invest in countries having strengthen and stabilizing financial ratios and representing an upward trend. It is of great significance that the ratios must be benchmarked against a standard in order for them to possess a meaning. Keeping that into account, the comparison is usually conducted between companies portraying same business and financial risks, between industries and between different time periods of the same company. The company under consideration is JB Hi Fi Limited and in this report analysis of the financial performance of the company for the financial year 2009 with the financial year 2010 has been conducted in order to draw attention to various financial trends and significant changes over the period. The analysis is divided into three main categorize namely Profitability, Liquidity and Gearing. Profitability ratios identify how efficiently and effectively a company is utilizing its resources and how successful it has been in generating a desired rate of return for its shareholders and investors. Liquidity ratios measure the ability of the company to quickly convert its asset into liquid cash to settle its short term liabilities. Whereas, the Gearing ratios identifies the extent to which the company is financed through debt and to what degree the operations are being conducted from the finance raised through raising equity capital or otherwise. Financial Analysis JB Hi Fi Limited is regarded as one of the prominent when it comes to selling home appliances. The company is involved in selling plazmas, computer and tablets and several other digital home entertainment appliances. It holds a considerable market share and manages its operations through a well established supply chain. The company represents sound financial outcome as its turnover has increased by 27% during the financial year 2009 as compared to the prior financial year, boosting the net profit by a massive 39%. The company’s reserves have also increased during the current financial year which shows that its investors are considering the company lucrative and are planning to have a long term association with it. Profitability Ratios   2009 2008   Profitability Ratios Gross profit margin 21.51% 21.86% Net profit margin 6.17% 5.65% ROCE 41.19% 39.71% Gross profit margin is an analyzing tool which assists in identifying how effectively and efficiently the company is utilizing its raw materials, variable cost related to labor and fixed costs such as rent and depreciation of property plant and equipment. The ratio is calculated by dividing the sales revenue by the gross profit. Analyzing the trend of gross profit margin, in the financial year 2009 the gross profit margin has marginally decreased as compared to the financial year 2008. Although the sales in the year 2009 increased by $498.702 million, but this was offset by an increase of $ 397.802 million in the cost of sales. Net profit margin, on the other hand analyzes the profitability of the company before deducting the taxation and finance charges from the earnings. The ratio is calculated by dividing the profit before interest and tax with the sales revenue of the current finan ... Read More
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