Preview

Jb Hi-Fi Financial Analysis

Powerful Essays
Open Document
Open Document
3054 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
Jb Hi-Fi Financial Analysis
Financial 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). The retail ratio report is comprised of a basket of listed companies which operate under the retail banner, which makes it relevant to use as a comparison to JB Hi-Fi.

1. Liquidity ratios are a class of financial metrics that is used to determine a company's ability to pay off its short-terms debts obligations. Generally, the higher the value of the ratio, the larger the margin of safety that the company possesses to cover short-term debts.

Table 1: Current Ratio Current ratio: This ratio measures whether or not a firm has enough resources to pay its debts over a twelve month period, comparing its current assets, with its current liabilities. | 2010: 1.25 | 2011: 1.45 | Industry: 2.67 |

Comparison: The industry average of 2.67 indicates that for every dollar owed, companies, on average will have $2.67 available in assets to convert into cash in the short term. From the JB Hi-Fi data calculated, it is interesting to note that current ratios of 1.45 in 2011 and 1.25 in 2010 are significantly below the industry average. However, this is not too concerning because JB Hi-Fi still have a ratio above 1, and therefore would still be able to meet their current obligations. The lower figure may be explained by the fact that JB Hi-Fi may have a high turnover of current assets, such as stock, which if sold before accounts payable become due, would decrease the current ratio.
Table 2: Quick Ratio Quick ratio: This ratio examines a firm’s ability to use its quick assets to extinguish its current liabilities immediately. Inventory or stock is generally excluded from this equation in order to produce a more accurate account of the firm’s ability to meet its short term obligations | 2010: 0.33 | 2011: 0.27 | Industry: 1.92 |

Comparison: The quick ratio measure’s an

You May Also Find These Documents Helpful

  • Satisfactory Essays

    Beacon lumber analysis

    • 269 Words
    • 2 Pages

    The debt-to-equity ratio measure a company's financial leverage, suggesting the proportion of equity and debt the company used to finance its asset. The debt-to-equity ratios of Beacon Lumber Company from November 2009 to January 2010 are 1.181047492, 1.230387896 and 1.14884363. These three ratios are all above1.0 showing that the majority of assets are financed through debt, which means the company strategy is aggressively generating more earnings. At the same time, Beacon Lumber Company should carefully handle this aggressive strategy and protect stockholder’s right.…

    • 269 Words
    • 2 Pages
    Satisfactory Essays
  • Powerful Essays

    Hsm/260 Financial Analysis

    • 2889 Words
    • 12 Pages

    An organization’s current ratio shows how liquid the assets of the agency are by comparison to the short term debts that the agency must pay to continue its operations. This ratio is calculated by taking the assets that can be converted to cash within a year (current assets) and dividing it by the liabilities that are either currently due or will become due within a year (current liabilities). The current ratio, ideally, should be at 1.0…

    • 2889 Words
    • 12 Pages
    Powerful Essays
  • Satisfactory Essays

    Current ratio is a simple way for the business to use to calculate its liquidity. The current ratio shows that Greggs performance in 2010 that Greggs has 74p worth to every £1 that the business owes. And this means that the business is able to pay its debts easily out of the current assets.…

    • 681 Words
    • 3 Pages
    Satisfactory Essays
  • Satisfactory Essays

    patton fuller

    • 1040 Words
    • 4 Pages

    The current ratio is a measure that gives an idea of the company’s ability to pay its short-term liabilities (debt) with its short-term assets (cash, inventory, receivable). The current ratio equals current assets divided by current liabilities. For instance, the Patton Fuller Community Hospital ratio is as follow (unaudited):…

    • 1040 Words
    • 4 Pages
    Satisfactory Essays
  • Good Essays

    EGT1 Task 3

    • 1171 Words
    • 5 Pages

    The first ratio calculated was current ratio. This is done by dividing current liabilities by current assets. Current ratio is important because it shows the business’s ability to pay back the current liabilities with the current assets that they have available to them. At the end of 2011, the current ratio was at 1.86. In 2012, this ratio dropped to 1.80. The industry ranges from 3.1 (showing a strong ability to pay back liabilities) to 1.4 (showing a weak ability to pay back liabilities) with a median of 2.1. Company G is below the median showing a weakness in this category.…

    • 1171 Words
    • 5 Pages
    Good Essays
  • Good Essays

    A. Current Ratio: The ability for a company to pay short term obligations is measured by this ratio. In 2011 Company G moved from 1.86 to 1.77. Compared to the 1.9 Home Center Retail Benchmarks industry ratio, the numbers are below standards. Current Ratio represents values above 2 quartile industry benchmarks data (1.4 to 2.1). Current Ratio represents a weakness for Company G.…

    • 910 Words
    • 4 Pages
    Good Essays
  • Good Essays

    FINM2400 Part 3

    • 828 Words
    • 3 Pages

    The liquidity measure is also known as short-term solvency. As the name suggests, short-term solvency ratios are intended to provide information about a firm’s liquidity. The primary concern in the firm’s ability to pay without undue stress, its bills that become payable in the short term. Consequently, these ratio focuses on current assets and current liabilities.…

    • 828 Words
    • 3 Pages
    Good Essays
  • Powerful Essays

    Week 3 individual

    • 816 Words
    • 6 Pages

    The aspects of the current ratio would be the current assets, which is then divided through the liability. The current ratio recognizes the businesses probabilities to compensate for the short-term liabilities; the more liquidity shows an excellent indication in favor of potential organizations letting this business getting credit in the future. Nevertheless the current ratio must not greatly surpass the standards of additional opponents. This could be revealing of unprofessional conduct of current assets furthermore; a lesser amount of cash flow representing the shareholders.…

    • 816 Words
    • 6 Pages
    Powerful Essays
  • Good Essays

    Dq Wk 4

    • 373 Words
    • 2 Pages

     Liquidity ratios—are used to evaluate the company’s ability to settle current debts. Current ratios and quick ratios are the most common of liquidity ratios. Current ratio is found by dividing the current assets by current liabilities. The quick ratio determines what a company can pay on immediately.…

    • 373 Words
    • 2 Pages
    Good Essays
  • Good Essays

    Ladbrokes Vs Hill

    • 331 Words
    • 2 Pages

    Most companies use current ratio in order to estimate their financial position. This ratio compares liquid assets with short term liabilities. A current ratio, higher or equal 1.0, informs that current assets should cover current obligations in case of bankruptcy. Quick ratio is more accurate ratio of liquidity rather than current ratio, because it contains solely the most liquid assets and eliminates the inventory that might be difficult to convert into…

    • 331 Words
    • 2 Pages
    Good Essays
  • Good Essays

    The first analysis we will perform is the current ratio, which is calculated by dividing current assets by current liabilities. This is a type of a liquidity ratio. Liquidity ratios measure a company’s ability to pay off short-term debt. A liquidity ratio can also indicate…

    • 709 Words
    • 3 Pages
    Good Essays
  • Powerful Essays

    Business

    • 1167 Words
    • 5 Pages

    Liquidity analysis. The meaning of a company 's liquidity is that the cash ability and the stability. Analyzing the liquidity we can get if the enterprise can repay long-term debt and short-term debt with its assets. This is the key point that distinguish the company can develop health or not. The most important ratio we have to consider during the analysis of liquidity is Current Ratio and Quick Ratio (Thomsett, Michael C.2007). According to the data in the balance sheet of Lamar Swimwear, we can find the total current assets and the total current liabilities. Divide current assets by current liabilities, we can get the current ratios in 200X to 200Z, Table 1.…

    • 1167 Words
    • 5 Pages
    Powerful Essays
  • Powerful Essays

    The purpose of this report is to evaluate the findings of an analysis conducted on JB Hi-Fi (JBH). This evaluation will be assessed to present a recommendation to acquire shares to add to an investment portfolio. This report will assess JBH relative to profitability, asset efficiency, liquidity, capital structure and market performance, before conducting a forecast and risk analysis. Annual reports from the past three years and analysts published views were used as the basis for the final recommendation. These evaluations will show JB Hi-Fi to be a strong investment opportunity.…

    • 2108 Words
    • 9 Pages
    Powerful Essays
  • Satisfactory Essays

    Ratio Analysis

    • 984 Words
    • 6 Pages

    Current Ratio: this expresses the relationship between current asset and current liabilities. That is, how an economic entity can settle its short-term obligations with it available short-term resources in a given period. Fan Milk Ghana Ltd’s (FML) current ratio fell from 2.68:1 in 2010 to 2.52:1 in 2011. This appears as a result of increase in assets or liabilities.…

    • 984 Words
    • 6 Pages
    Satisfactory Essays
  • Powerful Essays

    Another type of financial ratio is Liquidity Ratios which help to evaluate a company’s ability to meet its current financial obligations. In other words, liquidity ratios evaluate the ability of a company to convert their current assets into cash and pay its current obligations. Common liquidity ratios are the current ratio and the quick ratio. The current ratio is calculated by dividing current assets by current liabilities. The quick ratio helps determine a company’s ability to pay obligations that are due immediately.…

    • 1143 Words
    • 4 Pages
    Powerful Essays