Financial Performance Of Jb Hi Fi Limited

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Statement of Purpose In this report, we are going to analyse the financial performance of JB Hi-Fi Limited (JBH), over the past three years (2012 to 2014), by calculating a series of ratios, using different historical data provided by audited financial reports. A period of three years has been selected for the financial analysis of the company as trend results generated over several periods are much more meaningful than that from a single year balance sheet and income statements. Moreover, after having calculated the ratios, we will then draw conclusions on the past performance of the company and finally benchmark with of one its main competitors, Harvey Norman. Financial Analysis of JB Hi-Fi over the past 3 years Liquidity measure…show more content…
The Company has an excess of current assets, compared to JB Hi-Fi. Moving on to the year 2014, we can see that Harvey Norman, has considerably decreased its current ratio by 57% from the previous year (see Graph 1), while JB Hi-Fi, has increased its current ratio by 37%. Hence, we can say that Harvey Norman has been more efficient in managing its current assets than JB Hi-Fi. Quick Ratio (Acid test) This ratio is similar to current ratio, except that it excludes inventory from current assets. Inventory is subtracted because it is considered to be less liquid than other current assets, that is, it cannot be easily used to pay for the company’s current liabilities. A company having a quick ratio of at least 1.0, is considered to be financially stable. It has sufficient liquid assets and hence, it will be able to pay back its debts easily (Qasim Saleem et al., 2011). Over the past three years, even though, JB Hi-Fi had a significantly high turnover, its quick ratio was less than 1.0, which is not a good sign, and also as mentioned before, it has a current ratio which is higher than 1.0, so the company must review the value and turnover of its inventory (refer to Appendix D). While comparing the company’s quick ratio, to that of Harvey Norman, as illustrated in Graph 1 below, we can see that Harvey Norman, is more financially stable than JB Hi-Fi, it has enough liquid assets and

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