Jb Hi-Fi Financial Analysis Essay

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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…show more content…
Table 5: Fixed Asset turnover Ratio The fixed-asset turnover: This ratio measures a company's ability to generate net sales from fixed-asset investments | 2010: 11.03 | 2011: 11.25 | Industry: 5.26 | Comparison: Here the industry average is 5.26 times, compared to JB Hi-Fi’s figures of 11.25 (2011) and 11.03 (2010) times. This indicates that JB Hi-Fi is able to generate greater sales from its fixed assets, when compared to the market average. Generally, firms with a higher fixed asset turnover are successful in getting the most out of their assets, and in turn are able to generate higher revenues. Here JB Hi-Fi outperforms its sector, and this indicates that it is in a strong position to generate sales from the assets it has available. Table 6: Total Asset Turnover Ratio Total asset turnover : This ratio measures the efficiency of a company’s use of its assets | 2010: 3.97 | 2011: 4 | Industry: 3.17 | Comparison: This ratio calculates the amount of sales generated for every dollar worth of assets. The retail average is 3.17 times whilst JB Hi-Fi is slightly higher at 4.00 (2011) and 3.97 (2010) times. This indicates that JB Hi-Fi may have lower profit margins, when compared to the rest of the industry. This may be explained by the fact that JB Hi-Fi is more cutthroat and competitive when it comes to pricing, trying to gain as many sales as possible. Table 7: Days Payables Ratio Days payables: This is a ratio
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