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Jb Hifi Essay

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Company Overview
JB Hi-fi was established by John Barbuto (JB) in 1974 and opened its first shop in Melbourne. In 1983, it was sold to Bouris and Rodd who expanded the company and, later on, sold the majority of their holding to a private equity, Next Capital Pty Limited. The company’s share was floated in Australian Stock Exchange in 2003 at IPO price of $1.55.
JB Hi-Fi, has diversified its business from predominantly selling music CDs, and is now a major retailer for televisions, audio/visual, photography, portable audio, in-car entertainment, computer/video games, DVD movies, gadgets and information technology equipments.
By 30 June 2009, the company currently has 123 stores in Australia and New Zealand and management has …show more content…

We derived the number based on 5 years average of each variable’s percentage as compared to sales.
% to sales
2005 2006 2007 2008 2009 Average
Depreciation 1.16% 1.07% 1.15% 1.15% 1.03% 1.11%
Capex 4.45% 4.19% 3.86% 4.02% 2.43% 3.79%
NWC 7.74% 8.42% 7.80% 7.08% 5.61% 7.33% We do recognize several potential shortcomings of the approach in forecasting future performance:
1. As the economic condition and consumer sentiment improves, JBH might be able to fully capitalize and book unexpectedly strong growth in the next several years. On the other hand, if expected economic recovery turned out to be a disappointment, or management decided to abruptly halt the company’s expansion, the assumed growth rate might be too optimistic.
2. We assume that the company will be a going concern entity and maintain growth in line with the economy. However increased competition, loss of market share, unsuccessful management strategy, or even potential bankruptcy due to various reasons is just examples of the less cheerful scenario for the company.
3. The company’s ability to generate profitability might not be constant and subject to a lot of factors.
4. The approach we use to forecast capex, depreciation and NWC is admittedly inadequate. However, it is very difficult to make a reasonable assumption without the knowledge of management strategy, depreciation schedule and other

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