Company Indent Significance Environmental †Myassignmenthelp.Com

Question: Discuss About The Company Indent Significance Environmental? Answer: Introduction JB Hi-Fi is the largest retailer for home entertainment that established in Australia. They are the market leader due to the competitive price, big brands and wide range of products like headphones, iPads, wireless speakers, home theatre, mobile phones, laptops and televisions. The company identifies the significance of environmental, social and governance related matters towards the shareholders, customers and suppliers. psychology details related to the company are as follows Industry situation and company plans JB Hi-Fi Limited belongs to the retail industry in Australia and though the retail industry is becoming stronger as compared to the past years. Retailing sector in Australia increased by 3% during 2016 with regard to the current value terms that is the growth line recognized during the period. Though the growth is positive, it is slower as compared to the year 2015 as the country became cautious regarding its discretionary spending owing to the low growth in income (Post Byron, 2015). Wesfarmers was the biggest retailer during 2016 along with it being the leader over all the multiple categories for retailing. Their value growth was mainly driven by strong performance in home related products. Therefore, JB Hi-Fi will continue to have a strong competition with Wesfarmers during the current year as well as in the future years. Further, retail industry in Australia is expected to grow at the value CAGR for 3% at constant rate. This growth will mainly driven by the home entertainment, garden specialist and internet retailing that are expected to grow owing to the increase in demand for new home related products and new technologies adoption. Future plans of the company The solution from JB Hi-Fi is the key driver for their success. They will continue with the plan of aggressive recruitment along with the expansion of the services and products they offer. They are planning to set up the play in the integrating related products and the services towards the education sector, government and business sectors through the JB Hi-Fi solutions arm. Further, it is expected to provide $ 500 million per year with regard to sales through the strategic acquisitions and organic growth (Hunjra Bashir, 2014). Moreover, the company has a plan to expand their store with regard to home branded to 75 from 43 outlets. Each new outlet for JB Hi-Fi store contributes towards the growth of the customer awareness, supplier support and marketing share. As per the CEO, Mr Murray, in association with the ongoing investment towards the store wages, supply chain and staff training put the company in strong position so that they can continue with the expansion. Financial statement analysis Statement of financial performance Determination of gross profit, net income and income from operation Particulars 2013($m) 2014($m) 2015($m) 2016($m) 2017($m) Gross profit 699 739 798 865 1231 Income from operation 178 191 201 221 268 Net income 116 128 137 152 172 Gross profit - It is identified from the above table that the gross profit of the company is in increasing trend and it reached to $ 1,231 million for the year ended 2017 from $ 699 million in the year 2013. Further, with the increase in revenue the company is able to increase its gross profit from sales. Therefore the profitability position of the company seems good. Income from operation - It is identified from the above table that the income from operation of the company is in increasing trend and it reached to $ 268 million for the year ended 2017 from $ 178 million in the year 2013. Further, with the increase in revenue the company is able to increase the income from operation from sales. Therefore, the profitability position of the company seems good. Net income - It is identified from the above table that the net income of the company is in increasing trend and it reached to $ 172 million for the year ended 2017 from $ 116 million in the year 2013. Further, with the increase in income from operation the company is able to increase the net income from sales. Therefore, the profitability position of the company seems good. Trend analysis HORIZONTAL ANALYSIS Particulars 2013($m) 2014($m) 2015($m) 2016($m) 2017($m) 2013 2014 2015 2016 2017 Gross profit 699 739 798 865 1231 100% 106% 114% 124% 176% Income from operation 178 191 201 221 268 100% 107% 113% 124% 151% Net income 116 128 137 152 172 100% 110% 118% 131% 148% Significant accounting policies The financial statement of the company has been prepared in compliance with the IFRS (International financial reporting standard) that is issued by IASB (International Accounting Standards board). Further, the general purpose financial statements are prepared as per the AAS (Australian accounting standards and the interpretations released by AASB (Australian accounting standard board) and Corporation act 2001. Items different from industry norm Though the retail industry in Australia is growing rapidly, the increase in gross margin of the company seems to be unrealistic as the increase from 2016 to 2017 amounted from $ 865 million to $1231 million. Statement of financial position Particulars 2013($m) 2014($m) 2015($m) 2016($m) 2017($m) Total Liabilities 600 565 552 588 1599 Shareholders equity 243 295 343 405 854 Total assets 843 860 895 993 2452 VERTICAL ANALYSIS Particulars 2013($m) 2013($m) 2014($m) 2014($m) 2015($m) 2015($m) 2016($m) 2016($m) 2017($m) 2017($m) Total Liabilities 600 71% 565 66% 552 62% 588 59% 1599 65% Shareholders equity 243 29% 295 34% 343 38% 405 41% 854 35% Total assets 843 100% 860 100% 895 100% 993 100% 2452 100% HORIZONTAL ANALYSIS Particulars 2013($m) 2014($m) 2015($m) 2016($m) 2017($m) 2013 2014 2015 2016 2017 Total Liabilities 600 565 552 588 1599 100% 94% 92% 98% 267% Shareholders equity 243 295 343 405 854 100% 121% 141% 167% 351% Total assets 843 860 895 993 2452 100% 102% 106% 118% 291% Significant accounting policies Property and equipment the impairment loss with regard to the assets is recognised where the varying amount is more than the recoverable amount. Further, the assets is derecognised when it is probable that the there will be no economic benefits that will arise from the asset or the asset is disposed off (Wagner, Block, Miller, Schwens Xi, 2015). Inventories inventories are shown in the balance sheet at the lower among the net realisable value and cost. Determination of net realisable value is depended upon the key assumptions those are required under the management judgement. Receivables the receivables are reviewed on continuous basis. Allowance for the bad debt is is used when it is probable that the amount will not be collected. Further, the amount of the allowance for impairment is the difference between carrying amount of the asset and the amount that is expected to be collected. Goodwill goodwill is measured as the excess of cost of acquisition over its fair value for the companys share of net recognizable asset at the acquisition date Intangibles Other intangible assets like location premiums, rights to share of profit and brand names are measured as they have indefinite asset life. These assets are carried in the balance sheet at the cost reduced by the accumulated losses for impairment (Bailey, Price, Pyman Parker, 2015). Items different from industry norm Though the retail industry in Australia is growing rapidly, the increase in total assets of the company seems to be unrealistic as the increase from 2016 to 2017 amounted from $ 993 million to $2452 million. Statement of cash flows Particulars 2013($m) 2014($m) 2015($m) 2016($m) 2017($m) Operating cash flow 178 191 201 221 268 Net income 116 128 137 152 172 Net income % 65% 67% 68% 69% 64% It can be identified that the net income percentage after deducting the expenses from operating cash flows are in increasing trend. Therefore, it can be said that the profitability position of the company is improving along with the increase in operating cash flow of the company (Graves Shan, 2014). It is recognized that the company is sufficiently expanding though the investing activities and it increased from $38 million in 2013 to $ 886 million in 2017. However, the increase from the year 2016 to 2017 was significant as the increase was from $ 52 million to $ 886 million seems unrealistic. The most important source of financing for the company is through equity as more percentage of finance is raised through equity as compared to raising through debt. During the year ended 30th June 2016, shareholders equity represents the amount of $854 million whereas, the amount of debt amounted to $ 559 million. Item 2013($m) 2014($m) 2015($m) 2016($m) 2017 ($m) Cash 67 43 49 52 73 It can be identified from the above table that there is no specific trend for the cash of the company over the past five years. During 2013, the amount of cash under balance sheet was amounted to $ 67 million and started decreasing and reached to $ 52 million in 2016. However, during 2017 it again increased and reached to $ 73 million. The major points of interest regarding the above findings concerning the cash flow statement is that with regard to investing activities, the increase from the year 2016 to 2017 was significant as the increase was from $ 52 million to $ 886 million seems unrealistic. Further, the net cash provided from financing activities were in negative till the year 2015. However, it went up to $716 million at the closing of the period 30th June 2017. The reason behind this must be found out. Ratio analysis TYPE FORMULA 2013 2014 2015 2016 2017 Industry average liquidity ratio Current ratio Current asset/current liabilities 1.27 1.64 1.62 1.57 1.32 1 long term solvency ratio Debt-Equity ratio Total debt/total equity 0.51 0.21 0.41 0.27 0.65 0.5 profitability ratio Net profit margin Net profit/net sales *100 3.52 3.69 3.74 3.85 3.06 7% cash flow adequacy ratio Cash flow to asset ratio Cash flow from operation/total assets 0.19 0.05 0.20 0.19 0.08 0.20 Market strength ratio Price earnings ratio Price/earning 18.37 12.44 14.30 18.66 15.08 29 Analysis of the ratios From the above table of ratios, it is recognized that the current ratio of the company are moving around 1.27 to 1.64. However, during the year 2014, 2015 and 2016 it is more than 1.50 that indicates that the company may not using their working capital efficiently. Further, there is no specific trend for the solvency ratio. During the year 2013, 2015 and 2017, it was more or less as per the industry average (Bodie, 2013). However, for the year 2014 and 2016 it was significantly low as compared to the industry average. Further, the net profit margin of the company for the last 5 years were significantly lower as compared to the industry average and it was moving around 3% only. The cash flow from operation was as per the industry average only for the year ended 2013, 2015 and 2016. However, for the other years the ratio was significantly low. Moreover, the price earnings ratio of the company almost half for all the years as compared to the industry average. Conclusion It is found from the above analysis that the company is performing steadily. However, the net profit margin of the company of the company for the last 5 years was significantly lower as compared to the industry average of 7% and it was moving around 3% only. Further, the price earnings ratio of the company for all the years under consideration is considerably low as compared to the industry average of 29. Recommendationb As the net profit margin of the company is significantly low as compared to the industry average, the company shall find out the areas of wastages and minimize the expenses as far as possible. Further, the company shall try to create shareholders value through generating income from sales and increasing the shareholders value. As it is identified that the company performance with respect to all aspect are in increasing trend and company is regular in payment of dividend to the shareholders. Though the price earnings ratio is lower as compared to the industry average, it is found that the company is able to provide positive return to the shareholders throughout the period of 5 years that is under consideration. Therefore, it will be a good decision to invest in JB Hi-Fi Limited. 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