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Financial Statement of JB Hi-Fi Limited

University: Kensington College of Business

  • Unit No: 6
  • Level: High school
  • Pages: 10 / Words 2396
  • Paper Type: Assignment
  • Course Code: TACC101
  • Downloads: 70
Organization Selected : JB Hi-Fi Limited

INTRODUCTION

Accounting is referred to as one of the appropriate process which is useful in summarizing and interpreting various financial transactions of the company over a specific period (Birt and et.al., 2019). Accounting helps in summarizing the operations of the company by understanding its financial position. This study will demonstrate types of revenues which has been generated within consolidated group. Furthermore, it also demonstrates various range of questions associated with the JB Hi-Fi Limited.

JB Hi-Fi Limited is considered to be one of the publicly listed Australian retail company which was founded in the year 1974 by John Barbuto. This company tends to sell various consumer goods. JB Hi-Fi Limited is listed on the Australian Stock exchange and is also headquartered in South bank, Melbourne, Australia.

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PART A

1. Assessing total value in the consolidated financial statements.

PARTICULARS

TOTAL VALUE ($m)

Cash and cash equivalents

72.0

Inventories

891.1

Sales revenue

6,854.3

Other income

1.1

Plant and Equipment

198.0

Interest Expense

(16.6)

Sales and marketing expense

(695.1)

Occupancy expenses

(305.7)

Trade and other payables

665.3

Borrowings

469.4

2. Determining normal balances for the above listed accounts.

Cash and cash equivalents: This account tends to come under balance sheet statement under the heading assets and sub heading current assets. Decrease in the value of cash and cash equivalents will affect the credit side of the account.

Inventories: This account tends to come under balance sheet statement under the heading assets and sub heading current assets (de Lautour, 2018). Decrease in the value of inventories will affect the credit side of the account.

Sales revenue: The income statement or profit and loss statement of the company tends to present the sales revenue of the company generated during specific year. Decrease in the value of sales revenue will affect the debit side of the account.

Other income: The profit and loss statement of the company tends to present the other income of the company generated during specific year. Decrease in the value of other income will affect the credit side of the account.

Plant and Equipment: This account tends to come under balance sheet statement under the heading assets and sub heading non- current assets (Nambukara-Gamage and Peries, 2020). Decrease in the value of plant and equipments will affect the credit side of the account.

Interest Expense: The income statement of the company tends to present the interest expense of the company generated during specific year. Decrease in the value of the interest expense affect debit side of the account.

Sales and marketing expense: The profit and loss statement of the company tends to present the sales and marketing expense of the company generated during specific year. Decrease in the value of the sales and marketing expense affect debit side of the account.

Occupancy expenses: The income statement of the company tends to present the occupancy expense of the company generated during specific year. Decrease in the value of occupancy expense will affect the debit side of the account.

Trade and other payables: This account tends to come under balance sheet statement under the heading liabilities and sub heading current liabilities (Collier and Munir, 2016). Decrease in the value of trade and other payables will affect the debit side of the account.

Borrowings: This account tends to come under balance sheet statement under the heading liabilities and sub heading non- current liabilities. Decrease in the value of borrowings will affect the debit side of the account.

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PART B

1. Evaluating various type of revenues generated by the consolidated group.

Revenue is the amount of income which in turn has been generated from the normal business activities of the company (Zaw, 2019). JB Hi-Fi Limited has generated deferred revenue, revenue from the external customers, interest revenue, revenue from contracts, revenue generated from ordinary activities, etc.

2. Assessing how group assets are classified.

The common types of the assets mainly consist of current asset, physical asset, non- current asset, operating asset, intangible asset and non- operating asset. The assets can be classified on the basis of tangible and intangible assets. Furthermore, Tangible assets tends to contain set of sub- classes which mainly includes fixed and current assets (Pallegedara and Warren, 2016). Hence, current assets includes cash and cash equivalents, prepaid expenses, marketable securities, other current assets, trade receivables, inventories, etc. On the other hand, intangible assets are the one which in turn are non- physical in nature. The non- current assets mainly includes intangible assets like goodwill, patent, trademarks, copyright, etc., buildings, plant and machinery, investment and various other non- current assets.

3. Determining number of ordinary shares held by JB Hi-Fi Limited in financial year.

The major categories associated with the group's equity mainly consists of contributed equity, reserves and retained earnings (Bielefeld, 2016). For the financial year ending 2018, the contributed equity is estimated to be $441.7 million. For the financial year ending 2018, the reserves is estimated to be $42.7 million. The retained earnings for the financial year 2018 is $463.2 million. Hence, the total equity for the financial year ending 2018 is $947.6 million (JB Hi-Fi Limited. 2018). The fully paid ordinary shares held by the JB Hi-Fi Limited in financial year 2018 is estimated to be 114883372.

4. Determining group’s current liability for dividends to ordinary shareholders.

The interim dividend for the financial year ending 2018 is 86.0 cent per share. The dividend paid to the shareholders for the financial year ending 2018 is $132 million. The number of ordinary shares owned by the JB Hi-Fi Limited is 100. Current year’s total amount associated with the dividend per share is $13200 million (JB Hi-Fi Limited. 2018). The dividend paid to the shareholders is estimated to be $151.6 million per share.

5. Dividend payout ratio.

Earning per share is referred to as the ratio which tends to determine the profitability of the company as compared to the per share of specific stock. On the other hand, dividend per share tends to show the amount of dividend that in turn has been paid to the shareholders on the per share. The earning per share of the JB Hi-Fi Limited in financial year 2018 is estimated to be $203.1 million. The dividend per share of the JB Hi-Fi Limited in financial year 2018 is estimated to be $132.0 million (JB Hi-Fi Limited. 2018). The total dividend paid for the financial year 2018 is 132 cents per share. The dividend payout ratio of the JB Hi-Fi Limited in 2018 financial year is estimated to be 65%.

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PART C

1. List the subsidiary companies in the JB Hi-Fi Group.

JB Hi-Fi Group tends to have range of subsidiary companies which mainly includes JB Hi-Fi Group Pty Ltd, Clive Anthony's Pty Ltd, JB Hi-Fi (A) Pty Ltd, Rocket Replacements Pty Ltd, Network Neighbourhood Pty Ltd, JB Hi-Fi Group (NZ) Limited, JB Hi-Fi NZ Limited. The consolidated financial statements tends to take into consideration the assets and liabilities of all the subsidiary companies (Johnson, 2017). Subsidiary companies are the entities which in turn are controlled by the parent company.

2. Determining the value of the group’s sales revenue.

Sales revenue is referred to as the income which in turn has been received by the company from its sales of the goods and services within the specific financial year. The sales revenue generated in the financial year 2017 is estimated to be $5628 million (JB Hi-Fi Limited. 2018). The sales revenue generated in the financial year 2018 is estimated to be $6854.3 million. The percentage change in the sales revenue for the current fiscal year is 21.78%. This has been calculated as current year sales revenue minus base year sales revenue, divided by the base year sales revenue multiplied by 100 (6854.3-5628/5628*100).

3. Determining the group’s final profit.

Profit is referred to as the financial gain of the company after taking into consideration various expenses, interest and tax. This is considered to as the revenue generated from several business activity within the specific financial year. The profit generated in the financial year 2017 is estimated to be $172.4 million (JB Hi-Fi Limited. 2018). The profit generated in the financial year 2018 is estimated to be $233.2 million. The percentage change in the profit for the current fiscal year is 35.26%. This has been calculated as current year profit minus base year profit, divided by the base year profit multiplied by 100 (233.2-172.4/172.4*100).

4. Evaluating the percentage change in (2) and (3).

The percentage change of the sales revenue is 21.78% in the financial year 2018. But on the other hand, the percentage change of the profit is 35.26% in the financial year 2018. This in turn states that, the sales revenue of the company is comparatively good. JB Hi-Fi Group tends to have good control over the expenditures of the company. This is the reason profit of the company is higher when compared to the sales revenue (Thongnoppakun, 2018). The company must in turn focus on more promotional activities in order to increase the sales of the JB Hi-Fi Ltd. Company. This in turn leads to higher generation of sales and profitability.

5. Determining the total value of inventories on hand.

Inventory is considered to be the raw material which in turn is required by the company to produce finished goods. Inventories at the end of the year 2017 is estimated to be $859.7 million. Hence, there is an increase in the inventory levels at the end of the year 2018 is estimated to be $891.1 million (JB Hi-Fi Limited. 2018). The percentage change in the inventory levels is estimated to be 3.65%. This has been calculated as current year profit minus base year profit, divided by the base year profit multiplied by 100 (891.1-859.7/859.7*100).

The percentage change in the sales revenue is estimated to be 21.78%. But on the other hand, the inventory change is estimated to be 3.65%. The inventory turnover of the company states that, the company tends to focus on increasing their prices for the product and the customers are willing to buy products at high price because of the good quality goods and services (Babich, 2016). This in turn results in higher change in the sales revenue when compared with the inventory turnover.

6. Calculating profit margins and inventory turnover.

Profit margin is referred to as an amount where the revenue generated from the sales tend to exceed the cost associated with the business. This profitability ratio is useful in assessing the percentage of sales which has generated profits for the company (Morgan, 2019). The formula of the profit margin is net sales minus cost of the goods sold which in turn is divided by the net sales.

Inventory turnover ratio is considered to be another profitability ratio which in turn helps in determining the number of times company has replaced inventory during specific financial period (Howland, 2017). The formula of the inventory turnover is sales divided by the average inventory.

Profitability ratio analysis

 

 2018

Gross Profit

 

1470

Net profit

 

233.2

GP ratio

Gross profit / sales * 100

21%

NP ratio

Net profit / sales * 100

3%

Efficiency ratio analysis

 2018

   

Cost of goods sold

5384.1

Average Inventory

891.1

Stock turnover ratio (In times)

6.042082819

CONCLUSION

From the above conducted study it has been concluded that, accounting helps in summarizing the operations of the company by understanding its financial position. This study examines that, decrease in the cash and cash equivalents and inventories will affect the credit side of the account. This study demonstrates that, assets can be classified current assets and non- current assets. Furthermore, it has been summarized that, the profitability of the company is higher when compared with the sales revenue. The company must focus on more promotional activities in order to increase the sales of the JB Hi-Fi Ltd. Company. Furthermore, this study also concludes various profitability ratios.

REFERENCES

  • Babich, B., 2016. The Hallelujah effect: philosophical reflections on music, performance practice, and technology. Routledge.
  • Bielefeld, S., 2016. Income management and Indigenous women: A new chapter of patriarchal colonial governance. UNSWLJ. 39. p.843.
  • Birt, J. and et.al., 2019. Accounting: Business reporting for decision making. John Wiley & Sons.
  • Collier, P. M. and Munir, R., 2016. Performance measurement. In Strategic management accounting. (pp. 235-356). Deakin University.
  • de Lautour, V. J., 2018. Strategic Management Accounting: Aligning strategy, operations and finance (Vol. 1). Springer.
  • Howland, J. ed., 2017. Duke Ellington Studies. Cambridge University Press.
  • Johnson, B., 2017. Technologized Sonority. In Dark Side of the Tune: Popular Music and Violence. (pp. 65-80). Routledge.
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