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Jb Hi-Fi Case Study Capital Structure

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The short-term liquidity of JB HI-FI is captured by the capability company sell its assets to raise cash through calculation of metrics includes current, quick and operating cash flow ratio. Particularly, the average current ratio of the company is 1.47 that indicates that for every dollar earned, the company will get $1.47 presented in the asset to change into cash. JB HI-FI quick and cash ratio are getting highest ratio in 2015 while a decrease in 2016. However, it is a non-concern signs since company’s ratio is still above industry benchmark, which is 1, as the company still able to meet their current target. The composition of 75% inventory in current asset and trade credit, account payable in current liabilities is give JB HI-FI high stock turnover, which quickly converts into cash. …show more content…

Although company’s operating cash flow is under benchmark, their cash position of business at the end of 2016 is very healthy. Specifically, the company generated alone $3.954m on that year, they able to purchase PPE at $53,434 and also repay debts at $30,000. However, changing company’ product line via Omni distribution channels can be one of the key solutions improve its liquidity. 6.2 DEBT SERVICING – SOLVENCY BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB Over the last five periods, JB HI-FI major cash flow is from operating activities and the achievement of assets. Financial obligations such as debt are repaid directed from this source. Specifically, the interest coverage earnings have increased 37.75 and interest cover also increased 23.56. The ratio of debt/ cash flow from operating decrease, this indicates that debts can still be repaid with operating cash flow 0.6 years only. Generally, it believed that the company’s liquidity to repay short-term debts is positives while need more efforts to meet long-term

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Moreover, based on their capacity to repay, it is evident that their forecasted liquidity is not in a good state, which is not good as their Accounts Payable is much lower than before. On top of that, their liquidity has been dropping from the year 2004, which does not bode well with this company. Looking at BIS’s collateral, it is

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2. Buy back and re-advertised stocks in the market. Moreover, the company enjoys an excellent financial strength. Thus the company can continue doing business under the less-than-favourable conditions without having to pay substantial interests to the creditors. To further ensure the company financial stability, it is critical for the management to take advantage of the low price and also give a lit to the current earnings per unit

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More liquidity is what manger and shareholders are looking for to determine whether the company has the ability to cover the short-term liabilities. The current ratio value for the year 2013 calculated in comparison to 2012 shows decrease in liabilities. To measure the debt-equity rate of the company, show if a business is using the fitting amount of debt financing (Parrino, Kidwell, Bates, 2012). Greater potential on return and greater bankruptcy risk are shown by higher ratios (Parrino, Kidwell, Bates, 2012). The debt interest rate in 2012 was 15% information revealed the SG&A expenses ratio to income is blank unlike the net year which, is nearly 40% for 2013, long-term debt from the year 2012 to year 2013 has nearly increased by

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By evaluating the working capital and checking their current ratio, which is 1.22 in 2014, shows

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Secondly, the company’s payables turnover ratio shows that the company’s payable’s turnover decreased from 201-2015 but improved in 2016 more than the value recorded in 2014. Thirdly, company’s working capital turnover ratio improved from 2014 to 2015 and similarly in 2015-2016. Information in Appendix B indicates that the payables turnover ratios, which is the activity, calculated as the cost of products olds over the payables declined in 2014-2015. However, in 2015-2016 the payables turnover ratio increased more than the level recorded in

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The solvency ratios are the ratios which are used in the process of assessing the company’s financial health and hence measure the ability to measure the ability to meet the long-term debt and its interest by the company. The different solvency ratios in the company are like the total debt to Equity ratio of Constellation Brands was 1.70 at 2017 and 1.54 in 2016 and 1.57 in 2015. The trend fall from 2015 to 2016 which meant that the company used little of their cash flow interests in paying for their debts in 2016 as compared to 2015. The increase in the debt ratio in 2017 means that there has been an increase in the debt level financing the organization as compared to before which imposes a high risk in their operation as the interest on debt

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The bond and stock analysis shows the growth of the company. Their recent earnings of 2017 have been revealed as increasing to 15% over 2016 and its expected annual revenue to increase by 11% (2017). Steven Madden Ltd has no long-term debt. This means that Steven Madden Ltd can meet their financial requirements for outstanding loans. By Steven Madden paying their short-term debt, it determines that their quick ratio measures their ability to meet their obligations and indicated good short-term financial strength.

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The current ratio shows the relationship between current assets and current liabilities and is a key indicator for the short run liquidity of the business. Liquidity is a measure of how quickly a business can convert its assets to cash to cover its expenses. This is an important characteristic of a successful business, as to remain solvent, a business must have cash to run its operations and pay their debts as they fall due. For example, Party Perishables current ratio for 2018 was 2.08, which means that Mr Chugani has $2.08 of current assets to cover every $1 of current liabilities/short term debts. Compared to the industry average of a current ratio of 3:1, Mr Chugani’s business is far more inefficient.

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The debt to equity ratio have a direct relationship with the company’s financial, liquidity situation the company is facing. Moreover, the higher the debt to equity ratio the company has, the more liability the company has. In addition, Suncor also has a very healthy cash flow ratio. The analysis of cash flow can be relate to the organization’s liquidity situation. According to the Suncor 2014 Third Quarter Report Suncor had a quarterly operating cash flow of $2.280 billion, and an increment of free cash flow to $3.082 billion by the end of September 30, 2014 (Suncor Third Quarter Report 2014, Suncor) .

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There is no major change in numbers for revenue, cost of revenue, gross profit, operating expenses, operating income, equity, liabilities, total assets, and stocks. Revenue has slightly increased since 2013 but there has been no dramatic increase or decrease in the past three years when taking into account the scale of the graphs. The only noticeable trend is the decrease is in net income from the past two years. In 2014 the net income was 846,912,000 and in 2015 it decreased to 512,951,000. The liquidity ratio that shows short-run debt-paying ability is 1.230 and the debt ratio which shows percentage of assets financed through borrowing is 0.813.

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Then a meager 7% increase for each subsequent year. Long term prognosis ( > 10 years) we expect the amount in current liabilities to flatten out and/or decrease as the firm leverages its operating profit (from 2017 onwards) to pay down current liabilities. Corporate Strategy: Related Diversification Multidivisional

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The return on investment of company is approximately 4% and market is 8.75%. This shows the performance of company is not up to the level of market average. The capital structure of the company is composed of 32% debts, which is inconsistent with that of market having 40.25% debt structure. The shareholders return of company for the period ended 30 June 2017 is negative since there is net loss for that

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2013 Debt/asset 31% 36% Debt/equity 45% 57% Both Debt to asset and Debit to equity ratios have decreased this year which clearly indicates that the company has a less risky capital structure and is lowering its risk of solvency.

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This means that a huge part of the company's assets is financed by debt. While this level of debt may increase the company's financial risk, it may also enable the company to finance growth opportunities and generate higher returns for shareholders (Délèze & Korkeamäki, 2018). In terms of the solvency position of the company, it is essential to observe that the Debt Ratio is just one of many financial ratios that should be considered. The solvency position of the company should be assessed based on a range of factors, including its ability to generate cash flow, its profitability, and the level of interest payments on its debt (Rugy & Salmon, 2022).

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