BUSN3064 Financial Statement Analysis Semester 2, 2021 WRITTEN ASSIGNMENT Due Date: Tuesday 5th October 2021 at 11:00 pm This assignment is marked out of 100 and will comprise 20% of the overall assessment for this course. General Requirements 1. Workings â€“ you must show any relevant calculations and workings. 2. Due date â€“ Lodgement of your assignment is expected prior to the due date and time. If exceptional circumstances lead to the requirement for an extension, this must be applied for prior to the due date via the assignment extension tool on FLO, complete with supporting documentation. Otherwise, a late lodgement penalty applies of 5% of the allocated mark per day or part thereof overdue, up until the return date of the assignment. Assignments submitted after the return date will not be marked. 3. Lodgement â€“ Please lodge a single PDF file of your assignment. You may wish to prepare your assignment in Word, and embed any necessary tables that have been prepared in Excel, prior to conversion to PDF format for submission. Alternatively work in excel and convert to a PDF. Take note of pagination issues so your assignment is presented properly. 4. Text-matching â€“ Please submit your assignment through the text-matching tab on FLO. This is for your feedback before final submission of the assignment. 5. Presentation â€“ Please note that marks may be deducted for poor presentation, formatting, and written expression (including spelling and grammar). 6. Academic integrity â€“ Please be aware that you MUST abide by the University policy on academic integrity. For details on academic integrity for students, please refer to: For details on academic integrity for students, please refer to: https://www.flinders.edu.au/content/dam/documents/staff/policies/academicstudents/student-academicintegrity-policy.pdf Especially note that collusion, which is collaborating with another person on the preparation of answers for an individual assignment, is a breach of academic integrity. ALL work submitted must be your OWN. While discussing problems with other students is encouraged as a useful way to enhance your understanding of a topic, you should discuss lecture, textbook and tutorial examples for this purpose, NOT your assignment question. PART A STRATEGY ANALYIS Visit the JB Hi-Fi Group investorsâ€™ website at https://investors.jbhifi.com.au to familiarise yourself with JB Hi-Fi Limited and its subsidiaries. Required Undertake strategy analysis by answering the following: 1. To what extend is JB Hi-Fiâ€™s industry subject to technological, cultural, demographic, regulatory and/or epidemiological change? How will these changes influence this industryâ€™s future growth rate? 2. How does the business cycle (i.e. changes in general economic conditions) affect this industry? 3. How profitable is this industry? You should perform Porterâ€™s five competitive-forces analysis to support your answer to this question. 4. What is the JB Hi-Fi Groupâ€™s competitive strategy? Does JB Hi-Fi Group have a sustainable competitive advantage? Explain why you answered as you did. 5. What is JB Hi-Fi Groupâ€™s corporate strategy? How will this corporate strategy create value for JB Hi-Fi Groupâ€™s shareholders? 6. Undertake a Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis for JB Hi-Fi. [30 Marks] Additional information The most important element in PART A is the requirement to undertake a five competitiveforces analysis. This analysis is worth half of the 20 marks available for PART A. Any sources utilised to assist compiling answers to PART A should be cited using the Harvard-in-text (Author-Date) referencing style. You should also append a bibliography identifying the sources you cited to the back of your assignment. Guidance relating to the Harvard-in-text referencing style is available here: https://students.flinders.edu.au/content/dam/student/slc/harvard-referencing.pdf PART B FINANCIAL ANAYSIS The following summarises the financial statements issued by Lima Limited for the 20X0- 20X1 and 20X1-20X2 financial years. LIMA LIMITED Statements of Profit or Loss For Years Ended 30 June (Dollars in Thousands Except Earnings per Share) 20X2 20X1 Net sales $ 16,734 $ 15,564 Cost of sales 7,144 6,360 Gross profit 9,590 9,204 Selling, general and administrative expenses 5,758 5,414 Other expenses (income), net 9 (301) Operating profit 3,841 3,489 Net interest expense 52 59 Profit before income tax 3,789 3,430 Income tax expense 1,235 1,117 Net profit $ 2,554 $ 2,313 Earnings per share $ 51.08 $ 46.26 LIMA LIMITED Balance Sheets As at 30 June (Dollars in Thousands) 20X2 20X1 Assets Current assets Cash, cash equivalents and marketable securities $ 878 $ 490 Receivables (net of allowance of $49 and $53 respectively) 1,675 1,610 Inventories 1,327 1,222 Other assets 522 408 Current assets 4,402 3,730 Non-current assets Property, plant and equipment, net 3,668 3,693 Goodwill 2,657 2,362 Other intangible assets, net 1,341 831 Deferred tax asset 115 84 Other assets 541 472 Non-current assets 8,322 7,442 Total assets $ 12,724 $ 11,172 20X2 20X1 Liabilities and shareholders’ equity Current liabilities Accounts payable $ 1,244 $ 1,165 Short-term debt 34 48 Current portion of long-term debt 346 561 Current tax liability 392 272 Accrued expenses 1,700 1,682 Current liabilities 3,716 3,728 Non-current liabilities Long-term debt 4,430 2,815 Deferred tax liability 252 108 Other liabilities 1,785 1,704 Non-current liabilities 6,467 4,627 Total liabilities 10,183 8,355 Shareholdersâ€™ equity Paid-up capital: Ordinary shares ($10 per share) 500 500 Retained earnings 1,891 2,187 Reserves 150 130 Shareholders’ equity 2,541 2,817 Total liabilities and shareholders’ equity $ 12,724 $ 11,172 Required 1. Calculate the following ratios for the 20X1-20X2 financial year. a. Short-term liquidity: i. Current ratio; ii. Quick ratio; iii. Cash ratio; and, iv. Operating cash flow ratio.* * Lima Limitedâ€™s net cash flow from operations amounted to $2,896,000 during the 20X1-20X2 financial year. b. Working capital management and asset utilisation. i. Accounts receivable turnover; ii. Days receivables; iii. Inventory turnover; iv. Days inventory; v. Accounts payable turnover utilising cost of goods sold; vi Days payables utilising cost of goods sold; vii. Accounts payable turnover utilising purchases; vi Days payables utilising purchases; vii. Operating working capital turnover; viii. Net long-term asset turnover; ix. Property, plant and equipment (PPE) turnover; and, x. (Total) asset turnover. c. Debt, equity and long-term solvency: i. Liabilities-to-equity ratio; ii. Debt-to-equity ratio; iii. Net debt-to-equity ratio; iv. Debt-to-capital ratio; v. Net-debt-to-net-capital ratio; and, vi. Interest coverage (earnings basis only). d. Profitability:** i. Return on equity; ii. Return on (total) assets; iii. Common earnings leverage; iv. Capital structure leverage; v. Net profit margin; vi. Earnings before interest and tax (EBIT) margin; vii. Gross profit margin; viii. Selling, general and administrative expenses-to-sales ratio; ix. Tax expense-to-sales ratio; and, x. Price-to-earnings (P/E) ratio.*** ** There is no minority interest because Lima Limited is not a part of a group of companies and Lima Limitedâ€™s tax rate is 35%. *** Lima Limitedâ€™s share price was $225.23 on 30 June 20X2. [70 Marks]
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