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Financial analysis is such analysis which is conducted in order to assess the business related viability, stability and profitability and it also termed as analysis of financial statement or analysis of finance or accounting analysis. Unit 10 Financial Analysis Assignment is further utilised by the management in order to prepare various kinds of reports. Financial analysis is made in order to assess various heads such as profitability as evaluating their ability to earn adequate amount of income or revenues in order to maintain growth at a steady pace in short term as well as in long term and for this purpose they make use of income statement. Secondly they evaluate the solvency and liquidity of the organisation as they are able to meet out their immediate liabilities as well as long term liabilities and in order to make evaluation they make use of their balance sheet. With the use of it they also make evaluation of their stability as they are able to run their business activities for long run without getting losses or deficit balance and in order to measure the stability feature there is effective requirement of the all the prepared financial statements along with their financial and non-financial indicator.
In this Unit 10 Financial Analysis Assignment financial analysis is made over the JB Hi-Fi Limited in order to make evaluation of their available cash. In the evaluation there will be discussion made over the inflow and outflow of the cash within their business. With the help of the analysis there is analysis made over the liquidity of the business as they attain sufficient funds with them or not. It is also evaluated that as they have any control system or not in order to put control over the activities related to their liquid funds.
Cash is the terminology utilised in place of the in hand money or currency. It is the liquid form of the finance which get utilised instantly in order to make purchases or making some kind of payment. In a business organisation there are various activities which get performed in the form of cash and cash equivalents. And in order to maintain proper record of the cash flow within the business they prepare cash flow statement as activities related to the cash and cash equivalents get recorded under it. The cash is utilised in order to make small routinely payment in order to boot the activities of the business organisation and help in smooth running of the business. Business makes small payments in cash and these payments make inclusion of various activities such as salary and wages, purchases of raw-material, rentals, interest amount and many more. Cash is the availability of the liquid funds which get utilised for the purpose of meeting the short term liabilities. The cash related transactions get recorded under cash flow statement and it represents the summarised view of cash utilised. The utilisation of cash is segregated into three types of activities as cash get utilised for meeting operational activities, financial activities and investing activities. The purpose of preparing statement is to get to know about from where money came from and where it goes or spend. Operating activities make inclusion of the sales and purchases of the goods and services, investing activities make inclusion of sale and purchase of assets and Financial Resources make inclusion of the borrowings, etc (Minnis, 2011).
Yes, there is subsequent increase in the cash and cash equivalents balance of the JB Hi-Fi and the balance is increased by the amount of $27,658,000. The balance of cash and cash equivalents is increased by subsequent balance as there is effective increase in the receipts from customers along with this there is effective decrease in the cash payments in the investing activities. The major difference among the financing activities as the share of repayment of borrowings is much lower as compare to the last year’s payment. There is effective difference is noted down among the cash payment which creates a huge difference in the balance of the cash and cash equivalents. The net cash flow from operating activities is $156,410,000 which is less as compare to previous years but the balances of investing activities financing activities having negative balances as they made cash payments also get lowered as compare to the previous year’s payments. The difference of payments in the two subsequent activities helps in getting huge cash and cash equivalent balance (Rodríguez-González, et. al., 2012).
The main reason behind getting huge positive cash balance is that they focus over lowering the cash payments of capital expenditures. Along with this there is no huge repayment of borrowings made by them in the year 2013 which also lowered down their cash payments and plays a vital role in attaining huge cash balance. As well as the amount of opening balance is also just double as compare to the last year’s opening balance (Yang, & Cogill, 2013).
No, the balance of cash and cash equivalents shown in the balance sheet at the end of year is not different from the balance shown in the statement of cash flows at the end of year. In balance sheet the final balances of the different account get shown such as cash and cash equivalents, profits, debtors, creditors etc. As per their notes it is stated that cash and cash equivalents include their cash in hand, along with their deposits at financial institutions, highly liquid investments having tenure of three or less months which get converted into cash at any time and bank overdraft. The amount of bank overdraft can be recorded under the liabilities side as it is their short term debt having high risk associated with it. The amount of bank overdraft is the liquid fund or cash which is utilised for the purpose of meeting their routinely expenditure. The payment made by them having adequate ratio. The amount shown in the balance sheet is equal to the balance of the cash flows as balance sheet is the summarised overview of the various balances. Cash flow statement is the statement which renders detailed information related to the cash and cash equivalents activities of the whole year (Clapp, 2015).
The cash flow statement is prepared in order to record their different financial transactions made in cash and cash equivalents. The net balance of the cash and cash equivalents get attained by adding up all three different types of activities such as operating activities, financial activities and investing activities. The balance shown in the balance sheet is the sum of all three activities or final balance of the cash flow statement (Clapp, 2015).
The internal control used by the JB Hi-Fi Limited is the overview of the operating and financial activities. They made sales with the help of the various sources as their major sales made through the branded retail store network; along with this they make sales from their branded online stores, their commercial and education Business Environment. Their total sales are $3,308.40 million is made by them for the whole year and it is reflected in their income statement. In notes they make evaluation of their revenues earned with the help of sales as it shows the deduction of the cost of goods sold. In the financial statements all the payments and revenues get shown as with the help of the notes these get described in detailed manner. The financial review is made in order to make evaluation of their every activity or the financial transaction as it is correctly mentioned or not. With the help of the review they render the correct information to the different users. By doing review of their financial performance there are effective chances of identifying some miss-match among their financial figures. In the review they evaluate the treatment of financial figures as they follow the set rules and regulations or guidelines rendered by the IFRS. They also make disclosure of all these kinds of policies and guidelines which is utilised by them in order to record or make adequate treatment of their financial figures (Sinn, & Wollmershäuser, 2012).
Under the review of financial performance they evaluate the revenues as well as the expenditures made by them during the whole year (Sinn, & Wollmershäuser, 2012).
Clapp, J. 2012;2015;, Hunger in the Balance: The New Politics of International Food Aid, 1st edn, Cornell University Press.
Minnis, M. 2011, "The Value of Financial Statement Verification in Debt Financing: Evidence from Private U.S. Firms", Journal of Accounting Research, vol. 49, no. 2, pp. 457-506.
Rodríguez-González, A., Colomo-Palacios, R., Guldris-Iglesias, F., Gómez-Berbís, J.M. & García-Crespo, A. 2012;2011;, "FAST: Fundamental Analysis Support for Financial Statements. Using semantics for trading recommendations", Information Systems Frontiers, vol. 14, no. 5, pp. 999-1017.