Cash Flow Statements Of Harvey Norman and JB Hi Fi Ã¢â¬ Free Samples
Question: Discuss about the Cash Flow Statements Of Harvey Norman and JB Hi-Fi. Answer: Introduction: The report discusses the analysis of the information that is retrieved from cash flow statement of tow selected companies that is Harvey Norman and JB Hi-Fi. Harvey Norma is a large multinational retailer of small appliances, bedding, flooring, furniture, information technology provider based in Australia. On other hand, JB Hi-Fi is one of the fastest growing businesses that specializes in wide variety of consumer goods services in Australia and New Zealand (Anderson et al., 2015). In the current report, analysis of financial performances of both the organizations has been demonstrated through the application of ratio analysis tool. Analyzing the cash flow statements of Harvey Norman by incorporating ratio analysis: While analyzing the cash flow statement, it is required it consider various components such as cash flow for operating activities, cash flow from investing activities and cash flow from financing activities (Butler Ghosh, 2015). It can be ascertained that net cash flow from operating activities for financial year 2016 was recorded at $ 437691 as compared to $ 340448 in financial year 2015. This is indicating that there has been increase in cash generated from operating activities. Net cash used in investment activities has also witnessed an increase as depicted by figure. Value stood at $ 179853 in year 2016 compared to $ 81803 in year 2015. Furthermore, net cash used in financing activities has also increased by considerable amount. Amount of cash used in financing activities increased to $ 307427 in financial year 2016. Working capital ratio of Harvey Norman is 1.26 and this indicates that organization is capable of paying its liabilities using their assets. Cash flow adequacy ratio is recorded at 0.91 that is indicative of the fact that a sufficient cash flow is generated by firm and there is no requirement of equity or debt funding in current scenario. Debt to total asset ratio stood at 0.39 and debt coverage ratio is 16.20. Debt to assets is lower than one which is indicative of the fact that for funding the assets, organization is relying more on equity. Debt coverage ratio depicts that there is sufficient operating profit generation. Cash flow to sales ratio for Harvey and Norman stood at 24.37% depicts that Harveys ability to efficiently convert its sales into cash. Analyzing the cash flow statements of JB Hi-Fi by incorporating ratio analysis: Now, the cash flow statement of JB Hi-Fi has been analyzed. Net cash flow from operating activities for financial year 2016 was recorded at $ 185140. This figure suggests that there has been increase in net cash generated from operating activities. Net cash flow used in investing activities has also increased in current year and the figure stood at $ 520001. This has been mainly due to payment made to plant and equipment. There has been net cash outflow from financing activities in year 2016 and the figure stood at $ 130565. Organization has made payment for shares bought back and has repaid the borrowing that has led to increase in net cash outflow. Ratio analysis of JB-Hi-Fi involves analysis of various ratios discussed above. Working capital ratio stood at 1.57 that organization is efficient in making payment using their current assets. Cash Flow adequacy ratio is recorded at 0.91 that is indicative of the fact that 1.05 that is indicative of the fact that organization is efficiently generating cash flow for meeting the ongoing expenses. Debt to total asset ratio stood at 0.59 depicts that there is a lower financial risks of company as they are not relying much on loan and borrowed amounts for asset financing. Debt coverage ratio is calculated at 55.48 and it is preferable to have higher ratio in this regard. It also depicts that serving debt can be done easily by income generated by organization. On other hand, cash flow to sales ratio stood at 5% is illustrative of the fact that ability of organization to generated cash from sales is not desirable. Reason might be due to ineffective management of trade receivables on part of management or due to change in sales terms (Collier, 2015). Conclusion: From the analysis of cash flow position of both organizations, it is seen that net cash flow from operating activities of JB Hi-Fi is much lower as compared to Harvey Norman. Furthermore, net cash outflow from investing and financing activities of Harvey Norman is higher as compared to JB Hi-Fi. Moreover, the capability of JB Hi-Fi to finance its debt using their revenue is considerably higher than Harvey Norman References: Anderson, D. R., Sweeney, D. J., Williams, T. A., Camm, J. D., Cochran, J. J. (2015). An introduction to management science: quantitative approaches to decision making. Cengage learning. Butler, S. A., Ghosh, D. (2015). Individual differences in managerial accounting judgments and decision making. The British Accounting Review, 47(1), 33-45. Collier, P. M. (2015). Accounting for managers: Interpreting accounting information for decision making. John Wiley Sons. Datar, S. M., Rajan, M. V., Horngren, C. T. (2013).Managerial Accounting: Decision Making and Motivating Performance. Pearson Higher Ed. Nielsen, L. B., Mitchell, F., Nrreklit, H. (2015, March). Management accounting and decision making: Two case studies of outsourcing. In Accounting Forum (Vol. 39, No. 1, pp. 64-82). Elsevier. Weygandt, J., Kimmel, P., Kieso, D. (2014). Financial Accounting: tools for business decision making, Hoboken.
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