JB HI-FI VERSION 1

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1 JB HI-VERSION 1 Student's Name Professor's Name Institutional Affiliation Course Name Due Date

2 JB HI-VERSION 1 Economic Analysis Question A The interest rate that banks pay to borrow money from other banks overnight on the money market is known as the cash rate. It affects all interest rates, including those on deposits and mortgages. The institution that is responsible for setting the target cash rate in Australia is The Reserve Bank of Australia (Reserve Bank of Australia, 2023). The RBA kept the official cash rate steady on August 1st. The Reserve Bank of Australia (RBA) has decided that the current official cash rate is 4.10%. With the exception of a break in April, the RBA has been tightening policy since May 2022, raising rates at each meeting. But to gauge the economic effects of the hikes, it kept them untouched once again on July 4 (Reserve Bank of Australia, 2023). For companies like JB Hi-Fi Group, changes in the cash rate may have an impact on the cost of borrowing. Question B "Monetary policy stance" is the phrase used to describe the direction of monetary policy. The RBA may adopt either an expansionary or a contractionary monetary policy stance in response to changes in the cash rate. When the RBA adopts an expansionary policy and reduces the cash rate, the money supply rises. This may be represented as a rightward change in the money supply curve using a money demand and money supply diagram. Lower interest rates increase spending and borrowing, which boosts the economy (Reserve Bank of Australia, 2016). In contrast, when the RBA implements a contractionary policy and increases the cash rate, the money supply falls, which causes the money supply curve to move to the left. Higher interest rates make borrowing and spending less attractive, which may help keep inflation under control.

3 In Australia, monetary policy entails adjusting interest rates to have an impact on the economy's total demand, employment, and inflation. One of the key economic strategies for regulating business cycles is this one. An expansionary policy may increase employment and economic growth. Although a contractionary strategy may slow down the economy and raise unemployment, it may assist manage inflation.

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5 Market/Industry Analysis

6 Company Analysis Question A The amount of the sales generated by JB Hi-Fi Group in 2022 as specified in the Financial Summary table is $9.23b. Growth of sales Sales Growth Rate = [(Sales in 2022 - Sales in 2018) / Sales in 2018] * 100%

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7 Sales in 2018 = $6.85 billion Sales in 2022 = $9.23 billion Sales Growth Rate = [($9.23 billion - $6.85 billion) / $6.85 billion] * 100% Sales Growth Rate = [($2.38 billion) / $6.85 billion] * 100% Sales Growth Rate ≈ 34.68% So, the sales of JB Hi-Fi Group grew by approximately 34.68% between 2018 and 2022. Question B The profit before tax for the JB Hi-Fi Group in the financial year 2022 is $775.3 million. The profit before tax for the Group in the financial year 2021 is $720.0 million. So to get change in profit= (Profit Before Tax for the year 2022- Profit Before Tax for the year 2021) Change in profit will be ($775.3 million- $720.0 million) =$55.3 million But we want our answer to be in percentage. Change in profit in Percentage = (Change in profit/Profit Before Tax for the year 2021) The multiply by 100 Change in profit in percentage = ($55.3 million/ $720.0 million) multiply by 100 Percentage change is 7.68%. Several important reasons will likely contribute to JB Hi-Fi Group's rise in profits before taxes in 2022. First, a critical factor in increasing profitability was a considerable increase in sales from $8,916.1 million in 2021 to $9,232.0 million in 2022 (Smith, 2022). This rise in top- line profits points to robust sales growth and a growing market for the company's goods. Profitability was significantly increased by the company's capacity to reduce operating costs. The total profit also increased because of an increase in other revenue from $2.9 million in 2021 to $3 million in 2022. Question C

8 The current ratio is a liquidity ratio that assesses a company's capacity to pay short-term or one-year commitments. Current Ratio = Current Assets/ Current Liabilities Current Ratio= ($1424. 7 million/$ 1306.3) = 1.0906 This therefore means that the current ratio of JB Hi-Fi Group is higher than 1, which means that its current assets exceed its current liabilities (Smith, 2022). This shows that the business has enough money to meet its short-term obligations. Quick Ratio Quick Ratio= (Current Assets- Inventory)/Current Liabilities Quick Ratio= ($1424. 7 million-$ 1135.3 million)/$1306.3 million= 0.22154 Quick Ratio= 0.22154 With a quick ratio of 0.22154, the corporation may be less able to pay its short-term obligations without resorting to the sale of goods (Smith, 2022). This might mean that JB Hi-Fi Group's liquidity depends in part on how quickly its inventory is turned through. Question D Return on Equity ROE = Net Income / Shareholders' Equity Net Income In the year 2022 = $544.4 million Shareholders Equity = $ 1280. 3 million ROE = $ 544.4 million/$ 1280.3 million = 42.52% Return on Assets ROA = Net Income/ Total Assets Net Income for the year 2022= $ 544.4 million

9 Total Assets = $ 3161. 4 million ROA = $ 544.4 million/ $ 3161.4 million = 17.22% Equity Multiplier Equity Multiplier = Total Assets/ Total Stockholders Equity Equity Multiplier = $ 3161. 4 million/ $ 1280.3 million = 2.47 Comparison ROE increased from 2021 to 2022. This suggests that, compared to 2021, JB Hi-Fi Group produced a greater return on shareholders' equity. ROA increased. This shows that the company's profitability as a percentage of its total assets increased. In 2021, the Equity Multiplier was 2.6542; in 2022, it was 2.47. A lower EM indicates less financial leverage. Executive Summary In economic analysis, QA, we spoke about the idea of the cash rate, which is the overnight interest rate at which Australian financial institutions lend or borrow money from the Reserve Bank of Australia (RBA). In QB, we examined the concept of "monetary policy stance" and how it relates to the RBA's reaction to fluctuations in the cash rate. Using the data presented and computations for company analysis, the discussion examined many facets of JB Hi-Fi Group's financial performance and ratios for the year 2022. The research showed improvements in the company's financial situation over the prior year. JB Hi-Fi Group demonstrated better profitability and effective asset use as shown by an improvement in both Return on Equity (ROE) and Return on Assets (ROA). A more cautious approach to lending is indicated by the declining Equity Multiplier (EM), which might improve financial stability. These results imply

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10 that JB Hi-Fi Group was able to improve its overall financial performance and more efficiently use its assets in 2022. Increased income, efficient cost management, and current economic circumstances could be responsible for these gains. References Reserve Bank of Australia. (2016). About Monetary Policy . Reserve Bank of Australia. https://www.rba.gov.au/monetary-policy/about.html#:~:text=The%20Reserve%20Bank %20of%20Australia Reserve Bank of Australia. (2023). Cash Rate Target Overview . Reserve Bank of Australia. https://www.rba.gov.au/cash-rate-target-overview.html Smith, D. (2022). JB HI FI Annual Report . /https://investors.jbhifi.com.au/wp- content/uploads/2022/09/Annual-Report-2022-with-Chairmans-CEOs-Report.pdf Statista. (2023). Consumer Electronics - Australia | Statista Market Forecast . Statista. https://www.statista.com/outlook/dmo/ecommerce/electronics/consumer- electronics/australia

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