Background:
You work for “Brisbane’s Best Electronics Ltd Group” (BBE) and Charles Bingley, your Chief Financial Officer, has asked you to analyse the financial operations of the company. Mr Bingley has identified the “JB Hifi Ltd Group” (JBH) as a publicly listed competitor that he thinks is well managed. Your task is to benchmark Brisbane’s Best Electronics (BBE) against (JBH) using the tools learned in FINM7409. In particular, Mr Bingley has asked for Common Size Financial Statements, Ratio Analysis, and a short report to the Board of Directors outlining the strengths and weaknesses of (BBE) relative to (JBH). All analysis is to be done as of 30 June 2015, the last full year for which (BBE) has financial statements. Brisbane’s Best Electronics is not a publicly traded company, so the only financial data you have are from internal financial statements. While not publicly traded, Mr Bingley believes the value of (BBE) shares is $2.27 per share (there are 10,325,740 shares in total). (BBE) paid dividends of 15 cents per share on its 2015 income. Mr Bingley has discovered that the closing price of (JBH) shares on 30 June 2015 was $19.53.
What can Brisbane’s Best Electronics learn from the numbers you have computed? Use the ratios(excel 2) and common size statements( Excel 1) to identify areas where BBE can improve relative to JBH. Also identify any areas where BBE is better managed relative to JBH. For each strength and weakness identified, explain what the ratio measures and give examples of how a company can improve this ratio. (You should identify at least 5 ratios as either a strength or weakness). At the conclusion of your analysis, recommend a single area for BBE management to focus on – this should be the area where improvement will have the greatest impact on the profitability of BBE in the future. Be sure to justify the choice of this area. You should write no more than 700 words. Submit your answer as a pdf file and note the word count at the bottom of the page.
