HI-5002 FINANCE FOR BUSINESS
The following report will discuss the fundamental features of a business analysis based on the finances of the business. This report is formed based on two major companies who are listed with the ASX, named GICS and JB Hi-Fi Ltd. this report will help in creating proper business decisions regarding the financial condition of both these companies. An elaborate conversation has been made based on the sales, change in gross margin, equity, and debt-related matters of the companies.
The report will also evaluate the businesses’ organizational structure, which would enable the reader to understand the key concept of ratio analysis, change in share prices, and other relevant factors, which would emphasize the financial condition of the companies to the reader. This report analyses the methods and procedures that provide a business with corporate governance. This report includes a graph index, fluctuations, and financial status of both companies that would help the reader to form a clear perspective of the companies.
The companies have been compared and contrasted using graphs, index charts, and financial analysis using ratio analysis of the companies as a comparative study. The report also includes a letter of recommendation, which would help in the analysis of the companies and provide a better choice of investment for the client. The recommendations have been made by using proper financial and investment analysis of the companies related to the report.
1. Description of operation and comparative advantages of the two chosen companies
The companies within this report included are JB Hi-Fi Ltd and GICS Industry.
JBH Ltd is a company that deals with the governance, social and economic factors of the shareholders’ personal information, information about investors, and suppliers of the company. The board of directors responsible for the governing activity of the company is responsible for analyzing the business standards of the company. The company also focuses on the business conducted by them in compliance with the standards set by ASX for companies located and operating in Australia (Gold et al., 2016).
It is the duty of the board of directors to ensure that the company follows the mandatory rules set by the ASX in their 13th edition. JBH Ltd performs their activities and policies in compliance with the governing authorities’ norms since August 2017 (jbhifi.com.au. 2017).
The global industry classification standard (GICS) is a fast developing standard on a global scale (Kaustia and Rantala, 2015). The members of this company are inclusive of groups, which are of around 11 sectors, 25 industries, and about 161 sub-industries related to the industrial functions, which correlate to GICS. The standard ensures that the S&P and MSCI fundamental market for each industry and assign the sub-industrial works related to the sector of operations. Advance Auto Part Inc was established in the year 1932 based in Virginia. The company had acquired a fortune of $9.47 million approximately by 2016.
They also acquired another company, Auto Part International Inc, which operated with 202 stores on the Atlantic Seaboard from 2005. Currently, the company has over 70,000 employees and functions in stores across the US (advanceautoparts.com.au, 2017). Since the company’s acquisition of General Parts Inc for $2.04 billion, Advance Auto Parts Inc became the most valued automobile spare parts, motor components reseller, and retailing industry stalwart with the maximum number of stores across the country in October 2013.
2. Calculation and comparison of performance ratios of the two companies:
3. Analysis of monthly share price movement for the two companies within 3 years:
This analysis will evaluate and examine the primary divisions in the share prices of JBH Ltd and Advance Auto Parts. The companies will be affected by the fluctuating share prices and the entire index. This ordinary index calculates the share prices and demands of shares related to the company.
It also represents the financial condition of the companies. The analysis aims to evaluate and explain the shares both JBH Ltd and Advance Auto Parts Inc have in the market. The fluctuations and movements related to the shares of both companies will be explained in this analysis report to establish the financial stability of both the companies from the investor’s perspective (Islam et al., 2014). This study will present the reader with the analysis of the companies as secure investments or volatile liabilities and if the companies are suitable investment choices or not.
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The above graph denotes the share prices and fluctuations of the company in the past 3 years. After examining the previous graph, it can be stated that the shares of JBH are more fluctuating than the shares of Advance Auto Parts Inc.
In the past three years at one point, the graph shows that JBH Ltd’s share prices dropped below the actual ordinary index. During the month of June-July of 2018, the share prices of JBH Ltd had increased but in comparison to the rise in shares from 2017, it was still minimal and below an ordinary index of the company.
From the graph above related to the share prices of the company, it can be seen that the share prices of the company had increased in the last few months.
It can also be seen from the graph that the company had an increase in shares in 2016, which crossed all the ordinary indices. Since the increase of shares in 2016, the company shares again started to fall due to controversies related to conducting child labor at several work locations of the company. Issues related to the lack of safety for workers have also affected the company’s shares.
The report examines the fluctuation of shares and prices of the same for both the companies. In this report, the share prices and movement will be based on the companies Advance Auto Parts Inc and JBH Ltd.
4. Identify any significant factors, which may have influenced the share prices of your chosen companies during the selected time frame:
This will also provide factors that affect the share price modification.
- By applying for quotation, the company had an increase in the reports of taxation in their financial report. The company also stated to improve the statements related to their financial activities through the management’s statements especially the Director. Before implementing these rules and regulations, the company had already suffered a decrease in their share by 0.80%.
- The company had an extensive record of all the shareholders’ private information.
- The company implemented proper procedures in registering the accurate number of shares to the correct shareholder.
5. Calculation of Beta values and expected rates of return using the CAPM of the two chosen companies:
What is the calculated beta (β) for your companies?
Financial data of the company:
JBH Ltd has a beta value of 0.38 in 2018 with a market value evaluated at $2837.62. Hence,
This is a beneficial state for the business of the companies. An increased return rate would imply the company’s high risk in business and may result in losing investors. Therefore, This signifies the lower market investment risk of Advance Auto Part Inc than JBH Ltd (Fernandez, 2015).
6. Identify and compare the dividend policy of the two chosen companies:
- Hence, They decided to allocate a portion of their funds to clear the service debt acquired by them.
- The Board members decided on a price of $50 for each share in the year 2006. The company created its dividend policies based on procedures that the company focused on during operations.
According to their last financial report, the company has been paying its shareholders a dividend amount on a quarterly basis. The board members in meetings held specifically for the same purpose calculate the amount of dividend paid to their shareholders.
The company evaluated the value of the shares their consumers and shareholders had with the company. Improved investment situation for the company will invite more investors hence making the company’s financial position better in the market.
7. The letter of recommendation:
This letter will analyze and evaluate the investment options available to the client between the companies selected.
Since This report is based on the financial status of two companies and the financial performance of these companies. The companies are responsible for following the set regulations in their operational activities.
Arthi, V.K., and Saravanan, R., 2016. A study on the performance of equity shares of the automobile industry and information technology industry in BSE. TCS. Therefore,
Azcue, P. and Mueller, N., 2015. Optimal dividend payment and regime switching in a compound Poisson risk model. SIAM Journal on Control and Optimization, 53(5), pp.3270-3298.
Barth, M.E., Gee, K.H., Israeli, D., and Kasznik, R., 2017. Stock Price Management and Share Issuance: Evidence from Equity Warrants.