Cash Flow Statement of JB HI-FI Limited

Question: Discuss about the Cash Flow Statement of JB HI-FI Limited. Answer: Introduction In this report an adamantine study has been prepared on the cash flow statement of JB HI-FI limited. It is Australian company engaged in providing goods and services specialized in video games and other home appliance. Richard Murry is the CEO of the company who makes all the strategic decision. It is evaluated that annual report of company has been showing computation of cash inflow and outflow from all its activities by using direct method. A complete analysis has been made on operating, investment and financial activities of JB Hi-FI limited to evaluate liquidity position of company in effective manner. Body context Evaluation of cash flow statement of JB HI-FI Ltd Cash flow statement of JB HI-FI provides liquidity position of company and determines how much cash inflows and outflow of company for a particular time period (Roth, 2017). Particular 2012 2013 2014 2015 2016 Net operating cash flow 215.01 156.4 41.3 179.9 185.14 Net Investing cash flow 0.270833 0.766638 2014.036 2195.167 1.449026 Net financing activity 2227.01 2169.4 2055.3 2194.9 2201.14 Analysis of cash flow from operating activities It is evaluated that JB HI-FI since last five years has reduced its cash inflow from its operating activities. In 2012, JB HI- FI was having 215.01 cash inflow from its operating activities which decreased to 185.14. This has shown company has reduced its cash flow from is operating activities. However, more deep analysis could be made by computing operating cash flow ratio (Google Finance, 2017). Particular 2012 2013 2014 2015 2016 Operating cash flow ratio 0.489772 0.353846 0.11733 0.473421 0.414183 It is evaluated that in 2012, JB HI- FI was having .48 operating cash flow which has been reduced to .41 in 2016. It reflects that company has been inefficient to draw good amount of cash inflow from its current liabilities engaged in its value chain activities (Brigham, and Ehrhardt, 2016). Capital expenditure ratio This ratio measures the capital available for internal reinvestment and for payment on its existing debts. However, by evaluating this ratio it could be inferred that JB HI-FI do not have adequate cash flow CAPEX requirement. Nonetheless, cash inflow from capital expenditure would be found lower in growing company. Therefore, JB HI- FI could justify its lowers amount of cash inflow to its stakeholders (Nizam Hoshino, 2016). Particular 2012 2013 2014 2015 2016 Capital expenditure ratio 0.27083 0.76664 0.03576 0.26715 1.44903 Computation of cash flow statement from indirect method (ASX, 2016) Adjustment to Cash flow Statement of JB HI FI for fives years Particular Fiscal year is July- June and all values in AUD Million 2012 2013 2014 2015 2016 Amount in Million Amount in Million Amount in Million Amount in Million Amount in Million Net income before extraordinary 104.6 116.3 128.4 136.5 152.18 Depreciation, Depletion, and amortization 30.75 33.23 35.33 39.12 40.19 Deferred Taxes Investment Tax Credit 1.61 -2.4 -3.3 Other funds 3.2 6.75 4.91 5.7 9.05 Funds from Operations 149.02 156.62 168.89 178.92 198.79 Changes in working capital 74.81 -0.2053 -127.56 0.98 -13.65 Receivables -0.441 -1.12 -6.17 -10.84 -13.65 Account payable 98.95 -19.48 -88.21 25.69 58.19 Other assets -2.74 5.23 3.14 6.34 6.51 Net operating cash flow 215.01 156.4 41.3 179.9 185.14 Investing Activities Capital expenditure -46.08 -35.31 -35.91 -42.47 -52.34 Sales of fixed assets 1.26 1.2 0.674 0.496 0.342 Purchase of investment -4.2 Other investment -3 Net assets from acquisition -2.4 Net Investing cash flow -44.82 -38.31 -38.236 -44.374 -51.998 Financing activities Cash dividend -77.03 -65.26 -77.18 -87.17 -93.21 Sale of Common Preferred Stock 3.51 1.08 21.4 3.1 5.91 Issuance/Reduction of Debt, Net -84.19 -26.84 54 -40.11 30 Net financing activity -157.71 -91.02 -1.78 -124.18 -57.3 Net Cash Flow from all activities 12.48 27.07 1.284 11.346 75.842 Conclusion It is observed that company has positive cash inflow from its operating activities. In addition to this, financial and investing activities have been providing negative cash outflow. JB HI- FI need to increase its liquidity position otherwise it will result into jeopardize situation for the business functioning of company. Moreover, since 2012 to 2016 company has reduced its cash inflow from its operating activities from 215.01 to 185.14. Nonetheless, cash outflow from its operating activities has increased by 16% in 2016 as compare to its 2012 cash outflow from its investing activities. Now in the end it would be inferred that company need to main its cash flow more than 1 for the smooth running of business (Thomson Reuters, 2016). References Brigham, E.F. and Ehrhardt, M.C. 2016. Account Finance. Cengage Learning, PP 1-549. Google Finance, (2017).ALL ORDINARIES: INDEXASX:XAO historical prices - Google Finance. [online] Google.com. Available at: https://www.google.com/finance/historical?cid=10584617startdate=Jun%201%2C%202015enddate=Jun%2030%2C%202016num=30ei=sTWoV9jrGNaAsgGMsouQDgstart=0 [Accessed 22 March 2017]. Nizam, N. Z., Hoshino, Y. 2016. Corporate Characteristics of Retail Industry among 11 Asian and American Countries.Journal of Management Research,8(1), 224-247. Roth, M., 2017.Top Stocks 2017: A Sharebuyer's Guide to Leading Australian Companies. John Wiley Sons. ASX, (2016). ASX, [Online], Accessed on: 23 march 2017, Available at:https://search.asx.com.au/s/search.html?query=jb+hi+fi+ltdcollection=asx-metaprofile=web Thomson Reuters, (2016).JB HI FI Limited,JBHIFI:ASX historical prices - FT.com. [online]Markets.ft.com. Available