Financial Analysis - David Jones Ltd

Overview of the Company

David Jones is an Australian departmental stores chain and commonly known as DJs. It was founded by David Jones in 1838 which has been the oldest continuously operating department store in the world still trading under its original name. Currently DJ has 37 stores across the Australian states and territories. The main department of David Jones Ltd is at Myer. The product offered by this company comprises of ladies beauty fashion products, accessories, shoes, children toys and wear, gift cards, home accessories, books, CD and travel goods and confectionery. Beside this, it also offers health screening service to the women like blood tests, breast screening and bone density assessments through its Rose Clinic. Consumer credit is provided to their customer through store card of David Jones. The head office of the company operated in Sydney and around 9000 employees are working.

Financial performance David Jones Ltd 2009

In order to analyze the financial performance of the DJs, financial statements have been analyzed for the critical analysis of the company for the years 2008, 2009 and 2010, so that a proper scenario can be manipulated for the improvement or deterioration in the financial health of the company. Hence, ratio analysis, vertical and horizontal analysis is the best method to see the trend of the company.

Profitability

Profitability Ratios

07/31/2010

07/25/2009

07/26/2008

ROA % (Net)

14.47

11.81

9.33

ROE % (Net)

23.47

24.01

26.07

ROI % (Operating)

23.73

16.92

12.15

EBITDA Margin %

14.28

13.65

13.93

Calculated Tax Rate %

29.44

28.01

29.73

The profitability trend of the David Jones is partially increasing, hence, over all the company is in positive profitability trend. This situation can attract good investors, in order to maintain this trend company needs good financial strategy for the future earning to be in positive trend, as ROA showing an upward trend throughout these three years as in 2010 but a huge enhancement from 2008 with 48.54% in 2010. Though the company sales are increasing but there are possibilities that company might not be receiving their receivable on time and much of the sales might be on credit (Paul D. K. 2009 p. 139).

As far as ROI is concern, David Jones has enhanced their investment due to profit earn in last few years. Increasing the level of this index indicates higher efficiency of capital employed. This is a signal to shareholders that the company actually uses its resources like other companies sin the industry. That is why when a new issue of shares (stocks) should pay special attention to the level of this index and its change over time. ROE showing a negative trend from last three years can state that company has not been generating sufficient revenue or return from the equity part. Hence, the overall profitability of the company has increased from 2008 and company is overcoming their loss they faced during financial crisis 2007 to 2009.

Liquidity Ratios

Liquidity Ratios

07/31/2010

07/25/2009

07/26/2008

Quick Ratio

0.13

0.13

0.8

Current Ratio

1.05

0.97

1.24

Net Current Assets % TA

1.24

(0.91)

9.4

The liquidity of the David Jones has been declining. The current ratio and Acid test ratio demonstrate the short-term liquidity picture of the company which is doing well comparing ...