CFM Assessment 2 excel JB HiFi with question answer PDF

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The full assignment of Assessment 2 very helpful I scored well in this one so should help you too. khguyg woiehwj...

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Name of the company: ___JB Hi-Fi_Limited______ Code: JBH Answer to part a) and b): Period 1: _March 2014 to February 2016__________

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Period 2: __February 2018 to January 2020____________

Answer to part c): The higher the standard deviation, the higher the risk. However, for JB HiFi Limited, the standard deviation values are relatively low over the two sub periods which indicates the investment is less risky or volatile. The correlation coefficient values of both the sub periods stand at around 0.1 which means that there is a relationship between the two variables, however it is not a strong one and it tends to get stronger as the value of the correlation goes near 1. Answer to part d): Calculation of estimated beta for period 1= 0.2173 Calculation of estimated beta for period 2= 0.3016

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Answer to part e): If a security’s returns are more volatile than the market portfolio returns with respect to systematic risk factors, its beta will be greater than 1 (Gitman 2011). If a security’s returns are less volatile than the market portfolio returns with respect to systematic risk factors, its beta will be less than 1 (Gitman 2011). The beta for period 1 is 0.2173 and the beta for period 2 is 0.3016 which means that theoretically, the security’s returns are less volatile than the market portfolio returns for both the sub periods. As the values are between 0 and 1, it shows that the return from asset j generally is in the same direction with the market return for both the sub periods (Gitman 2011). For being less volatile than the market, it will attract more risk averse investors. Answer to part f): Description of company: JB Hi-Fi Limited is a locally owned public company, which supplies home entertainment and consumer electronic products such as TVs, computers, cameras etc. The company has approximately 12,500 workers and operates in Australia and New Zealand. JB Hi-Fi is listed on the ASX under the code JBH. The Chief Executive of JB Hi-Fi is Mr. Richard Murray and the Chairman of JB Hi-Fi is Mr. Gregory Richards. The retailer has over 180 outlets. JB Hi-Fi is ranked number 53 out of the top 2000 companies in Australia and generates the majority of its income from the Other Store-Based Retailing in Australia industry. In 2019 the company generated total revenue of $7,097,700,000 including sales and other revenue. The company operates a few store types, while also having an online store presence. Along with JB Hi-Fi-branded stores, the group also has ownership interests in The Good Guys, an Australian-based consumer electrical store brand with a focus on home appliances. (Information taken from IBISworld) Answer to part g): What happened in the economy (macro level information) and the company (micro level information) during two periods. Why estimated beta for the two periods are different (Explanations with logic needed) Ans: Beta is a measurement of market risk or volatility. It indicates how much the price of a stock tends to fluctuate up and down compared to other stocks. The beta values for period 1 (0.2173) and period 2 (0.3016) are slightly different which states that period 2 is slightly riskier than period 1 but also has potential for better returns than period 1. Moreover, the estimated value of beta is different for two sub periods because of the result of various movements of the stock returns in response to the market. Period 2 beta increased slightly higher because of multiple factors such as the nature of the business, financial and operational leverages. The company’s type of product and services offered and its relationship with the overall macro-economic environment can have an influence on the beta value. Furthermore, higher proportion of fixed cost in the cost structure can lead to higher beta values. A big company like JB Hi-Fi Ltd may have increased fixed cost causing the higher beta. Lastly, increase in debt of a company adds to the increase in beta value as interest expense rises along with the market risks.

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