Case Study: Corporate Financial

Corporate Financial

1.COMPANY AND INDUSTRY OVERVIEW (1 page)

Provide a brief summary of the firm’s business activities and business segments and recent developments in the company and its industry.

  • This overview of up to 2 pages should also identify two comparable firms, which you will use in your analyses in the next section. You should fully justify your choice of the comparable firms.

Company: JB Hi-Fi Ltd (JBH)     two comparable firms: Dick Smith and Harvey Norman

  1. Historical Company and Peer/Industry Leverage Analysis (max. 3 pages)
  • You should document the financing and leverage history of the company and characterise the company’s historical (and current) leverage policy using:

o recent trends in the use of debt and equity and recent financing activities of the firm (debt and equity issues, placements and share buybacks); current and recent history of leverage and interest coverage ratios; management discussions about the firm’s leverage policy.

  • Does the company have a target leverage ratio?

o recent capital expenditures (including mergers) and their financing

  • Is the financing behaviour of the company consistent with the pecking order theory?
  • You should document and discuss the firm’s leverage policy relative to the leverage policies of comparable firms and to industry average leverage
 
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