Accounting Business Reporting for Decision Making

CHAPTER 8 Analysis and interpretation of financial statements 329

Consolidated

Notes

2015

$’000

% relative to

total assets

Non-current liabilities

Borrowings

Provisions

Other non-current liabilities

Other financial liabilities

18

19

20

139 461

6 073

25 664

0

16

1

3

0

Total non-current liabilities 171 198 19

Total liabilities 551 534 62

Net assets 343 479 38

Equity

Contributed equity

Reserves

Retained earnings

21

22

56 521

17 636

269 322

6

2

30

Total equity 343 479 38

FIGURE 8.6 Vertical analysis of a balance sheet: JB Hi-Fi Ltd

Source: Adapted from JB Hi-Fi Ltd 2015, preliminary final report, p. 58.

Note

Consolidated

2015

$’000

% relative

to revenue

Revenue

Cost of sales

3 3 652 136

(2 853 883 )

100

78

Gross profit 798 253 22

Other income

Sales and marketing expenses

Occupancy expenses

Administrative expenses

Other expenses

Finance costs

4

631

(374 084

(160 216

(27 711

(35 414

(5 927

)

)

)

)

)

1

10

4

1

1

1

Profit before tax

Income tax expense 5

195 532

(59 021 )

5

1

Profit for the year 136 511 4

FIGURE 8.7 Vertical analysis of a statement of profit or loss: JB Hi-Fi Ltd

Source: Adapted from JB Hi-Fi Ltd 2015, preliminary final report, p. 56.

The vertical analysis of the statement of profit or loss highlights the importance of an item relative

to the revenue figure. Each item in the statement is divided by the revenue figure and expressed as a

percentage of that figure. In figure 8.7, the anchor point for the vertical analysis of the statement of

profit or loss is revenue ($3652.1 million). The gross profit and profit before tax are 22 per cent and

5 per cent respectively, suggesting that every dollar of sales generates on average 22 cents of gross

profit and 5 cents of profit before tax. Aside from the cost of sales, the main expenses of the entity

are sales and marketing expenses, constituting 10 per cent of revenue. This suggests that JB Hi-Fi Ltd

spends around 10 cents of every sales dollar on sales and marketing. Note that JB Hi-Fi Ltd reports

some key statistical data under its statement of profit or loss. The data presented includes the following

items expressed as a percentage of sales revenue: gross profit, rent for trading stores, cost of doing

business, and EBIT.