could someone please help me with an appropriate conclusion to this i have added my answers so far to help

this was the question all the data is here i just need help with the conclusion please

Facts and Purpose: An accountant is responsible for providing high level financial advice to their clients. The global pandemic known as COVID-19 shook up businesses and has had an impact on their shareholders/customers/potential investors. The purpose of this assignment is to analyse the ratios/trends/other factors of three large ASX listed retailing entities to make a recommendation about which of the three were performing the best prior to COVID-19 (specifically for the financial years ending 2017, 2018, 2019).

Three large retailing entities:

Kogan (ASX: KGN)

Woolworths (ASX: WOW)

JB Hi-Fi Limited (ASX: JBH)

i have finished everything else just need a conclusion

Intro

This memo has been provided in response to your invocation to analyse ASX listed companies; Kogan, JB Hi-fi and Woolworths for the years 2017 to 2019 to see which was performing best prior to the covid-19 pandemic. Our accounting specialists will be using the ratio sub-categories of Profitability, liquidity and gearing as a tool to decipher which company was performing the best.

Profitability Ratios - Measure of success in wealth creation.

Net Profit Margin Ratio -

Net Profit Margin is net profit after taxation before abnormalities divided by net operating revenue, expressed as a percentage. The ratio is a useful measure of the effectiveness of the company's cost control policies. The higher the net profit margin is, the more effective the company is at converting revenue into actual profit.

Earnings before interest, Taxes, Depreciation, and Amortisation (EBITDA) Margin Ratio -

The EBITDA margin measures the extent to which cash and non-cash operating expenses use up revenue. EBITDA is the income that a company has free for interest, taxation payments and depreciation and amortisation charges. It is a useful measure for large companies with significant assets and significant amounts of debt financing.

Woolworths

2017

2018

2019

Net Profit Margin %

2.55

2.83

2.92

EBITDA Margin %

6.00

6.44

6.58

JB Hi-Fi

2017

2018

2019

Net Profit Margin %

3.74

3.41

3.52

EBITDA Margin %

6.43

6.01

6.04

Kogan

2017

2018

2019

Net Profit Margin %

1.17

3.45

3.98

EBITDA Margin %

3.21

5.69

7.06

Recommendation - Woolworths

Net profit margin ratio analysis across financial year ending 2017 - 2019 sees a steady increase. Up 0.28% between 2017 - 2018, this is due to Woolworths 1 billion invested back in 2017 to keep grocery prices low and improve services to compete with rivals. 2019 was a 0.09% increase between 2018 -2019, further investments have gone into store refurbishments and expanding the online offerings in 2018, which lead to the 31% increase in sales for the online sector in 2019. EBITDA also saw a steady increase across the financial year ending 2017 - 2019 with on average of 0.34%. The biggest earnings coming from Australian food market sector, this improvement shows Woolworths has free income for interest, taxation and depreciation charges, meaning higher share return rate for its investors.

Recommendation - JB Hi-Fi

Both net profit and EBITDA margins are showing a significant decrease from 2018 to 2019. This demonstrates that the company is struggling more and more to control costs. This is due to JB hi-fi being forced to keep their prices lower in order to stay competitive against online retailers (CommsecTV, 2018). Due to JB hi-fi being forced to lower their prices this is resulting in the cost of good sold accounting for much larger parts of their revenue. In contrast, competitor online retailers such as Kogan have shown gradual increase from years depicted above by 2.81% (Datanalysis Kogan, 2020). This ratio comparison demonstrates the struggling future of the physical retail store based companies.

Recommendation - Kogan

Net profit margin ratio analysis across the financial year ending 2017 - 2019 shows an increase. Up a massive 2.28% between 2017 - 2018 which is due to Kogan's significant investments back in 2017 in order to improve the customer offering with the most in-demand products and services that are affordable and further, enhance its competition to rivals in the near future. There was also an increase of 0.53% between 2018 -2019, where further investments have gone into expanding the online offerings for more in-demand products in 2018, which lead to the 41.6% increase in sales in 2019. EBITDA also saw an increase across the financial year ending 2017 - 2019. Up a massive 2.48% between 2017 - 2018, and another increase of 1.37% between 2018-2019. This led to the EBITDA outperforming the prior year by 12.5% and 15.6% respectively.

Liquidity Ratios: The ability to meet short term obligations.

Current ratios- compares the businesses 'liquid' assets with short term liabilities (current). The higher the ratio, the more liquid the company is.

Acid Test Ratio or Quick Ratio - The quick ratio, also known as the "acid test", is similar to the current ratio but excludes the value of inventory or stocks in the current asset calculation. The reasoning for this is that inventories are not always immediately realisable as a source of cash. Inventory can also be subject to valuation problems.

Woolworths

2017

2018

2019

Current Ratio

0.79

0.78

0.73

Acid Test Ratio

0.33

0.32

0.23

JB Hi-Fi

2017

2018

2019

Current Ratio

1.32

1.32

1.38

Acid Test Ratio

0.35

0.35

0.42

Kogan

2017

2018

2019

Current Ratio

1.98

1.73

1.68

Acid Test Ratio

0.92

0.85

0.52

Recommendation - Woolworths

Supermarket chains will have a relatively low current ratio as it holds fast moving stocks of finished goods and will generate mostly cash sales. This statement reflects exactly that trend within Woolworths, with 0.1% increase between 2017 - 2018 and 0.5% decrease in 2018 -2019. As with the acid test ratio this excludes inventories meaning for supermarket chains (Woolworths) this ratio will also be relatively low. The industry average is traditionally sitting at 1 - 2, but having a lower percentage in this industry specifically shows Wolloworths can sell its stocks quickly, thus improving the financial position of the company.

Recommendation - JB Hi-Fi

As shown above, the current ratio shows no improvement between 2017 and 2018. But there is a considerable jump between JB Hi-fi (ASX) ability to liquidate from 2018 to 2019. An ideal ratio across industries is 2:1, the higher the ratio, the more liquid the company is (Atrill, McLaney, and Harvey 2017, p.312). In contrast, the quick ratio is not high enough for the company to quickly liquidate to cover their liabilities. This is because quick ratios show how quickly companies can liquidate, by excluding the inventory from the calculation (DatAnalysis, Quick ratio). The difference between the quick and common ratio demonstrates how much JB hi-fi relies on it's inventory to liquidate.

Recommendation - Kogan

The current ratios across the financial years ending 2017-2019 shows a decrease. Between 2017 2018 Kogan's current ratio dropped 0.25% as well as in 2018-2019 with a further 0.05% decrease. This indicates that Kogan's current assets are decreasing year on year or the current liabilities are increasing. Similarly, the acid test also showed a decrease in the financial years ending 2017-2019. Between 2017-2018 Kogan acid test ratio decreased by 0.07%, while 2018-2019 also showed a decrease of 0.33%. Both the low and decreasing current ratio and acid test ratio shows that Kogan is in a poor ability to liquidate.

Financial Gearing (leverage ratios) - Measure of degree or risk to add with the amount of leverage used to finance the business.

Financial gearing occurs when a business is financed, at least in part, by outside parties, typically borrowings. Gearing may be used both to adequately finance the business and to increase the returns to owners - as long as the returns generated from the borrowed funds exceed the interest cost of paying interest.

Woolworths

2017

2018

2019

Gross Gearing %

30.69

25.84

29.33

Net Gearing %

21.48

14.10

19.34

JB Hi-Fi

2017

2018

2019

Gross Gearing %

65.47

49.54

42.96

Net Gearing %

56.94

41.94

30.64

Kogan

2017

2018

2019

Gross Gearing %

1.70

0.00

2.45

Net Gearing %

-73.35

-89.01

-51.42

Interest cover ratio: measure the amount of profit available to cover interest expense -

Interest Cover Ratio is calculated by determining operating profit and dividing by the interest expense.

Woolworths

2017

2018

2019

Interest Cover Ratio

287.54

368.35

476.06

Workings to calculate ratio

55,668.60/193.60

56,726/154

59,984/126

JB Hi-Fi

2017

2018

2019

Interest Cover Ratio

525.98

412.90

496.17

Workings to calculate ratio

5,628/10.7

6,854.30/16.6

7,095.30/14.30

Kogan

2017

2018

2019

Interest Cover Ratio

2,387.25

704.95

733.17

Workings to calculate ratio

286.47/0.12

408.87/0.58

432.57/0.59

Recommendation - Woolworths

Between both the net and gross gearing ratios it is clear to see that the percentage of borrowings was high in 2017 due to the high investments discussed earlier in improving on competitive tight price competition between rivals. This investment saw success in 2018 with a decrease in gearing by 4.85%. 2019 saw a 3.49% increase in borrowings with investments placed in strong promotional campaigns across the Australian food sector. Interest cover ratio has shown an increase of 80.81 between 2017 - 2018 and 107.71 between 2018 -2019. This shows Woolworths has improved the profit available to cover interest expense to adequately finance the business and generated an increase in operating profit to pay back borrowed funds and exceed the interest cost of paying interest.

Recommendation - JB Hi-Fi

Despite JB Hi-fi being forced to reduce their prices to stay competitive with online retailers and struggling continually to control costs they are at least managing to reduce their debt. Financial gearing ratios demonstrate the amount of risk associated with a company due to revealing how much the company relies on funding from outside parties (Atrill, McLaney, and Harvey 2017, p.298). In 2017 gross gearing was at 65.47% and 56.47% (Datanalysis JB Hi-fi, 2020). Their debt accounted for over half their financing. Despite this JB Hi-fi have been able to reduce their gross gearing margin by 23.41% and 26.3% (Datanalysis JB Hi-Fi, 2020). Demonstrating that JB hi-fi is investing heavily into reducing debt and trying to gain stability in the market.

Recommendation - Kogan

The gearing ratios look at the long term solvency of the firms. First is the debt to equity ratio which shows the level of each source of financing in a firm. D/E ratio for Kogan was 1.70 in 2017, declining to 0.00 in 2018 and increasing to 2.45 in 2019. The lower the gearing the less the leverage risk, thus Kogan has a favourable D/E ratio. The second ratio on net gearing is the financial leverage which focuses on a firm's use of debt to finance its total assets and thus lower financial leverage is recommendable. Kogan had ratios of -73.35 in 2017, increasing to -89.01 in 2018 and -51.42 in 2019. The Negative gearing shows that the company does not produce to cover their costs.

Year End Share Price ($) - Closing share price market value on the last day of the company's financial year.

2017

2018

2019

Woolworths

25.54

30.52

33.23

JB Hi-Fi

23.37

22.52

25.85

Kogan

1.67

6.82

4.75

Recommendation -

Between all three companies it is evident to see that the overall trend is increasing. Woolworths has come out in front with the highest growth rate in share price, average is $2.6 increase each year. Kogan was in second place with a $5.15 increase in 2018, but a slight downfall in 2019 with the share price down $2.07. Lastly, JB Hi-Fi saw the least improvement in share price market value, decreasing in value in 2018 but improving in 2019 with a $2.48 increase compared to the 2017 value. Based on the three year figures it is evident that Woolworths is able to provide it's investors with steady increases each year in share value, whilst JB Hi-Fi and Kogan could prove to have an uncertain trend analysis, with investors is a less confident position to buy in.

this is the part i need help with please

conclusion

- Use facts from the discussion to support your recommendation

-the conclusion is a concise summary of the main points listed with a finall view and come recommendations