Competitors Analysis
A review of competitors allows the management to determine its position in the industry by focusing on the performance of its business rivals. Ratio analysis outlines the position of the business, and more so, determine its competitiveness. In particular, profitably and efficiency ratios determine the competitiveness of the company. The gross profit ratio outlines the efficiency of the company in generating revenues. In this case, Best Buy's gross profit was 23.2% in 2019 which was a decline from 23.4% reported in the previous year. This means that the company made 23.2 cents of gross profit on every dollar, which is commendable performance. Still, on profitability, the company reported an increment in Return on Equity (ROI) from 27% recorded in 2018 to 44% in 2019. This ratio indicates that the company is able to generate profits using shareholder equity. Inventory turnover outlines how the company is managing stock, which is a vital component of business operations. Best Buy has maintained a high ratio, which indicates that the company can manage the inventory. The efficiency and profitability ratio provides an overview of the company's competitiveness and the ability to take opportunities.
Industry Analysis
The debt to equity ratio, current ratio, return on equity, and net profit ratios are some of the most critical ratios used in analyzing a company's performance and comparing them with those of the industry. The net profit margin shows the ability of a company to control costs and the efficiency in converting its revenues to actual profit. Best Buy's net profit ratio for the financial year of 2019 was 3.53%, which was higher than the 2.7% of the industry. The debt-equity highlights the solvency of the company. Best Buy, in 2019, was 39.6%, which was higher as compared to 32.1 % of the industry. This means that the company is financed by more debt than those recommended in the industry in which it operates. The current ratio measures the ability of the company to honor its short term debt. A higher ratio indicates the ability of the company to pay back its debt obligations. Best Buy reported a current ratio of 1.05, which was below the industrial average of 1.5 ("Best Buy (BBY) Financial Ratios," 2019). Finally, the return on equity ratio indicates the ability of the company to generate profit for the shareholders. Best Buy reported a ratio of 49%, which was way above the industry average (19.7%). Generally, the ratio gives an overview of the company performance compared to the industry, which it operates.
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Investor Analysis
Best Buy Inc. is a multinational company that has ventured into different areas in technology. This aspect has allowed the company to enjoy sustained growth since its inception. The analysis of the company ratio provides an overview of financial health and the general performance of the company. The profitability of the company has improved in recent years, a clear indication of stable management and excellent strategic planning. The net gross net profit ratio of the company has been stable for the last ten years (Best Buy, 2019). The return on asset ratio has been way off the industrial leverage. Besides, the company solvency ratios have been within the industrial range. Ideally, the company performance has been nothing short of the best. However, the global giant needs to focus more of the most profitable division, and more so, invest more resource on corporate social responsibility, this will not only improve the overall performance of the company, but it will enhance the corporate image of the company.
References
Best Buy (BBY) Financial Ratios. (2019, November 30). Retrieved from https://www.investing.com/equities/best-buy-ratios
Best Buy. (2019). Annual Report 2019 . Retrieved from http://investors.bestbuy.com/investor-relations/financial-info/annual-reports-and-proxy-statements/default.aspx
