As Harvey Norman moves to increase its debit levels JB Hi Fi has moved to reduce their liabilities.

Over the past year, JBH has reduced its debt from AU$559m to AU$470m – this includes both the current and long-term debt.

With this debt payback, JBH currently has AU$72m remaining in cash and short-term investments for investing into the business. On top of this, the CE and appliance retailer has also generated cash from operations of AU$292m in the last twelve months, leading to an operating cash to total debt ratio of 62%, meaning that JBH’s debt is appropriately covered by operating cash.

In comparison Harvey Norman has ramped up its debt from AU$721m to AU$925m – this includes both the current and long-term debt.

With this rise in debt, HVN’s cash and short-term investments stands at AU$202m

Analysts claim that ‘With current liabilities at AU$917m, it appears that JB Hi Fi has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 1.32x. Generally, for Specialty Retail companies, this is a reasonable ratio since there is a bit of a cash buffer without leaving too much capital in a low-return environment’.