Analysis of Wesfarmers Limited's Financial Performance

This report presents a comprehensive financial analysis of Wesfarmers Limited, an Australian conglomerate, evaluating its financial position and profitability from 2015 to 2018. It examines key financial indicators such as net profit after tax, earnings per share, return on equity, and dividend per share, highlighting trends and market influences. The report also assesses Wesfarmers' sustainability initiatives, including safety performance, gender equality, and community contributions, providing a balanced perspective on the company's performance. Furthermore, it includes a detailed cash flow statement for the year ending December 31, 2018, offering insights into the company's cash management and overall financial health. The analysis incorporates data from financial statements and sustainability reports, supported by relevant graphs and figures, to provide a clear understanding of Wesfarmers' performance and strategic initiatives. Finally, the report concludes with a summary of the key findings and their implications for stakeholders and investors.

Accountancy

Table of Contents
INTRODUCTION...........................................................................................................................1
Question 1........................................................................................................................................1
Question 2........................................................................................................................................3
Question 3........................................................................................................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Accountancy or accounting is the process of recording each business transaction,
classification and reporting which further helps in maintaining proper financial records. It help
the managers to formulate strategy or evaluate financial results in order to analyse financial
position of the business.
This project report based on the Wesfarmers limited which is Australian based
conglomerate company. Its headquarter situated in Perth, Western Australia and it is largest
revenue based company in the nation (Wesfarmers Limited, 2019). Company founded in 1914
and the are they served are Australia, India, Ireland, New Zealand, United Kingdom.
Question 1
Financial position and profitability will be evaluated with the help of analysis of financial
statement and it will prepare by using financial information. Management of the company able to
done effective financial statement analysis by using various information. In context of
Wesfarmers Limited, financial statement of 2015 to 2017 helps the manager to evaluate their
financial position of the company in the market (Abd Halim and et.al., 2014). It helps in
evaluating various indicators such as total profit, number of customer, revenue generate by the
company etc. These information helps the internal as well as external parties such as
stakeholders. Some of financial results discussed below which further helps in improving
financial positing or not of the company:
Net profit after tax: It is one of the most important indicator which used to evaluate
financial position of the company and it is used by stakeholder to analyse company's current
position which further helps in decision making process. Majority of stakeholders evaluate net
profit of the year and it will be compare with previous year result and then analyse that company
grow or decline in this year. Net profit of the company decrease in 2016 in comparison to 2015
where net profit in the year of 2015 was $ 3440 million and remains $ 1038 million in 2016.
Before evaluating any conclusion, market analysis also required because 2016 was not so
profitable for retail sector organization. Company become sustainable in 2017 where net profit of
Wesfarmers increased to $ 4138 Million. This change represent the growth of company in the
single year and that is very beneficial for the company. If comparison based on last five years
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then it is found that company continuously grow on the basis of Net profit except 2015 to 2016.
Market position of retail sector currently stable which is profitable in the future.
Earning per share: It is also important factor for the analysis of financial statement
because it helps in evaluating financial position. EPS is the return which provided by the
company to its shareholders and it will be considered by the potential investors before
purchasing any share of the company. Similar to the net profit, Earning per share decreased in
2016 and then further increase in 2017 (Chang and et.al., 2014). Due to poor market condition,
value of share price will reduce which impact the EPS of the company. In 2016, EPS decreased
by 216.1% from 2015 that is 209.5%. In the next year it was increased by 254.7% and further it
will stable for longer period due to effective market condition. Above mention two factor
evaluate that profitability in the 2017 was stable or substantially in comparison to 216.
Return on equity: It is profitable ratio which helps the internal as well as external party
to evaluate financial position of the company in context of profitability. This ratio shows that
profitability in comparison of total equity and these investments will be done by the shareholders
of the company. With the help of financial statement, there has been significant increase in total
return on equity in 2017 in comparison of 2016. Return increased from 9.6% to 12.4% which is
profitable for the company.
Dividend per share (DPS): Increase in EPS not sufficient for the organization, investors
also evaluate the change in DPS because this factor attract more investors. Due to this reason
dividend is the deciding factor of financial position. In comparison of other factor, DPS
increased in 2016 and also sustainable in 2017. Wesfarmers pay total 223% per share in 2017
and in the same year EPS will be paid 254.3% per share. These figures shows that dividend
payout ratio of the company around 85%. This is the most important or profitable indicator to
attract investors which helps the organization to grow in the market.
From the above mention financial analysis factors which helps in evaluating financial
position of the company (Faizrakhmanov, Klychova and Khametova, 2014). From the last five
years company face the growth excepting in the 2016 due to low market condition. Where
economy was down, flow of cash in the economy is not good, interest rate were high etc.
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Question 2
With the help of sustainable report of Wesfarmers Limited they have to compare
initiative and provide some opinion on these initiatives. Some of the sustainability initiatives
discuss below:
Safety performance: Organization have to focus on employees safety because at the
time of performing their task people injured very badly which impact the production. According
to the Lost time injury frequency rate (LTIFR), injuries represented on the basis of per million
hours worked by employees. In 2017, TRIFR ( Total recordable injury frequency rate ) reduced
by 16 % from 33.6 to 28.3% due to improvement in all the units. Along with this, worker's claim
reduced more than 1000 to 6294.
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Above graph represent that rate of injury in 2015 to 2016 almost same and it increased in
2017 that is 7.4%. From 2013, injury rate reduced but after 2016 it will slightly increase that is
the point to be consider.
Safety initiatives: Management of the company have to ensure about employees where
they have to formulate strategies or other programs. Such as monitor the injuries because it
impact the individual performance. In the Wesfarmers company, safety program called “Safe
Person Commitments” and main objective is to meet expectation of safety at the time of
performing risky task (Mendoza, 2014). Along with this, company focus on mental health which
increase strength of employees. One of the subsidiary company organise a program called “mind
your health program” in order to improve mental health.
Gender equality: In context of Wesfarmers Limited, company successful in delivery
gender equality between employees. 64% of the employees are male and rest of the workers
means 44% are female employees. Along with this, women holds essential role in the
organization such as in the 2016 to 2017, total 38% females are on post of non executive
director. 28% in 2017 and 23% in 2016 women are on post of senior executive, these figures
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indicate that Wesfarmers successful in delivering gender equality. Below mention figures
represent gender equality in the organization which helps in providing sustainability.
Contribution in the community: Organization has to contribute some amount in the
community for the sustainable development. It helps the stakeholders to grow and these
investment in form of direct or indirect forms (Picard, 2016). In 2017, total contribution in
community is about $ 132.2 million.
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Above mention graph represent that direct investment in the community is more than
indirect investment. In 2016, direct investment about $ 57.8 million and in 2017 it was $ 72.9
million which increased. On the other hand, indirect investment in 2016 was $ 53.8 million and
in 2017 $ 59.3 million.
Question 3
Cash flow statement: In the organization, it is one of the important tool which used to
evaluate financial position of the company. It represent the change in balance sheet or income
statement and affect of cash & cash equivalence (Xu and et.al., 2014). It helps the inventors to
evaluate financial position of the company in terms of cash flow. Below mention statement
represent the cash flow of Wesfarmers company from the various company.
Cash flow statement for the year ending 31st December 2018
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Particulars Amount
Cash flow from operating activities:
Net profit after tax 110520
Depreciation 33200
Gain on sale of investment -9600
Increase in account receivable -16560
Increase in Inventory -22200
Increase in account payable 9480
Increase in outstanding expenses 1320
Increase in dividend payable 2880
Net cash flow from operating activities (A) 109040
Cash flow from Investing activities:
Purchase of land -122400
Purchase of new equipment -130600
Sale of equipment 25400
Sale of Investment 117600
Net cash flow from Investing activities (B) -110000
Cash flow from financing activities:
Issue of equity shares 72000
Share premium receive 14400
Issue of bonus share from retain earning -64800
Net cash flow from Financing activities ( C) 21600
Total cash generated from all activities (A+B+C) 20640
Opening cash 71760
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Closing cash 92400
CONCLUSION
From the above discussion, it has been observed that accountancy and its techniques are
very important to evaluate financial statement or analyse financial position of the company. With
the help of annual report, external parties able to analyse annual growth in terms of net profit,
earning per share, dividend per share, return of equity etc. These indicators helps in analysing
financial position of the company and further beneficial for investors to make their decision on
the basis of available financial statements.
REFERENCES
Books & Journals
Abd Halim, M. S. and et.al., 2014. The Relationship between E-Commerce adoption and
organization performance. International Journal of Business and Management. 9(1).
pp.56-62.
Chang, X. and et.al., 2014. Cash-flow sensitivities and the allocation of internal cash flow. The
Review of Financial Studies. 27(12). pp.3628-3657.
Faizrakhmanov, D. I., Klychova, G. S. and Khametova, М. V., 2014. Accountancy in
horsebreeding organization in compliance with international accountancy
standards. Mediterranean Journal of Social Sciences. 5(24). p.111.
Mendoza, R. R., 2014. Accountancy service requirements of micro, small, and medium
enterprises in the Philippines. International Journal of Business, Economics and Law.
4(1).
Picard, C. F., 2016. The marketization of accountancy. Critical Perspectives on Accounting. 34.
pp.79-97.
Xu, W. and et.al., 2014. Financial ratio selection for business failure prediction using soft set
theory. Knowledge-Based Systems. 63. pp.59-67.
Online
Wesfarmers Limited. 2019. [Online]. Available Through:
<https://www.wesfarmers.com.au/>
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