Accounting Assignment- Wesfarmers and Coles

Added on - 28 May 2020

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Running head: ACCOUNTINGAccountingName of the Student:Name of the University:Authors Note:
ACCOUNTING1Table of ContentsAnswer to Question 1......................................................................................................................2Introduction..................................................................................................................................2Comparing the result of Wesfarmers and Coles..........................................................................2Analysing the Divisional performance of Coles..........................................................................3Conclusion...................................................................................................................................5Answer to Question 2:.....................................................................................................................5Answer to Question 3:.....................................................................................................................7Reference.......................................................................................................................................12
ACCOUNTING2Answer to Question 1IntroductionThe Coles Supermarkets were acquired by Wesfarmers in the year 2008. The business ofthe division is to provide fresh food groceries, fuel, liquor and financial services. The companyhas more than 21 million customer transaction in a week (Edmonds et al., 2016). The Colesdivision currently operates 2475 retail outlets and has 106000 team members. In the followingsection the aim is to analyse the financial result of Coles from 2016 to 2017 by studying theannual report of Wesfarmers and comparing the result of both the company.Comparing the result of Wesfarmers and ColesThe revenue of Coles have always showed an upward trajectory. However, in the year2017 the earnings of Coles have fallen for the very first time since its acquisition by Wesfarmers.The stiff competition in the market has been attributed to the slowdown of earnings of Coles.Wesfarmers on the other hand have continued performing exceptionally well despite the stiffcompetition (Al Dallal, 2016). The revenue of Wesfarmers for the financial year ending on 30thJune, 2017 has increased by 3.82% from the revenue of the company earned in the previous yearending on 30thJune, 2016. The company has earned a gross revenue of AUD 68,015 million inthe financial year ending on 30thJune, 2017 compare to AUD 65,512 million in the previous yearending on June 30, 2016. Compare to 3.82% overall growth of revenue of Wesfarmers therevenue of Coles from sale of foods and liquor which is used as a crucial measure of financialperformance of the company, only grew by 1% in the financial year ending on June 30, 2017.Till 2016 the company, i.e. Coles, showed an average growth of 4.1% per year in revenue(Darlington & Hayes, 2016). Thus, compare to the growth of 4.1% that the company was able toachieve till the year 2015/16 the mediocre growth of 1% is certainly a cause for concern of the
ACCOUNTING3management of the company. The performance of Wesfarmers over the last year can be furtherassessed with the help of the profits that the company earned. In the current year ending on June30, 2017 the company earned a gross profit of AUD 21,656 million compare to AUD 19,987million that the company earned a year before, i.e. in 2016 income year. The rate of gross profitin 2017 at 31.84% which was higher from the 30.51% of gross profit of 2016 further indicatesthe improvement in performance of the company in the last year (Liebhold et al., 2016).Analysing the Divisional performance of ColesThe earnings before interest and taxes of Coles for the financial year 2016/17 decreasedby almost 13.5%. In the year 2016/2017 the company’s income before interest and taxes was$1.61 billion, lower by 13.5% from the earnings before interest and taxes of the company for theyear 2015/16. This is the first time that the company has experienced a decline in earnings beforeinterest and taxes since the year 2008, i.e. the year in which it was acquired by Wesfarmers (Yiet al., 2015). The decline however was not completely unexpected as the major competitor of thecompany, i.e. Woolworth, has made a huge investment to lower its prices which have affectedthe revenue of the company. The food sales of Woolworth has increased substantially followingits major spending for lowering the prices of the products and offering by the company(Klingenberg, 2015). The statement showing trend analysis of the financial performance of theColes is provided below:Statement showing Divisional Performance of ColesParticulars2017 ($m)2016 ($m)Change% changeRevenue3921739242-25-0.06%Earnings before interest and tax16091860-251-13.49%Segment Assets2114022122-982-4.44%Segment Liabilities42454273-28-0.66%Capital Employed1658616541450.27%Return on Capital Employed10%11%-0.015-13.39%
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