Financial and Economic Interpretation and Communication

Financial and Economic Interpretation and
Communication

Executive summary:
An organization is always required to focus over the monetary and non monetary aspects,
information and items of the organization in order to calculate the overall presentation of the
company. The collection and evaluation over the monetary and non monetary aspects of an
organization assists the internal and external stakeholders of the business to make decision about the
organization. Wesfarmers limited has been studied in order to understand the importance of financial
and non financial information and items in an organization. The report focuses over the ratio analysis
to study to identify the financial performance of Wesfarmers and industrial and economical data of the
country has been studied to measure the non financial feat of the business. Wesfarmers limited is an
ASX listed company which mainly running its business in Australia, New Zealand, India, Ireland and
United Kingdom market. Mainly, the organization does business of retail, chemicals, industry safety
products and fertilizers. Overall monetary and non financial position of the company is quite attractive
in the Australian market.
Analysis:
Wesfarmers’s annual report (2018) has been studied to measure the financial level and non
financial aspects of the business. The study explains that various positive changes in relation to the
financial and non financial aspects have taken place in the business from 2017 in 2018. In case of
profitability ratio, it has been found that net profit margin point of the business has declined a little
because of the changes in capital structure and market growth of the business. The current net profit
margin of the company is 3.91%.
Further, liquidity ratio of the company is 0.87 which has been reduced to 0.93 in 2017. The
changes define about no management of working capital and higher liquidity risk level. Moreover,
cash ratio explains that business is enough able to manage the cost of debt of the industry. The interest
coverage ratio of the business has been improved to 18.07. Lastly, the market ratio of the company
has been calculated and found that EPS of the company is 1.06 which has been reduced from previous
year (Morningstar, 2019).
Ratio Calculations 2017 2018
(Amt in
$'000 )
(Amt in
$'000 )
Profitability Ratios: 2017 2018
Net profit margin %
Net profit / 2,873,000 2,604,000
Sales Revenue % 68,015,000 66,594,000
Answer: 4.22% 3.91%
Cash ratios 2017 2018
Interest Coverage Ratio
EBIT / 3,587,000 3,813,000
Net Finance Costs (used net interest
expense) 264,000 211,000
Answer: times p.a
13.5
9
18.0
7
Liquidity Ratios 2017 2018
Current Ratio
Current Assets / 9,667,000 8,706,000
Current liabilities 10,417,00 10,025,00