Financial Performance Analysis of Wesfarmers and Woolworths

Running head: ACCOUNTING FOR MANAGERIAL SKILLS
Accounting for Managerial Skills
Name of the Student
Name of the University
Author’s Note

1ACCOUNTING FOR MANAGERIAL SKILLS
Executive Summary
The main objective of this report is the analysis and evaluation of the financial performance of
Wesfarmers Limited and Woolworths Limited with the help of financial statements analysis and
ratio analysis. This report sheds light on the current market position of both of these companies.
This report also takes attempt to analyze the current financial information of these two
companies from the analysis of the financial statements like the statement of profit or loss,
balance sheet and statement of cash flows. This report also involves in the analysis and
interpretation of five kinds of ratios like profitability, efficiency, liquidity, gearing and
investment.

2ACCOUNTING FOR MANAGERIAL SKILLS
Table of Contents
Introduction......................................................................................................................................3
Description of the Companies.........................................................................................................3
Wesfarmers..................................................................................................................................3
Woolworths..................................................................................................................................3
Financial Statements Analysis.........................................................................................................4
Wesfarmers..................................................................................................................................4
Woolworths..................................................................................................................................5
Calculation of Ratios.......................................................................................................................6
Profitability..................................................................................................................................6
Efficiency.....................................................................................................................................6
Liquidity......................................................................................................................................7
Gearing........................................................................................................................................7
Investment....................................................................................................................................7
Analysis of Ratios............................................................................................................................8
Profitability..................................................................................................................................8
Efficiency.....................................................................................................................................8
Liquidity......................................................................................................................................8
Gearing........................................................................................................................................9
Investment....................................................................................................................................9
Conclusion.....................................................................................................................................10
References......................................................................................................................................11

3ACCOUNTING FOR MANAGERIAL SKILLS
Introduction
The analysis of the financial statements of the business entities is considered as one of the
major tools for the potential investors and others users to know about the financial health of
those companies. For this reason, it is the responsibility of the business entities to release all the
required financial statements of their businesses through the annual report so that the potential
investors and other users can gain the required financial information (Weygandt, Kimmel &
Kieso, 2015). It can be observed that companies use to publish three major financial statements
along with their associate financial notes; they are Profit or Loss Statement, Balance Sheet and
Statement of Cash Flows. The main aim of this report is to analyze and evaluate the financial
performance of two leading retail corporations of Australia; Wesfarmers Limited and
Woolworths Limited. The report involves in providing brief descriptions of these two companies
along with their position in the industry. After that, the report involves in the analysis of three
major financial statements of business. The next parts show the calculation of the major rations
of the business along with their interpretation.
Description of the Companies
Wesfarmers
Wesfarmers is considered as one of the leading conglomerates of Australia. The company
was established in the year of 1914 and it is headquartered at Perth, Western Australia, Australia.
The presence of Wesfarmers can be seen in many of the business areas like supermarkets, liquor,
home improvements, office supplies, hotels and convenience stores and others
(wesfarmers.com.au, 2018). With the help of strong revenue and profit margin, Wesfarmers has
become able in positioning itself as one of the leading companies having the most market share
(smh.com.au, 2018).
Woolworths
Woolworths is regarded as another major company having business operation in the
Australian retail industry. The company was established in the year 1328 and it is headquartered
at Bella Vista, New South Wales, Australia. Woolworths has its presence in many business areas
like supermarket, petrol, liquor, general merchandise, home improvements, hotel and gambling.
In the recent years, Woolworths is holding the second spot in terms of market share after