Project Report On Wesfarmers Ltd | Cash Flow Analysis

Added on -2020-02-17

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CASH FLOW ANALYSIS ANDSECURITY VALUATIONWESFARMERS LTD03
Table of ContentsINTRODUCTION...........................................................................................................................3Background..................................................................................................................................3Explain purpose of financial statements' analysis........................................................................4Analyze the firm’s current operation using its financial statements............................................5Dividend valuation model to value Wesfarmers's shares..........................................................18Draw graphs for Wesfarmers's adjusted share price and return.................................................19Identify areas in the cash flow on which higher attention to be payed by the firm...................21Recommend investment and financing strategies to improve the position of cash...................21State and Justify suggestions in terms of shareholders’ wealth maximization..........................22CONCLUSION..............................................................................................................................22REFERENCES..............................................................................................................................2403
INTRODUCTIONValuation of securities is an important weapon used by an entity owner in order toascertain its existing performance in the external market. Ensuring an entity's conditions willhelp them in order to craft several strategies to uplift their current position in the market.Wesfarmers Ltd has been selected for the project report in order to analyze its existing cashposition and assessing all kinds of securities held in the business for long time. This projectreport is all about collecting financial data from various external sources that provides reliabledata in facilitating variety of clients of the business. Cash flow and securities analysis will behelpful for an entity in order to achieve desired market aims and targets. Accomplishing allmarket goals is essential for an entity as in this way an entity will achieve all its aims and targetswithin a given span of time. Different financial statements are analyzed by an entity in order toidentifies all kinds of errors lies in the current financial statements in meeting all kinds of needsand higher expectations of an individual. Financial statements such as income statements,balance sheet and most importantly cash flow statements are evaluated by an individual usingratio analysis as the major source of comparison technique. Cash is regarded as the essentialelement which will be retained in the business for long time period. Status of an entity in theexternal market is need to be determined as this would help an entity owner in order to gainhigher level of competitive advantage in order to beat market rivals. Maintaining good andstrong position in the market would be helpful for an entity to create additional value for thebusiness concern in the external environment.BackgroundWesfarmers is an Australian conglomerate firm deals in various businesses such as retailstores, providing chemicals, fertilizers and input used in mining that is coal and mining.Industrial and safety products are also supplied by this entity to facilitate all its potentialcustomers. An entity will strengthen its business by retaining all the customers in their businessas creation of large base of customers is the ultimate aim of the business. Offering wide range ofproducts or services is a direct way through which customers are attracted towards thecapabilities of the firm as this helps in increasing higher level of customer satisfaction. Providingdiscounts and offers in the initial phase an entity will Satisfy all the customers in order to createtrust relationships with all of them. Current financial performance of this organization is higher03
grab the attention of all the stakeholders especially investors who intends to invest in a businesswhose current financial strength in higher in order to generate higher revenues in the near future.Wide number of external parties are invited to take interest in the services offered by the firm toget experience of the services provided by the firm in order to give negative or positive feedback.This entity is registered in the Australian stock exchange in order to create higher marketvolatility in boosting the existing performance of an entity (Grant, 2016). Revenues generatedfrom all the securities invested by the business will create unique identity of the business in frontof all the users located in the similar market. Target market of this entity includes home countrythat is Australia in which its regular customers are set up in generating higher revenues for thebusiness. Market share of this organization extends to UK which is famous tour destinationwhich attract variety of visitors from all across the world towards the aesthetic beauty of thecurrent place.Explain purpose of financial statements analysisFinancial statements prepared by an entity is to reflect its overall performance in thefinancial context in order to explore higher external market opportunities. It is regarded as theprocess of evaluating standard formats of the financial statements such as income statements,balance sheet and cash flow statements. In this process all aspect will be reviewed by anindividual in order to target all prospective factors that enhances the quality of resourcesrecorded in the financial statements of the business. In this particular process financial health ofWesfarmers will b analyzed by identifying all the frauds and errors lies in the system whichneeds to be identified in the initial phase in order to target an entity's existing businessperformance. The financial statement analysis used by various stakeholders who are takingdecisions of investing higher capital in the business that creates higher value of the business infront of its external market users located outside the business (Wu, Al-Khateeb, Teng andCárdenas-Barrón, 2016.). Future performance of an entity will be identifies by an entity ownerby analyzing its current financial resources in order to grab higher advantages over all the userslocated in the internal as well as external business environment. Various decisions makers whomake important decisions based on the financial information of an entity will accomplish all theirneeds and expectations. Business efficiency will get increases with the passage of time as eachand every factors of the business will be redefined in order to enhance the overall quality of all03
the business resources takes places in an entity. Different methods of financial statements usedby an entity owner includes fundamental analysis and Du-pont analysis that emphasis on eachand every component of an entity that are included in the balance sheet. Vertical and horizontalanalysis of financial statements will also ascertain the financial efficiency of an entity in order togenerate higher output in the near future. Financial adjustments can be made in the existingfinancial statements in order to uplift the current role of the business. Market opportunitiesexplored by the business is essential in order to grab higher level of trust and confidence of allthe external market users in achieving all the market aims and targets for the beneficial of thebusiness. Getting high level of customer satisfaction is essential for the firm in creating itsbusiness position in eliminating all kinds of market threats imposed on an entity.Analyze the firm’s current operation using its financial statementsProfitability RatiosYear200720082009201020112012201320142015NetMargin%8.113.133.023.033.513.673.794.473.93GrossMargin49.8134.8633.2633.4133.2833.7133.6430.9730.53AssetTurnover(Average)0.991.361.331.321.371.391.41.451.55ReturnonAssets%8.034.254.013.994.85.125.296.496.09ReturnonEquity23.589.0976.397.688.348.7610.349.6103
%InterestCoverage6.522.83.094.396.147.038.478.3511.932007200820092010201120122013201420150123456789Net Margin %InterpretationIn the external business environment, final profit used by an entity in reflecting itsexternal brand image is the net profit. The net profit produces by an entity after deducting allkinds of expenses from the sales of the business. Net profit is decreasing from one period toanother due to higher tax obligations imposes on an entity.03

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