Analysis of Wesfarmers' Cash Flow Statement, Comprehensive Income Statement and Corporate Income Tax

ASSESSMENT TASK
Wesfarmers is one of the largest public limited company listed in Australian Securities Exchange
and an in-depth analysis is being conducted on the company for the year ended as on 30th June,
2017.
Wesfarmers is a conglomerate and is engaged in multiple business operations all over the world
with a huge shareholder base. The main objective of the company is to increase the return for the
shareholders and thus establishes an employment base in the country.
CASH FLOW STATEMENT
I. Cash flow statement is prepared to witness the movement of the cash within the
organization and to manage the cash in a systematic way in the enterprise to prevent the
mis utilisation of the resources and to manage the hard earned resources efficiently and
effectively. Cash Flow statement includes three activities to organize the cash namely
Operating Activities, Investing Activities and Financing Activities. Operating activities
deals with the inflow and outflow of day to day activities of the business of the enterprise
which includes the receipts from customers, payment to suppliers and vendors,
manufacturing related expenses, office related expenses and any other incomes or
expenses of operating nature. It specifically excludes non-cash items like depreciation. It
shall also include interest and dividend if the organization is engaged in such business
and which forms a primary part of the enterprise’s income.
Second comes the Investing Activities which deals with the investments and properties
acquired and invested by the enterprise. Here assets include both tangible and intangible
assets and the tangible assets include both movable and immovable assets. On the other
hand, Investments include both short term and long term and further investment in a
subsidiary and associates shall also be considered for the purpose. Investment activity
further includes both acquisition and disposal of assets and investments and the net of the
two is done to arrive at the net cash flow from investing activities.
Lastly, comes the Financing activities which engages the finance related issues of the
enterprise which specifically deals in issue and redemption of shares and debentures,
dividend payable and other financing activities which affect the financial position of the
enterprise in monetary terms (Jones 2015)
In context of the Wesfarmers, the operating activities of the company include all that
items as described above including taxes paid and borrowing were specifically excluded
from the activity. The operating activity showed a net cash flow of $4226m which is 25
percent more than the previous year. The reason for such increment is the increase in
realization from the customers and a diminution in the borrowing cost of the enterprise.
Similarly, the investing activity of the Wesfarmers is mainly comprised of sale and
acquisition of the business of associates and enterprises. It is reflecting a net cash outflow
of $53m which represents a huge difference compared to last year due to proceeds of sale
of business of the associate and redemption of loan notes. Finally, comes the financing
activities which includes proceeds and repayment of the borrowings and dividends paid

to equity shareholders of the company. There’s a drastic change in the cash flow from
financing activity of the Wes farmer for the year ended 30th June, 2017 from the negative
flow of $1333 to 3771 due to the major change in proceeds from borrowings and excess
repayment of the borrowings.
Thus, from the above views it is clarified that the company is in a better position as
compared to previous year and more stable in monetary terms (WesFarmers 2017)
II. The comparative analysis of the Wesfarmers of 2015, 2016 and 2017 respectively gives a
holistic view of the financial position of the enterprise. It has been observed that the
interest and the dividend under the operating activity is unpredictable in nature as they
vary unevenly every year. However the receipts vary at an equal pace of approximately
five percent upwards every year. Further the observation under the investing activity
gives a view that the company has sold its holding from its associates company and
redeemed the loan notes to generate cash flows to the enterprise which helped the
enterprise to manage and maintain the liquidity of the cash in the organization and to use
the same for repaying the external borrowings to reduce its liability of finance cost and
cost of capital. Other items in this activity does not have a major impact on the changes in
the cash flow in the last three years of comparison and thus are more or less constant in
nature. Lastly, major variations are being observed in financing activities of the three
years . The proceeds and repayment of borrowings are having an uneven distribution by
the enterprise and the dividends paid to equity holders depend upon the profits of the
enterprise which is obvious to vary each year which ultimately affects the cash flow from
the financing activities. These variations are thus observed in these three activities of the
cash flow for the three different years and the analysis of the same is being analyzed
above in an understandable and simple language. Thus through the above analysis it can
be said that the company is in a stable position in the current year and is taking step
towards improvement every year (WesFarmers 2017) (WestFarmers 2016)
OTHER COMPREHENSIVE INCOME STATEMENT
III. Comprehensive Income statement records all the transactions that does not impact the
profitability of the company and are treated as notional in nature. It means that incomes
and losses that have not been actually received or incurred is the part of comprehensive
income statement and in the context of Wesfarmers the statement includes foreign
exchange difference on translation, share of reserves of associates and subsidiaries and
joint ventures , loss/gain from defined benefit obligations and gains and losses from non-
financial assets. These are the items which have been recorded in the comprehensive
income statement of the company which hardly puts an impact in the actual reserves of
the company and the returns to the shareholders of the company.
IV. Each item in the comprehensive income statement have separate significance and each
have their own relevance in the financial statements of the company. The foreign
exchange fluctuations arises on account of transaction with entities located in a different
country and the currency and the value of the currency of both the countries are
different. For example a supplier in country A supplies 500 units of a certain item to its
customer in country B and the supplier bills the amount in currency of country B when