Financial and Economic Analysis of Wesfarmers Limited

Financial and Economic Interpretation and Communication
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Resource A
Executive Summary
The present report is developed for the purpose of providing an analysis into the
financial and non-financial performance of an ASX listed entity. The analysis is undertaken
with the help of information extracted form the annual report and other recent publications
containing the information in relation to the selected company. The analysis is carried out to
provide recommendations to the potential investor for taking the investment decision. The
company selected is Wesfarmers limited, an ASX listed entity involved in diverse businesses
such as retail, chemicals, fertilizers, coal, industrial and safety products. It is recognized as a
leading retia company of Australia having about 220,000 employees base.
Analysis
Key Measures that shows the financial performance of Wesfarmers
Particulars FY17 FY16
$M $M
Total Revenue $ 68,015.00 $65,512.00
Operating Expenses $ 16,973.00 $16,209.00
EBIT $ 4,683.00 $ 3,778.00
$ 2,873.00 $ 407.00
Earnings Per share $ 2.55 $ 0.36
Current Assets $ 9,667.00 $ 9,684.00
Current Liabilities $ 10,417.00 $10,424.00
Non Current Assets $ 30,448.00 $31,099.00
Long term debts $ 5,757.00 $ 7,410.00
Shareholder's equity $ 23,941.00 $22,949.00
Cash Flow from operating activity $ 4,226.00 $ 3,365.00
Profit for the period from continuing
and discontinued operations
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Earnings Per share $ 2.55 $ 0.36
Current Assets $ 9,667.00 $ 9,684.00
Current Liabilities $ 10,417.00 $10,424.00
Non Current Assets $ 30,448.00 $31,099.00
Long term debts $ 5,757.00 $ 7,410.00
Shareholder's equity $ 23,941.00 $22,949.00
Cash Flow from operating activity $ 4,226.00 $ 3,365.00
$ 402.00 $ (100.00)
Key Financial Ratios of Wesfarmers
Net increase/(decrease) in cash and
cash equivalents
There has been changes in the financial results of Wesfarmers over the last tow years.
The company has significantly improved its financial outcomes in the year 2017 as compared
to the year 2016. This is largely on account of increasing ability of the company to manage its
cash resources adequately.
Interpretation
Financial Analysis
It can be stated from the analysis of the financial performance of the company over
the last two years that its profitability position has improved in the year 2017 as compared to
the previous year. The net profit ratio of the company has also improved in the year 2017
depicting that its realizing larger revenue growth and have improved its operational
efficiency. The return on assets ratio has also strengthened depicting the increasing ability of
the company to realize sales from asset utilization. The company is also able to achieve high
return on equity employed and also have reduced financial leverage as depicted from reduced
debt-equity ratio in the year 2017 as compared to the year 2016. Also, there is increase in its
liquid asset resources for meeting the financial liabilities in the respective year. Therefore, it
can be stated from the overall financial analysis of Wesfarmers that it is performing
financially sound (Wesfarmers Limited: Annual Report, 2017).
Resource B
Non-Financial Information
The core business areas of Wesfarmers Pty Ltd are supermarkets, liquor, hotels,
convenience stores, home improvement, office supplies and department stores. It is also
having industrial divisions in business areas of chemicals, energy, fertilizers, safety products
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