Assignment on Wesfarmers Limited

Running head: Wesfarmers Limited 1
Wesfarmers Limited

Wesfarmers Limited
Executive Summary
Wesfarmers is one of the most trusted brands of Australia in retail business and in this report a
detailed analysis of the financial statements has been carried out to understand the performance
with respect to each area. The ratio analysis techniques have been implemented individually for
the period of 5 years as well as alongside one of the most competitive company Wal-Mart. Each
are has been scrutinized carefully and Wesfarmers is a good buy from the point of view of the
investors and the shareholders due to higher return on equity. The entire report answers
Wesfarmers to be a good buy for short term duration and adopt strategies and recommendations
to hold shares for longer duration.

Wesfarmers Limited
Contents
Executive Summary................................................................................................... 2
Part 1: Analysis of Wesfarmers............................................................................................ 4
Wesfarmers Limited Overview......................................................................................... 4
Ratio Analysis............................................................................................................. 4
Profitability.............................................................................................................. 4
Liquidity................................................................................................................. 5
Efficiency................................................................................................................ 5
Capital Structure....................................................................................................... 6
Du Pont Analysis.......................................................................................................... 7
Peer Comparisons......................................................................................................... 8
Recommendations and Conclusions.................................................................................11
Part 2: Reflection........................................................................................................... 11
References............................................................................................................... 13

Wesfarmers Limited
Part 1: Analysis of Wesfarmers
Wesfarmers Limited Overview
Wesfarmers Limited is an Australian Conglomerate, founded in the year 1914 having its
headquarters in Perth, Western Australia. The prime activity in which the company is engaged is
retail business, chemicals, coal mining, safety and industrial products. As per the current
financial year, the revenue of the company is $1940 and as per the recent count there are 223000
employees (Wesfarmers, 2019).
Ratio Analysis
Ratio analysis is a technique or a methodology that has been used by the companies to get an
insight of the yearly performance or against the peer groups. The ratio analysis is undertaken for
Wesfarmers Limited in this report and the 5 year financial analysis is undertaken of each
category. The categories are bifurcated as the liquidity, profitability, solvency as well as
efficiency (Schroeder, Clark and Cathey, 2019).
Profitability
Under the category of the profitability analysis, the return on equity has been calculated as the
major ratio to identify the position of the business. The return on equity is a metric that is used to
define how much return has been allocated to the shareholders after all the distributions. The
return on Equity of Wesfarmers Limited has been on the increasing front. Earlier in the year
2015, the ROE was 9.85% but thereafter the ratio fell down due to drastic fall in the profits of the
company. Further, the ratio picked up the pace and reached to 19.46% in the year 2019. This
implies the company has increased the value for the shareholders by balancing the profits.