Operational, Financial and Managerial Performance Analysis of Wesfarmers Limited

Running head: ACCOUNTING FOR BUSINESS
Accounting for Business
Name of the Student
Name of the University
Author Note

1ACCOUNTING FOR BUSINESS
Executive summary
The discussion deals with the operational, financial and managerial performance analysis of
the chosen organisation of Wesfarmers limited which is one of the largest retail businesses in
Australia. It deals with mining, super market, petrol, chemical, fertilizers and safety products.
In order Analysis of the profitability of the chosen company of Wesfarmers of the recent two
years the profitability ratios have been calculated followed by evaluation and analysis of the
cash flow statements of the business organizations. It becomes easier to gain an
understanding of their outflows as well as the inflow. The critical analysis have been
conducted of the statement balance sheet of the firm along with the ratio analysis that
identifies the aspects of the organisations of the operating and the financial performance with
the help of various ratio the liquidity, efficiency, solvency and profitability ratio. The
discussion examines critically the annual report to find out the operational and managerial
productivity of the company.

2ACCOUNTING FOR BUSINESS
Table of Contents
Executive summary....................................................................................................................1
Introduction................................................................................................................................2
Discussion of the Report............................................................................................................3
Section 1.................................................................................................................................3
Profitability analysis both company wise and year wise...................................................3
Analysis of the cash flow statement...................................................................................5
Analysis of the balance sheet.............................................................................................7
The balance sheet ratio for determining the financial positions........................................8
Section 2.................................................................................................................................9
Ratio analysis.....................................................................................................................9
Section 3...............................................................................................................................12
Directors Report analysis:................................................................................................12
Conclusion................................................................................................................................14
References................................................................................................................................15

3ACCOUNTING FOR BUSINESS
Introduction
For the purpose of analysis of the annual report the chosen company that is listed on
the Australian Stock exchange (ASX) is Wesfarmers limited which is the largest retail
business in Australia. It deals with the super market, mining, chemical, fertilizers and safety
products. The chosen company offers stable cash flows and comparatively low risks and it
facilitates payment to the investors along with the potential long-term growth. It seeks to
establish the diversified portfolio with regard to regulated utility infrastructure assets and
continuing to be in the lead position under the Australian infrastructure investment fund
(Gates, Prachyl and Sullivan 2016.). Moreover, the values upon which the company is
maintaining its growth are honesty, fairness, maximising the value of the security holder and
maintenance of the high corporate governance standards.
Discussion of the Report
Section 1
Profitability analysis both company wise and year wise
In order Analysis of the profitability of the chosen company of Wesfarmers limited of
recent two years the profitability ratios have been calculated. The two ratios gross profit ratio
and net profit ratio has been assessed (Haslam et al. 2015). The gross profit ratio of the
present year is 0.32 in 2017 which has increased from 0.30 in the year 2016, which is a very
nominal change. It can be said that there is positive change in the operational profit in the last
two years.

4ACCOUNTING FOR BUSINESS
2017 2016
0.29
0.30
0.31
0.32
Gross profit Ratio
While calculating the net profit ratio of the two years 2016 and 2017 it can be
observed that there has been significant rise in the net profit of the company of Wesfarmers
limited from 0.30 to 0.32. The percentage has changes is having a positive effect in profit
indicating a sound financial performance. This is due to the better operating profit that took
place in the year 2017(Wahlen, Baginski and Bradshaw 2014).
2017 2016
0.00
0.01
0.02
0.03
0.04
0.05
0.06
Net profit Ratio
While conducting the company wise analysis that is comparing with the competitor in
order to find out the profitability (Kraft 2014). In the present case the company of
Woolworths has been taken as the competitor. Woolworths is engaged in the retail business
in Australia similar to Wesfarmers limited in the same industry. From the analysis it can be

5ACCOUNTING FOR BUSINESS
seen that gross profit has been remained more in case of Wesfarmers limited although
showing a nominal change. The net profit ratio of Wesfarmers is more as compared to
Woolworth which is 0.05 in 2017 and Woolworths has 0.02. Therefore the profitability of
Wesfarmers is betters as compared to Woolworths.
Wes farmers Woolsworth
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
Company wise analysis in 2017
Gross profit Margin Net Profit Margin
The below table shows the profitability analysis of Wes farmersin last years with its
competitor Woolworths
Wes
farmers Woolworths
Balance sheet 2017 2016 2017 2016
Gross profit
Margin
Operating
Income
2,16,70,00
0 2,00,51,000 1,59,28,900
1,51,25,10
0
Revenue
6,84,44,00
0 6,59,81,000 5,56,68,600
5,36,63,70
0
Ratio 0.32 0.30 0.29 0.28
Net Profit
Margin
Net Income 28,73,000 4,07,000 15,33,500 -12,34,800
Revenue 5,56,68,60 5,36,63,700 6,84,44,000 6,59,81,00