Comparative Analysis of Westfarmers' Financial Performance in 2015 and 2017

Introduction
It is vital for a business to compare performance between two or more financial period for the
purpose of evaluation of overall company performance which aid in better decision making.
Variances are noted in this process and the correct corrective measure taken to correct the
variances if negative or aid in appraisal of better business practices (Zakaria, 2016).
Performance between two financial periods can be compared by looking at some of the financial
statements which include the financial position statement, cash flow statements and as well as
Income statement. Ratio analysis plays a great role in comparing performance by using
information from the listed financial statements above to calculate various elements that evaluate
a firm’s performance (Kim & Im, 2017).
For example in this we are going to compare the performance of Westfarmers for the two years
2015 to 2017. This is discussed below:
1. Evaluation of the Income Statement
This statement indicates the net income and the net loss that the business experienced over a
certain period. It states the revenue (sales) and the expenses the business incurred within a given
time and period (Krishnamurthy & Warr, 2018).
For Westfarmers;
 Revenue ( in $m)
2016 65981
2017 68444
It is evident that there has been a revenue increase of $2463m (4% Increase) between the two
years. This shows that there was improvement in the revenue generated in the current year.
 Operating Expenses

Revenue in itself is not sufficient indication of performance. Expenses are the most crucial
element as they directly reduce profits a company may enjoy from the revenue generated.
(Chrobak, 2017)
Year Expenses. (In $m)
2016 64984
2017 64477
Expenses incurred have reduced by $507m (0.8%). This indicates that the firm has cut down its
variable expenses and thus chances that the profits will be high.
Generally from the income statement, after deduction of all costs, profit in 2017 is seen to be
higher than profit in 2016 as below;
Year Profit (in $m) 254.7 36.2
2016 407
2017 2873
There is an increase of profits by $2466m. This is conclusive enough to say that Westfarmers
was more profitable in 2017 and thus there were improvements in its operations. This is further
supported by the earnings per share value which is high in 2017 ($254.7m) as compared to the
one in 2016 ($36.2m).
Thus Westfarmers was more profitable in 2017 than in 2016 as far as the income statement
analysis is concerned.
2. Balance Sheet
This shows the financial position of a company as at given date. A Calculation of a number of
ratios from this financial statement as below will help us make conclusion on the whether there
was financial improvement or not between the two years as below.

i) Current Ratio
This ratio normally states a firm’s ability to pay its short term debt as and when it arises.
This is normally done by comparing the current assets and current liabilities in the balance sheet
(Sbaraglia, 2009).
Current Ratio = Current Assets / Current Liabilities.
Year Current Assets ($m) Current Liabilities ($m) Current Ratio. (As a %)
2016 9684 10424 92.9%
2017 9667 10417 92.8%
From the above calculation it can be concluded that the firm was better at meeting its current
obligations in 2017 as compared to 2016 as indicated by the current ratio difference of 0.01%.
This can further be supported by the value of cash and cash equivalents which was higher in
2017 ($ 1013m) as compared to 2016 ($611m) as stated both in the balance sheet and the cash
flow statement.
ii) Company’s Equity
The company’s equity from the balance sheet can be determined by the difference between the
values of total assets less total liabilities as below;
Equity = Total Assets – Total Liabilities.
Year Total Assets ($m) Total Liabilities ($m) Equity ($m)
2016 40783 17834 22949
2017 40115 16174 23941
As far as the Company’s Equity values reflect, there was better performance in Westfarmers in
2017 as compared to 2016 with an equity value difference of $992m.
3. The cash flow statement