Financial and Sustainability Analysis of Westfarmers Company

Running head: MASTERS OF ACCOUNTING
Masters of Accounting
Name of the Student:
Name of the University:
Author’s Note:

1MASTERS OF ACCOUNTING
Table of Contents
In Response to Question 1..........................................................................................................2
In Response to Question 2..........................................................................................................8
In Response to Question 3........................................................................................................11
Reference..................................................................................................................................12
Bibliography.............................................................................................................................15

2MASTERS OF ACCOUNTING
In Response to Question 1
The financial analysis of the Westfarmers Company was done in order to review the
financial overview and performance of the company. The financial performance of the
company has been impressive as the earnings of the company and the return created for the
stakeholders for the company has been impressive or the company. The use of ratio analysis
was done in order to review the company’s financial position and performance. The key
ratio’s analysed as a prospect for the same were current ratio, quick ratio, cash flow, asset
turnover, percentage return on equity and net profit margin. The key financial data taken for
the financial performance was for the financial year 2015-16 and 2016-17. The performance
of the company has been shown with the help of the trend analysis among the financial year
(Almamy, Aston and Ngwa 2016).
The current ratio for the company states about the potential of the company in
order to fulfil the current obligations/liabilities of the company. The formula for the current
ratio is Current Ratio = Current Assets/Current Liabilities. The current ratio for the company
is around 0.93 times in both the financial year under the trend period taken. The company
should focus more on increasing its current assets of the company in order to service its
obligations and remain liquidity in the daily operations of the business (Katsouras, et al.
2015).
Figure 1: Current Ratio
2016-17 2015-16
0.93
0.93
0.93
Current Ratio

3MASTERS OF ACCOUNTING
(Source: Wesfarmers.com.au 2018)
The Quick ratio is also called the acid test ratio and is an important source for determining
the liquidity of the company. The formula for the Quick Ratio is (Marketable securities+
Cash+ Trade Receivable)/Current Liabilities. The Quick ratio for the company is around 0.41
times in the year 2017, while the same was around 0.32 times in the year 2016 this shows that
the liquid assets of the company such as cash and trade receivables of the company has
increased substantially (Yu et al. 2014).
Figure 2: Quick Ratio
(Source: Wesfarmers.com.au 2018)
The cash flow ratio for the company Westfarmers has shown a significant amount of increase
from the year 2015-16 to 2016-17. The formula for the Cash flow ratio is Cash Flow Ratio:
Cash Flow from Operations/Current Liabilities. The ratio for the company showed an
improvement from 0.32 times to 0.41 times. This shows the company has a sufficient amount
of cash flowing from the operating source of their business to cater/service the current
liabilities of the company (Rahman and Rahman 2017).
2016-17 2015-16
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
0.45
Quick Ratio