Financial Statement and Investment Analysis of Westfield Corporation

This report analyses the financial performance and financial position of Westfield Corporation through analysing its annual report and key financial ratio for the year 2014, 2015 and 2016. It discusses the core activities of the company, major changes in the financial performance, key financial ratios, overall assessment and future prospects.

Running head: FINANCIAL STATEMENT AND INVESTMENT ANALYSIS
Subject name - Financial statement and investment analysis
Subject code –
Case topic –
Name of the student –
Student ID –
Name of the university –
Date of submission –
Author note

1FINANCIAL STATEMENT AND INVESTMENT ANALYSIS
Table of Contents
Executive summary....................................................................................................................2
Introduction................................................................................................................................3
Discussion..................................................................................................................................3
Core business activities..........................................................................................................3
Major changes in the financial performance..........................................................................4
Key financial ratios................................................................................................................4
Overall assessment and future prospects................................................................................7
Conclusion..................................................................................................................................8
Reference....................................................................................................................................9

2FINANCIAL STATEMENT AND INVESTMENT ANALYSIS
Executive summary
The main objective of the report is to analyse the financial performance and financial position
of Westfield Corporation through analysing its annual report and key financial ratio for the
year 2014, 2015 and 2016. The report will discuss about the core activities of the company
and will go through the managing director’s report for finding out any major changes in the
financial performances. Further, the report will state regarding the future prospects of the
company.

3FINANCIAL STATEMENT AND INVESTMENT ANALYSIS
Introduction
Westfield Corporation is the public listed Australian company that is consisted of
America Management Limited and Westfield Corporation Limited. The company operates in
United States, United Kingdom and Australia and have it’s headquarter in Sydney. The
company was resultant restructure where the company was segregated into international and
domestic operations (Westfield.com 2018).
Discussion
Core business activities
Westfield Corporation operates and owns number of retail shopping centres. At present the
company has 34 shopping centres in Europe, United Kingdom and United States. It provides
various services –
 Leases to the retailers
 Brand ventures that deliver marketing services to the entities those are involved in
using event spaces within Westfield shopping centres.
 Leases to the common operators area like fast food and café franchises
Apart from the above the company is engaged in providing services to labs division,
development of digital technology that is designed to connect the digital media with the
physical shopping space in better way. The company further operates in the airports all over
United States (Ibisworld.com.au 2018).
Further, the company’s recent international development includes –
 Italy – Joint venture with the company named Gruppo Stilo
 New York – the Westfield Trade Centre

4FINANCIAL STATEMENT AND INVESTMENT ANALYSIS
 California – Los Angeles – Westfield Valley Fair, Westfield UTC Phase 2, Westfield
Topanga and Century City.
 London – Westfield London Phase 2 and £ 1 billion joint ventures with the
Hammerson.
Major changes in the financial performance
As per the review of managing director of the company the year 2016 was significant
as it experienced the transformation of company’s assets into the global portfolio for
shopping centres. Owing to this, the company was able to gain an amount of $ 1 billion from
revaluation. Further, the group reported $ 700.4 million FFO earnings for the closing of the
year 2016.
Key financial ratios
Ratio Formula 2016 2015 2014 Interpretation
Profitabilit
y ratio
Net profit
margin
Net profit/Sales * 100 121.69
%
181.89% -26.26% Net profit margin determines
the amount left with the
company after paying all the
expenses from sales revenue.
Owing to property revaluation
gain and tax credit the
company’s net profit for 2015
and 2016 was more than its
revenue (Amba 2014).
However, for the year ended
2014 the company could not
generate positive income.
Return on
Asset
Net profit/Total
assets * 100
7.28% 13.21% -1.23% Return on assets (ROA)
indicates the ability of the
company to generate income

5FINANCIAL STATEMENT AND INVESTMENT ANALYSIS
through deploying its assets.
ROA is used to compare the
profitability position of various
companies in the same industry
or to compare the performance
of any company with the
previous year’s performance
(Heikal, Khaddafi and Ummah
2014). ROA of the company
reduced from 13.21% to 7.28%
over the years from 215 to
2016. However, as the
company was not able to
generate any positive income
during 2014 the ROA for the
same period is in negative.
Stability
ratio
Debt to asset
ratio
Total liabilities / total
asset
0.49 0.47 0.56 Debt to asset ratio indicates
measures the proportion of
asset financed through debt.
Generally, low debt to asset
ratio indicates that the company
is lower leveraged and is
capable of arranging finance
through other source like equity
(Babalola and Abiola 2013). It
is identified that the debt to
asset ratio of the company is in
reducing trend. it indicates that
the leverage position of the
company is strong.

6FINANCIAL STATEMENT AND INVESTMENT ANALYSIS
Debt equity
ratio
Total liabilities / total
equity
0.95 0.89 1.26 Debt equity ratio states the
composition of the company’s
capital structure that is
percentage of debt and
percentage of equity. Generally
the lower percentage of debt is
preferred as large portion of
debt will overburden the
company with interest
obligation. However, the
reducing trend of debt equity
ratio over the period from 2014
to 2016 is indicating that the
company is improving its
gearing position.
Liquidity
ratio
Current ratio Current assets /
Current liabilities
0.40 1.80 0.97 Current ratio is used to measure
the liquidity position of the
company. It determines
whether the company is able to
meet its short term obligation
when they become due with the
short term assets (Ehiedu
2014). It can be observed that
though the current ratio
increased from 0.97 to 1.80
over the years from 2014 to
2015, it fell significantly to
0.40 in 2016.
Quick ratio (Current assets -
inventories) / current
0.37 1.77 0.84 Like current ratio, quick ratio is
also used as liquidity metric.

7FINANCIAL STATEMENT AND INVESTMENT ANALYSIS
liabilities The only difference is that it
does not consider most liquid
assets like inventories as the
inventories generally take some
times to get converted into cash
(Vogel 2014). It can be
observed that though the quick
ratio increased from 0.84 to
1.77 over the years from 2014
to 2015, it fell significantly to
0.37 in 2016.
Efficiency
ratio
Account
receivable
ratio
Sales / average
receivables
35.98 14.72 1.37 Account receivable ratio
determines the number of times
in a year the company can
collect its dues from the debtors
(Brigham et al. 2016). As the
ratio has been increased from
1.37 to 35.98 times it can be
stated that the efficiency of the
company has been increased
significantly.
Overall assessment and future prospects
Regulations and laws applicable to the company are complied by the company with
regard to its development, operations management activities and construction. Recent earning
of the company as announced by the company revealed that it gained an earnings growth of
13.55% through robust tailwind. However, the outlook for future years for the company is

8FINANCIAL STATEMENT AND INVESTMENT ANALYSIS
pessimistic with decline in earnings by 53.33%. Moreover, the earnings are expected to
decline significantly further by the year 2020 (Clark 2018).
Conclusion
From the above details it can be concluded that return on the assets for the company
has been significantly reduced in 2016 as compared to 2015. Further, the significant fall in
liquid ratios like current ratio and quick ratio is indicating that the company’s ability to meet
the short-term obligation is deteriorating. Therefore, it is recommended that the company
shall pay off its short-term obligation to improve the liquidity position. Further, it shall
control its operating expenses, wherever possible to improve the profitability position.

9FINANCIAL STATEMENT AND INVESTMENT ANALYSIS
Reference
Amba, S.M., 2014. Corporate governance and firms’ financial performance. Journal of
Academic and Business Ethics, 8(1).
Babalola, Y.A. and Abiola, F.R., 2013. Financial ratio analysis of firms: A tool for decision
making. International journal of management sciences, 1(4), pp.132-137.
Brigham, E.F., Ehrhardt, M.C., Nason, R.R. and Gessaroli, J., 2016. Financial Managment:
Theory And Practice, Canadian Edition. Nelson Education.
Clark, S., 2018. What Are Analysts Saying About Westfield Corporation’s (ASX:WFD)
Long Term Outlook?. [online] Simply Wall St. Available at:
https://simplywall.st/stocks/au/real-estate/asx-wfd/westfield-shares/news/what-are-analysts-
saying-about-westfield-corporations-asxwfd-long-term-outlook/ [Accessed 24 Jul. 2018].
Ehiedu, V.C., 2014. The impact of liquidity on profitability of some selected companies: the
financial statement analysis (FSA) approach. Research Journal of Finance and
Accounting, 5(5), pp.81-90.
Heikal, M., Khaddafi, M. and Ummah, A., 2014. Influence analysis of return on assets
(ROA), return on equity (ROE), net profit margin (NPM), debt to equity ratio (DER), and
current ratio (CR), against corporate profit growth in automotive in Indonesia Stock
Exchange. International Journal of Academic Research in Business and Social
Sciences, 4(12), p.101.
Ibisworld.com.au., 2018. Westfield Corporation - Retail . [online] Available at:
https://www.ibisworld.com.au/australian-company-research-reports/rental-hiring-real-estate-
services/westfield-corporation-company.html [Accessed 24 Jul. 2018].

10FINANCIAL STATEMENT AND INVESTMENT ANALYSIS
Vogel, H.L., 2014. Entertainment industry economics: A guide for financial analysis.
Cambridge University Press.
Westfield.com. 2018. Westfield - United States. [online] Available at:
https://www.westfield.com/ [Accessed 24 Jul. 2018].