Corporate Financial Report Analysis: Wesfarmers Company

This report analyzes the corporate financial reports of Wesfarmers, a conglomerate company. It examines the company's annual reports, focusing on financial performance, including revenue, costs, and profitability, with key metrics like profitability, liquidity, activity, and leverage position. The report discusses the revaluation of assets, auditor's reports, and recommendations for improvement, such as leveraging technology and strategic management. The analysis includes profit and loss statements, retained earnings, and financial summaries, adhering to Australian Accounting Standards and Corporations Act 2001. The report highlights the importance of financial statements for stakeholders and investors, the impact of accounting transactions, and the company's financial position and performance in retail, chemicals, fertilizers, coal mining, and other industrial products. The report also analyzes the sales, cost of sales, and operational costs, and provides suggestions regarding the hedging activities and tax reforms.

Running head: CORPORATE FINANCIAL REPORTS
Corporate Finance
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Table of Contents
Part A...............................................................................................................................................2
Annual Report Analysis...................................................................................................................8
Part B...............................................................................................................................................8
References......................................................................................................................................11

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Part A
1) The company selected for the purpose of Analysis is the Wesfarmers Company that is
headquartered in Australia operating predominately as a conglomerate company. The
operations of the company is diverse in the field of retail, chemicals, and fertilizers, coal
mining and other industrial products. The Annual Report presented by companies are a
formal representation published on an annual basis and are being sent on to the
shareholders and various other stakeholders of the company for whom is the report
disseminated (Hussey and Ong 2017). The annual reports presented by company shows
the overall year operations and the view of company in the upcoming year in regards to
the operating and investment activities it wishes to undertake. The management of the
company prepares the annual report of the company which is cross checked by the Board
of Directors and Auditors of the company regarding the financial information presented.
The annual report of the business is distributed for the stakeholders of the business which
would be involving different individuals such as shareholders, debtors, creditors,
government so that the performance of the business is appropriately presented. It is on the
basis of these, important decisions are taken by such stakeholders. In addition to this,
financial institutions also checks the financial reports of the business in order to judge the
viability of the business in handling loans and servicing of the same. Before
disseminating the report to the Securities Exchange Commission, the Auditor of the
company verifies and cross checks the various types of information’s that are presented
in the financial statement so that the same is material and can be well taken into
consideration for the purpose of analysis by the stakeholders of the company (Munir and
Terry 2018). After the successful verification and approval from the regulatory body and

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other concerned parties the company disseminate the annual report through the Website
of the company which is easily accessible by shareholders, investors and other
stakeholders of the company. One other manner in which the management of the
company can disseminate the annual report of the business is by presenting the same in
Annual General meeting among the shareholders and other stakeholders of the business.
2) The annual report presented by the Wesfarmers Company reflecting the health of the
company in terms of financial performance and financial position to the shareholders and
various other stakeholders of the company (Lo, Ramos and Rogo 2017). The annual
report of the company contains pertinent information in regard to company that is
essential in reporting. The financial information’s presented by companies is well taken
into consideration for the purpose of evaluating the financial performance which is then
used by investors for the purpose of valuation and investment considerations. When
evaluating the investment returns the stakeholders and shareholders of the company are
able to gain meaningful data about the company in various aspects allowing them and
helping them to gain important aspects about the company. In the perspective of the
annual statement of the company it is the financial report of the company that is taken
into analysis and consideration for the purpose of valuation of shares of the company by
looking at the past historical financial ut by the performance and the future aspects about
the company. The key evaluation metrics that are used as a tool with the financial data is
the various aspects of profitability, liquidity, activity and leverage position of the
company giving the investors a better idea about the ongoing activities of the company
(Drake, Roulstone and Thornock 2016).

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3) The annual which is prepared by the management of the company mainly presents the
financial statements of the business which depicts the performance of the business during
the period. The financial statement comprises of income statement, balance sheet and
cash flow statement which shows the performance of the business during the period
(Dumitru, Budică and Budică 2017). In addition to this, the annual report also shows
information relating to the directors and the messages of key executives of the company.
These are covered in the report of the director which is presented in the annual report of
the business. In addition to this, the annual report would also be showing the auditor’s
report for the year and also notes to the financial statements which are basically
explanations relating to the treatment of complex transactions of the business. The
presented fiscal financial report for the company also contains historical past
performances about the company in terms of the financial activities and financial
performance of the company. The report also contains a section that includes the various
achievements done by the company in terms of sales performance and cost minimization
and expansion of operations of the company in terms of market of goods and services
offered.
4) The annual report of the business of Wesfarmers appropriately shows the consolidation of
the financial results of different businesses in order to present the same under the head of
one business. The annual report further shows the different businesses which are working
under the retail sector of the company such as Bunnings, Coles and several others. The
divisional breakup for performance is also provided in the annual report of the business
for each of the businesses along with a consolidated statement for the same. The financial
performance presented by the company is presented both in a consolidated manner and in

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a detailed manner so that the financial users of the company are able to better introspect
and analyze the financial performance of the company. Thus it can be said that the
management of the company presents the financial performance of the business in a
consolidated manner.
5) Wesfarmers currently has reported revaluations of the two key assets namely Non-
Current Investment done by the company in the form of Investment in Associate and
Joint Ventures where the earnings contributed around $45 million of income as compared
to $55 million in the last fiscal year due to lower property revaluations. The company
also reported revaluation of the Non-Current Financial Assets which are in the form of
Cash Generation Units for the company. There were key assumptions that were made for
assessing the recoverable amounts of the Coles CGU (that almost accounts for around
77% of the Company’s Goodwill and other Intangible Assets carrying Infinite Lives as at
30th June 2018. The key factors that lead to revaluation were the changes in growth rates
and discount rates used for the purpose of valuing the assets. The changes in the target
and growth rate of Coles CGU are as follows:
6) The auditor report of the business shows that the financial statements of the business is
appropriately presented and all the regulations of Corporation Act is followed (Williams
and Dobelman 2017). The audit report of the business shows that all information is
presented in an appropriate manner in the financial statement.

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7) The management of the company appropriately sets out all the carried forward losses of
the business from previous years and the same is also shown in the financial statements
of the business.
8) The Wesfarmers Company did record details of the income and expenditure account of
the company thereby providing necessary classifications and relevant account
transactions thereby providing reasonable judgments and assumptions in contrast to the
same.

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9) The financial summaries of the business of Wesfarmers ltd shows that the business earns
appropriate revenue from the operations of the business. The profit and loss statement of
the business shows that the profitability of the business has declined. The profitability
statement of the business shows that cost of operations of the business has enhanced.
10) There are various recommendations that would be made to the management of the
company for the purpose of improving the business activity of the company and the same
can be in the form of rise in the total expenses of the company and this were in the form
of direct raw materials costs and various other operational costs that were incurred by the
company in the perspective of its operations (Robinson et al., 2015). It is recommended
that company deploys various technological factors and strategic management into
account for the purpose of improving the operations and the net margins of company.
11) There were some recommendations that were made to the company and some suggestions
regarding the hedging activities in respect to hedge the financial position of the company
and the tax reforms that otherwise would be taken by the company in order to better
reform there operations and management aspects.
12) The organization has presented and prepared the financial statements of the company in
accordance with the various statutory requirements like Australian Securities Exchange
and various other legislative body that applies to the company (Wesfarmers.com.au
2018).
Annual Report Analysis
1. The analysis for the annual report of the company was done with the help of management
review in order to increase the sales and bring sustainable growth in the operations of the
company (Williams and Dobelman 2017). During the financial analysis conducted from

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the year 2017-2018 it was well found that the sales did rise for the company but the same
came at the cost of increasing cost of sales and operations cost. The management of the
company must review the same and take necessary actions in order to reduce the same
(Corbet et al., 2019).
2. The recommendations and improvements were well observed with the help of financial
analysis performed for the company and the relevant analysis performed. The changes
expected by the company was well observed but the same came at cost of decreasing
profit margins for the company (Cucchiella and Rosa 2015).
Part B
1) Profit and Loss Statement: The profit and loss statement for the company summarizes
the revenues, costs and expenses that are incurred during the period usually during the
specified period of time. The statement shows how the company have actually transferred
the revenue of the company into net profitability and the various costs incurred in making
up that amount of profitability (Lourenço et al., 2018). The management of the company
takes various accounting transactions that were recorded and performed in the trend or
fiscal year. There are various breakdowns in terms of total revenue earned and total costs
incurred which are reported by the company in a consolidated basis but the detailed
transactions and assumptions are well presented in the footnotes of the company. The
profit and loss presented by the company were well prepared in accordance with the
Australian Accounting Standards and Corporations Act 2001 where relevant business
activities carried on by the companies were taken into account. The revenue reported by
the company in the financial year 2018 saw an increase from the last year profitability.
On the other hand there were key accounting terms used in the expenses classified for the

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company such as impairment expenses where the carrying value reported for the assets
were greater than the fair value of the assets making the company impair the financial
assets for the purpose of reflecting the true and fair value of the financial statement of the
company. Both the performance of the continued operations and discontinued operations
that were carried or discarded by the company were well taken into record while
preparing the profit and loss statement of the company.
2) Statement of Retained Earnings: The statement of retained earnings is a key financial
statement outlining the changes in the retained earnings of the company. The statement
reconciles the beginning and the ending retained earnings of the company for the
specified period of time by using and analyzing information such as net income from
other financial statements (Ball et al., 2016). The statement reflects a detailed information
about the company in terms of the retained earnings of firm, net income and the various
amounts that were distributed to the shareholders of the company in the form of
dividends. The retained earnings reflects a detailed information about the amount of
profitability that would be kept aside by the company for the purpose of reinvestment in
the business and the amount of funds that would be used by company for the purpose of
repayment to shareholders of the company. The key component that was included in the
company in the preparation of the retained earnings was the amount of profit retained by
the company for the purpose of reinvestment in the business. On the other hand,
important information’s like the measurement loss on defined benefit plans were some of
the key highlight taken into record while preparation of the retained earnings statement of
the company.

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3) Balance Sheet: The balance sheet shows the financial position of the company reflecting
the value of the assets, liabilities and the equity shareholders of the company at a
particular period or a point of time. There are various classification done in the balance
sheet of the company in both the assets and liabilities of the company in the form of
Current and Non-Current Assets/Liabilities (Ratcliffe 2018). Assets or Liabilities that are
used by the company for a shorter period of time say for a one year period of time are
classified into this head. On the other hand, assets and liabilities that are held for the
purpose of long term investments, borrowings, or till the long-term maturity of the assets
is classified into Non-Current Assets/Liabilities depending upon their nature and class.
On an overall basis the company’s balance sheet in simple terms reflects the amount it
owns and the amount it owes and as well as the amount invested by the equity
shareholders of the company. The balance sheet presented by the company included all
the relevant details from the movement in the asset position of the company, liability
position of the company along with the changes in the equity shareholders balance of the
company for the year 2018. The key accounting terms that were included in the
preparation of the financial statements were the reported intangible assets of the company
including the goodwill and patent that were reported at fair value measurement done by
the company. Derivatives included in the current asset portion of the company included
the risk exposures faced by the company in the field of currency risk and forex risk that
the company is engaged. On the other hand, in the liabilities side of the company there
were several provisions that were made by the company in both the current and non-
current liability side of the company.

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4) Cash Flow Statement: The statement of cash flows of a company reflects the changes in
the balance sheet of the reported company and the particular or stated changes in the cash
balance of the company due to various operating, investing and financing activities
carried during the financial year. The statement gives a small summary in terms of
changes in the cash and cash equivalents of a company (Del Negro and Sims 2015). The
Operating Part of the company is prepared with the help of net income earned by the
company and the various adjustment of non-cash items that were included in the Income
statement while calculating the net income of the company. The investing activities
reflects the various purchases, sales of property plant and equipment’s that were carried
out by the company in the due course of fiscal year analyzed. The cash flow statement of
the company included key items in the field of operating activities, investing activities
and financing activities that are carried on by the company for the financial year 2018.
The operating activities of the company included major cash receipts, payments made,
interest received and other borrowing costs that are included in the operating activities of
the company. The cash flow from investing activities was seen in the form of payment for
various property plant and equipment’s that were purchased by the company. The total
cash flow used in the investing activities was around -$658 and cash flow used in
financing activities was around -$3752 in the form of repayment of borrowings and
equity dividends that were paid by the company for the financial year 2018.