Financial and Economic Interpretation of Wesfarmers Investor Report

This report provides a comprehensive financial analysis of Wesfarmers Limited, an ASX-listed company operating in Australia, New Zealand, India, Ireland, and the United Kingdom. The analysis focuses on the company's 2018 annual report, evaluating profitability, liquidity, and market ratios. Key findings include a slight decline in net profit margin, a reduced current ratio indicating potential working capital management issues, and a cash ratio suggesting the company's ability to manage its debt. The report also examines non-financial aspects, such as the Australian economic position and the retail industry's growth. The study concludes with recommendations for stakeholders, suggesting long-term investment and changes to policies and capital structure to maintain and improve the company's performance. The report uses data from the annual report and external sources like Morningstar and Focus Economics, and provides calculations, interpretations, and comparisons to prior year figures.

Financial and Economic Interpretation and
Communication

Executive summary:
An organization is always required to focus over the monetary and non monetary aspects,
information and items of the organization in order to calculate the overall presentation of the
company. The collection and evaluation over the monetary and non monetary aspects of an
organization assists the internal and external stakeholders of the business to make decision about the
organization. Wesfarmers limited has been studied in order to understand the importance of financial
and non financial information and items in an organization. The report focuses over the ratio analysis
to study to identify the financial performance of Wesfarmers and industrial and economical data of the
country has been studied to measure the non financial feat of the business. Wesfarmers limited is an
ASX listed company which mainly running its business in Australia, New Zealand, India, Ireland and
United Kingdom market. Mainly, the organization does business of retail, chemicals, industry safety
products and fertilizers. Overall monetary and non financial position of the company is quite attractive
in the Australian market.
Analysis:
Wesfarmers’s annual report (2018) has been studied to measure the financial level and non
financial aspects of the business. The study explains that various positive changes in relation to the
financial and non financial aspects have taken place in the business from 2017 in 2018. In case of
profitability ratio, it has been found that net profit margin point of the business has declined a little
because of the changes in capital structure and market growth of the business. The current net profit
margin of the company is 3.91%.
Further, liquidity ratio of the company is 0.87 which has been reduced to 0.93 in 2017. The
changes define about no management of working capital and higher liquidity risk level. Moreover,
cash ratio explains that business is enough able to manage the cost of debt of the industry. The interest
coverage ratio of the business has been improved to 18.07. Lastly, the market ratio of the company
has been calculated and found that EPS of the company is 1.06 which has been reduced from previous
year (Morningstar, 2019).
Ratio Calculations 2017 2018
(Amt in
$'000 )
(Amt in
$'000 )
Profitability Ratios: 2017 2018
Net profit margin %
Net profit / 2,873,000 2,604,000
Sales Revenue % 68,015,000 66,594,000
Answer: 4.22% 3.91%
Cash ratios 2017 2018
Interest Coverage Ratio
EBIT / 3,587,000 3,813,000
Net Finance Costs (used net interest
expense) 264,000 211,000
Answer: times p.a
13.5
9
18.0
7
Liquidity Ratios 2017 2018
Current Ratio
Current Assets / 9,667,000 8,706,000
Current liabilities 10,417,00 10,025,00

0 0
Answer: 0.93 0.87
Market ratios 2017 2018
Earnings per share
Net income / 2,873,000 1,197,000
Weighted average shares 1,128,000 1,131,000
Answer: % 2.55 1.06
(Morningstar, 2019)
Interpretation:
Annual report (2018) explains about reduction in the financial position and performance of
the business. The changes into net profit margin of the company have occurred due to the changes
into production process and new project investment by the company. Along with that, cost of sales
and other operating expenses of the company has also been improved which has affected the
profitability intensity. Further, the liquidity level of the corporation has also been reduced because of
the reduction in current assets level. It evaluates higher risk involved with the daily procedure and
cash management level of the business.
Further, the cash ratio of the business defines about better management of cost of the
business. It defines that company is enough capable to pay the cost of debt of business. Lastly, market
ratios of the company defines that EPS of the business has been reduced because of the reduction in
net income level and improvement in the outstanding shares of the company (Morningstar, 2019). The
overall performance of business defines that few changes are required to be done in the business to
improve the overall performance of the company.
Further, the non financial performance of company has been measured through focusing over
the Australian economical position. The economical position and Australian retail industry is growing
further which defines about better position of the company in the market. After the financial crisis,
various improvements have been seen in the retail industry and economical performance of the
business (Focus economics, 2018). Currently, the retail growth rate of the business has also been
improved. The study explains that the financial position of retail industry have been affected in
previous year because of which the performance of the company has been affected. Wages offered by
the company is similar to competitor, Woolworths limited. Current ownership structure of the
company is matrix where top level management makes all the decision. Employees are offered
various benefits in Wesfarmers which has been improved from previous year.
Wesfarmers main business is retailing the products. Target market of the company has been
expanded and it depicts that the overall performance of the business would be better further in near
future (Home, 2018). The forecasting over the industry and the company explains that overall
improvement would be positive in near future. Company is suggested to make few changes into the
policies and capital structure to maintain the performance (Annual report, 2018). The administration
team decided through their qualifications and overall experiences. The overall non financial factors of
the company are in favour and few changes are required to be done to improve financial factors.
Conclusion:
To conclude, overall non financial factors of the business are in favour and few changes are
required to be done to improve financial factors. It is recommended to the stakeholders of the business
to make long term speculation in the business. It would present higher growth to the business.

References list:
Annual Report. 2018. Wesfarmers limited. (online). Available at:
https://www.wesfarmers.com.au/docs/default-source/asx-announcements/2018-annual-
report.pdf?sfvrsn=0 (accessed 3/6/18).
Focus economics. 2019. Australia economic outlook. (online). Available at: https://www.focus-
economics.com/countries/australia (accessed 3/6/18).
Home. 2019. Wesfarmers Limited. (online). Available at: https://www.wesfarmers.com.au/
(accessed 3/6/18).
Morningstar. 2019. Wesfarmers Limited. (online). Available at:
https://financials.morningstar.com/income-statement/is.html?
t=0P00006X1T&culture=en&ops=clear (accessed 3/6/18).