Comprehensive Financial Management Report: Wesfarmers Limited

This report provides a comprehensive analysis of Wesfarmers Limited's financial management practices. It begins with an overview of the company's various business operations, including retail, chemicals, and mining, emphasizing the importance of effective financial management in a dynamic environment. The report delves into the company's financial performance through vertical and horizontal analysis, examining key financial statements such as the balance sheet and income statement, and comparing data across different quarters and years. It explores the reasons behind profit and loss fluctuations, including the impact of seasonal demand and inflation, and discusses the significance of key dates like the annual general meeting. The report also includes a cash flow analysis, comparing trends and evaluating the impact of investing and financing activities. Additionally, it covers statutory compliance, taxes, and the suitability of the current accounting software, MYOB, suggesting a switch to SAP ERP for better integration. The report also examines resource allocation, the inclusion of new items in budgets, and the overall financial planning processes within Wesfarmers. Overall, the report aims to provide insights into Wesfarmers' financial health, management strategies, and areas for improvement.

Manage Finances

Table of Contents
INTRODUCTION...........................................................................................................................1
Overview about company:...............................................................................................................1
Activity 1A...................................................................................................................................1
Activity 1B...................................................................................................................................2
Activity 1C...................................................................................................................................2
Activity 1E...................................................................................................................................2
Activity 1F...................................................................................................................................2
Activity 2A...................................................................................................................................3
Activity 2B...................................................................................................................................3
Activity 2C...................................................................................................................................3
Activity 3A...................................................................................................................................4
Activity 3B...................................................................................................................................4
Activity 3C...................................................................................................................................4
Activity 4A...................................................................................................................................5
Activity 4B...................................................................................................................................5
Activity 4C...................................................................................................................................5
Activity 4D...................................................................................................................................5
SKILLS AND KNOWLEDGE ACTIVITY....................................................................................6
MAJOR ACTIVITY......................................................................................................................12
Plan for financial management..................................................................................................12
Establish budgets and allocate funds.........................................................................................13
Report on the business’ finances................................................................................................16
CONCLUSION..............................................................................................................................16
REFERENCES .............................................................................................................................18

INTRODUCTION
In present scenario, it is very crucial to manage money and finance related objects that
help to survive in dynamic environment and sustain for long. Managing finance is a systematic
approach that support in tracking expenses (Archer, 2012). Investing, budgeting, banking and
evaluating taxes of money so that meaning full decision are taken for improvement. Finance
management is a important method to form money produce the advanced interest output worth
for any amount spent within specific time frame. To better understand the context the managing
finance Wesfarmers has been selected. It is an Australian company that is engaged in various
business operations so there it is essential to manage finance for manager.
In this topic, review and analysis of previous financial data, reasons for previous profit
and loss, various resources, requirement for compliance and liabilities foe tax, review about
existing software is discussed. Report also shows allocation for resources, estimates of new items
for inclusion in budgets, prepare budget for requirement and statutory needs, circulate budgets
and ensure managers to take decision, manage risk by checking opportunities for misappropriate
of funds, review of profit and loss statements. Apart this, proper structure and reports, significant
issues in statements, prepare recommendations have been discussed.
Overview about company:
Wesfarmers Limited is Australian company which has its headquarter in Perth, Western
Australia and it also cooperate business in New Zealand (About Wesfarmers, 2018). Company
deals in retail, fertilisers, chemicals, coal mining and industrial and safety products. The
Farmers’ and other settler association of Western Australia established respective firm in 1914 as
a cooperative company. It has different business operation such as home improvement, outdoor
living, general and apparel merchandise, office equipments and also industrial sections fertilisers
and energy product, chemicals and safety products.
Activity 1A
In retail area in Wesfarmers Limited is most significant business area because company
generates highest income through this area. To determine performance in retail department,
vertical and horizontal analysis along with past data of company is most appropriate. It is very
important for every organisation to compare present financial data with past data because it helps
to take better decision to run a business by comparison. As per reported in P&L of company, net
income available for shareholder is $2440million in last quarter of year 2018 whereas it was

$1197 million in first quarter which indicates that company's efficiency to generate income is
increased as compare to past quarter data. In second and third quarter company has reported net
income of 2873 million and 407 million which clearly indicates that in third quarter company's
net income is lowest.
(All numbers in thousands)
Balance sheet
Period ending 31/12/2018 30/9/2018 30/6/2018 31/3/2018
Current assets
Cash and cash equivalents 2,04,900.00 3,07,350.00 5,12,250.00 6,83,000.00
Short-term investments 0.00 0.00 0.00 0.00
Net receivables 4,97,100.00 7,45,650.00 12,42,750.00 16,57,000.00
Inventory 18,03,300.00 27,04,950.00 45,08,250.00 60,11,000.00
Other current assets 1,06,500.00 1,59,750.00 2,66,250.00 3,55,000.00
Total current assets 26,11,800.00 39,17,700.00 65,29,500.00 87,06,000.00
Long-term investments 2,24,400.00 3,36,600.00 5,61,000.00 7,48,000.00
Property plant and equipment 25,22,400.00 37,83,600.00 63,06,000.00 84,08,000.00
Goodwill 40,47,300.00 60,70,950.00
1,01,18,250.0
0
1,34,91,000.0
0
Intangible assets 13,10,700.00 19,66,050.00 32,76,750.00 43,69,000.00
Other assets 3,63,300.00 5,44,950.00 9,08,250.00 12,11,000.00
Deferred long-term asset charges 2,07,600.00 3,11,400.00 5,19,000.00 6,92,000.00
Total assets
1,10,79,900.0
0
1,66,19,850.0
0
2,76,99,750.0
0
3,69,33,000.0
0
Current liabilities
Accounts payable 19,62,300.00 29,43,450.00 49,05,750.00 65,41,000.00
Short/current long-term debt 3,47,700.00 5,21,550.00 8,69,250.00 11,59,000.00
Other current liabilities 2,67,000.00 4,00,500.00 6,67,500.00 8,90,000.00
Total current liabilities 30,07,500.00 45,11,250.00 75,18,750.00
1,00,25,000.0
0
Long-term debt 8,89,500.00 13,34,250.00 22,23,750.00 29,65,000.00
Other liabilities 3,56,700.00 5,35,050.00 8,91,750.00 11,89,000.00

Total liabilities 42,53,700.00 63,80,550.00
1,06,34,250.0
0
1,41,79,000.0
0
Stockholders' equity
Common stock 66,83,100.00
1,00,24,650.0
0
1,67,07,750.0
0
2,22,77,000.0
0
Retained earnings 52,800.00 79,200.00 1,32,000.00 1,76,000.00
Treasury stock 90,300.00 1,35,450.00 2,25,750.00 3,01,000.00
Capital surplus 0.00 0.00 0.00 0.00
Other stockholder equity 90,300.00 1,35,450.00 2,25,750.00 3,01,000.00
Total stockholder equity 68,26,200.00
1,02,39,300.0
0
1,70,65,500.0
0
2,27,54,000.0
0
Net tangible assets 14,68,200.00 22,02,300.00 36,70,500.00 48,94,000.00
Income Statement
Revenue 30/06/18 30/06/17 30/06/16 30/06/15
Total revenue 66883000 64913000 65981000 62447000
Cost of revenue 46123000 45033000 45930000 43424000
Gross profit 20760000 19880000 20051000 19023000
Operating expenses
Selling general and administrative 13108000 12485000 12884000 11854000
Others 2352000 2432000 2702000 2562000
Total operating expenses 62781000 61125000 62812000 59059000
Operating income or loss 4102000 3788000 3169000 3388000
Income from continuing operations
Total other income/expenses net -252000 141000 -2131000 56000
Earnings before interest and taxes 4102000 3788000 3169000 3388000
Interest expense -186000 -219000 -266000 -271000
Income before tax 3850000 3929000 1038000 3444000
Income tax expense 1246000 1169000 631000 1004000
Net income from continuing 2604000 2760000 407000 2440000

operations
Non-recurring events
Discontinued operations -1407000 113000 113000 113000
Net income 1197000 2873000 407000 2440000
Net income applicable to
common shares 1197000 2873000 407000 2440000

Activity 1B
In order to review the main reason of profit and loss, organisation conducts analysis of to
evaluate the these reasons by covering all financial and non-financial aspects. Ratio analysis,
cash flow analysis, trend analysis etc. plays significant role to review the main reason of any
variation in profit and causes behind loss if any. For knowing profit and loss a company should
research and analysis the previous profit and loss and need to make further finance budgets that
helps to give suggestion in which department a firm should invest in order to make profits. In
company's context as per above data of income statements in Wesfarmers Ltd. Due to low
demand of company's products in third quarter net income is decreased however this is
temporary and seasonal effect. Overall profitability condition of company is good. Beside this in
third quarter profit is decreased due to effect of inflations.
Activity 1C
In Wesfarmers Limited date of annual general meeting is critical date because company's
annual report and financial statements are presented in this meeting before shareholders. At this
date company by presenting financial statements and annual reports, get a chance to attracts new
investors and shareholders. Company also prepare strategies during whole year to get ready for
this date. Beside this for company date of quarterly performance reports are important which not
only provides assessment of real time performance but also give a chance to improve
performance before year end.
Activity 1D
Cash flow analysis is important for any company as it can be easily compared. It is
observed that cash accounting is the best practices that which help to record payments and
receipts that are reported during in the period and all the expenses are recorded on the date of
happening. While comparing it with different company the cash is prepared for both companies
will be same and easy to compare. For cash flow trend analysis Wesfarmers compares its
previous year cash flow to the current year cash flows. The comparison shows that the cash flow
from operating activities in the year 2017 was 4226 and in the year 2018 is is marked at 4080
which shows the negative trend. In the year 2018 the cash flow used in investing activities is
658 and in year 2017 it showed at 53. This year cash used in investing is more than that of last

year. Cash flow used in financing activities in the year 2017 is 3771 and in the year 2018 is 3752
in comparison to the previous year cash used in financing activities is less than the previous year.
Earning per share value is also increasing as in the year 2018 company paid the dividend of
2528. overall the company is showing a positive trend.

Activity 1E
Some statutory compliance and basic tax which are applicable to all the Australian
business are Company Tax, Payroll Tax, Goods and Services Tax(GST) and Capital Gains
Tax(CGT). Taxes which are applicable to Wesfarmers are as follows:
 Income Tax: Income tax is a tax which is levied by the government on the total earning
of the individual or a business. Income tax paid by the company is year 2018 is $1271
million as compared to the year 2017 it paid $1225 million
 Payroll Tax: Payroll tax is the tax levied on the employer who pays salary. In the year
2018 company paid the tax of $403 million
 Government Royalties: Government royalties are tax paid the company to the party
from which they have taken the copyrights to use the assets. Company paid $153 million
in the year 2018
 Local Government charges: Tax paid by the company to the local government in the
year 2018 is $15 million.
 Fringe Benefits Tax: Fringe benefits tax is paid by the company to attract the good
quality staff. In the year 2018 company paid $13 million as the fringe benefits tax.
Activity 1F
Currently the company uses the MYOB ERP accounting software for the purpose of
preparation of the financial statements. Pros and Cons of the software are as follows:
PROS CONS
This software is easy to use and helps the The software does not provide the system of

company to manage its resources easily. passing the recurring transactions.
Adding day to day transactions is very easy,
and it also have many functions and very stable
to work with.
It always need a working high speed internet
connection to use and work with the company
files.
It helps the company to manage their day to
day transaction in a very professional manner.
The cost of this software is very expensive
according to the features it provide.
Accounting software currently used by the Wesfarmers is suitable for a small business
organisation as the Company is located in different countries the company should switch to SAP
ERP software. As Sap ERP software works on HANA could computing system which helps to
integrate different modules and gives the accurate result. SAP modules include everything from
the manufacturing of the product to the selling and distribution and material management.
Activity 2A
When manager are preparing for the future activities they use to look on previous year
financial data so that proper allocation of funds can take place. For example, manager in
Wesfarmer use to distribute an amount of 150000 as a salary to their employees that was not as
per the work requirement so they use to increases the job responsibility that make more
allocating of salary to relevant employees.
Activity 2B
The new item determined by the management in Wesfarmer is a machinery that help to
purify elements used to make fertilisers. The ongoing cost are electricity expenses, rent for
premises etc. and upfront cost are new labour charges, material required that are needed for
company.
Activity 2C
There is proper need for analysing the current situation by the manager of Wesfarmer to
produce budgets by following relevant policies such as, to forecast about income and expenses,
to make decisions for future and analyse business's performance.

Activity 3A
Activity 3B
Five types of fraud staff and their prevention are:
Larceny: In order prevent this management must make sure that company property must be
copyright and patent also so employees could not misuse of property.
Skimming: In order to remove the unethical behaviour of employees manager must be able
properly keep a detail information about each property of company.
Stealing business opportunities: It is important for management to use software so that privacy
can be maintained and employees do not misuse the list of customer.
More spending of company funds: It is essential for management to make sure that allocation of
funds must be done in systematic manner that will increase the performance.
Fraudulent disbursement: In order to overcome subsequent issue it essential for manager to make
sure that bills are stored in proper manner and also check tampering.
Activity 3C
In large organisation like Wesfarmer manager use to review and analyse the ageing
summary that support to give valuable information related to accounts receivable and payable.