Financial Analysis Report: Wesfarmers Performance Analysis - MBA403

This financial analysis report examines the performance of Wesfarmers Limited, an Australian company listed on the ASX, focusing on its financial and non-financial aspects. The report includes an executive summary, analysis, interpretation, and conclusion with recommendations. Ratio analysis, including operating profit, asset turnover, current ratio, debt-to-equity ratio, and dividend yield, is used to evaluate financial performance. The analysis indicates positive trends in profitability, efficiency, liquidity, and market value. Non-financial information, such as the company's history, business segments (Bunnings, Kmart, Target, Officeworks), workforce size, and sustainability initiatives, is also considered. The report concludes that Wesfarmers demonstrates strong financial health and growth potential, making it a suitable investment opportunity. The analysis highlights the company's ethical and sustainable management practices and strategic actions towards stakeholders.

Running Head: FINANCIAL AND ECONOMIC INTERPRETATION AND
COMMUNICATION
FINANCIAL AND ECONOMIC INTERPRETATION AND COMMUNICATION
Name of the Student
Name of the University
Author Note

1FINANCIAL AND ECONOMIC INTERPRETATION AND COMMUNICATION
Table of Contents
Executive Summary...................................................................................................................2
Analysis......................................................................................................................................3
Interpretation..............................................................................................................................3
Conclusion & Recommendations...............................................................................................5
Reference....................................................................................................................................7

2FINANCIAL AND ECONOMIC INTERPRETATION AND COMMUNICATION
Executive Summary
Financial analysis is the most used tools used for evaluating business, budgets,
projects as well as other finance related aspects for determining their suitability as well as
performances. Moreover, Wesfarmers limited is the Australian company in the sector of
consumer discretionary sector, which is listed on the indices of ASX. The company is in
different business operations, for instance hotels, convenience stores, supermarkets, office
supplies, home improvements as well as industrial divisions with the business in the energy
and fertilizers, chemical, coal and industrial and safety products (Wesfarmers.com.au. 2019).
Hence, this report includes analysis as well as interpretations of financial performance of
company with financial and non-financial performances of Wesfarmers Limited.

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Analysis
Operating Profit Margin 2019 2018
Operating Profit 2974 2344
Revenue 27920 26763
Result 0.11 0.09
Current Ratio 2019 2018
Current Assets 6350 8706
Current Liabilities 5216 10025
Result 1.22 0.87
Assets Turnover 2019 2018
Revenue 27920 26763
Total Assets 18333 36933
Result 152% 72%
Debt Equity Ratio 2019 2018
Long Term Debt 3146 4154
Equity 9971 22754
Result 0.32 0.18
Dividend Yield Ratio 2019 2018
Dividend 3628 2528
Market Share Price 35.42 36.16
Result 102.43 69.91
Wesfarmers Limited
Figure: Ratio Analysis
Interpretation
Financial Information
The company’s financial performance is interpreted by of ratio analysis. The
operating profit is calculated to show the profitability of company. Operating profit of
company for year 2018 was 0.09 and for 2019 is 0.11. This means the ratio has been increase
of 0.02. It indicates that the percentage of company’s earning has increased over last year.
Further, assets turnover is calculated to show efficiency of the company. The asset turnover
of the company for year 2018 was 72% and for the year 2019 is 152%. This mean the ratio

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has been increased by 80%. It indicates increased efficiency of company in utilizing its assets
for generating sales (Przychodzen and Przychodzen 2015). Moreover, current ratio is
calculated to show liquidity position of company. In 2018, current ratio of company was 0.87
and in 2019 is 1.22. This means there is increase in the ratio by 0.35. It indicates that
company’s ability for meeting its short-term liabilities has been improved over last year. In
addition, debt to equity ratio is calculated to show financial leverage position of the company
(Muhammad et al. 2015). The debt equity ratio in 2018 was 0.18 and in 2019 is 0.32. This
means that the ratio has increased by 0.14. It indicates that company has increased its usage
of long-term debt as compare to equity. Lastly, dividend yield ratio is calculated to show
market value of company. In 2018, dividend yield ratio was 69.91 and in 2019 is 102.43. This
means that the ratio has increased by 32.52. It indicates that cash flows from dividends or the
value of assets has increased over last year. Hence, these ratios indicate that the financial
performance of the company has been increased over last year (Wesfarmers.com.au. 2019).
Non-Financial Information
Wesfarmers was founded in year 1914 as the cooperative association by the Western
Australian farmers. It is one of the most recognized as well as well-known organization
around the world. Wesfarmers headquarter is in Perth of Western Australia. It operates in
different varieties of the business activities, which includes production of coal, chemicals,
grocery stores, home improvement products, office supplies, exports as well as security and
mechanical items (Matar and Eneizan 2018). The segment of the company includes
departmental stores, home improvement, industrials that include resources, WesCEF and
WIS as well as others. Moreover, Bunnings is the home improvement as well as outdoor
living products retailer in Australia and New Zealand. Further, Kmart is the retailer with
approx 210 stores all through New Zealand and Australia. Target is operating network of
approx. 300 stores as well as sells wide ranges of products such as home wares, apparel and

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general merchandise (Baños-Caballero, García-Teruel and Martínez-Solano 2014). In
addition, Office works is the supplier and retailer of the office products as well as solutions
for education, business and home. The interest is hold by the company in Mt Holland Lithium
project that is based in the Western Australia. Wesfarmers is having great number of
workforce, which includes approx 205,000 employees (Edwards 2014).
The company has seen strong financial results in 2019 with execution of the
significant change of portfolio for repositioning Group for growth of future, demerger of the
Coles from Group in 2018 as well as increased distributions to the shareholders that includes
payments of the special dividend. Wesfarmers has not changed fixed annual remuneration
structure of Group managing director and non-executive director. The board committee has
adopts principle that the executive of the company should not be afforded any of the undue
benefits or any detrimental as the result of demerger (Rensburg and Botha 2014). Further,
Wesfarmers perceives sustainability as critical aspects, board level, strategic as well as
strategic issues. The management of the company is responsible for the assessment as well as
managing the sustainability risks as well as opportunities and the board of Wesfarmers and
divisional boards have the oversights of risks and the opportunities (Mwangi, Makau and
Kosimbei 2014). Moreover, the ratio of independent to dependent directors of the company is
10: 4.
Conclusion & Recommendations
Therefore, this report concludes that the company is exceptionally doing well in terms
of profitability, liquidity, solvency, efficiency and market potential. It has been analyzed that
the over 2018, the company’s financial performance has increased in good percentage, which
indicates great potential of the company for the long-term growth. Moreover, the non-
financial performance indicator shows that company’s management havie great potential to

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manage the company in ethical and sustainable way with the help of their strategic actions
towards the business operations and towards their stakeholders.
Hence, investors should invest in the company because the company is having great
potential for the growth of their company as well as increasing the value of the shares for
their shareholders. The company will give good return, if investors will make invest in the
company’s shares. It can be analyzed from indicators of the financial and the non-financial
information that trend of the company’s performance is increasing over last year.

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Reference
Baños-Caballero, S., García-Teruel, P.J. and Martínez-Solano, P., 2014. Working capital
management, corporate performance, and financial constraints. Journal of Business
Research, 67(3), pp.332-338.
Edwards, D., 2014. The link between company environmental and financial performance
(Routledge Revivals). Routledge.
Matar, A. and Eneizan, B.M., 2018. Determinants of financial performance in the industrial
firms: Evidence from Jordan. Asian Journal of Agricultural Extension, Economics &
Sociology, pp.1-10.
Muhammad, N., Scrimgeour, F., Reddy, K. and Abidin, S., 2015. The relationship between
environmental performance and financial performance in periods of growth and contraction:
Evidence from Australian publicly listed companies. Journal of Cleaner Production, 102,
pp.324-332.
Mwangi, L.W., Makau, M.S. and Kosimbei, G., 2014. Relationship between capital structure
and performance of non-financial companies listed in the Nairobi Securities Exchange,
Kenya. Global Journal of Contemporary Research in Accounting, Auditing and Business
Ethics, 1(2), pp.72-90.
Przychodzen, J. and Przychodzen, W., 2015. Relationships between eco-innovation and
financial performance–evidence from publicly traded companies in Poland and
Hungary. Journal of Cleaner Production, 90, pp.253-263.
Rensburg, R. and Botha, E., 2014. Is integrated reporting the silver bullet of financial
communication? A stakeholder perspective from South Africa. Public Relations
Review, 40(2), pp.144-152.

8FINANCIAL AND ECONOMIC INTERPRETATION AND COMMUNICATION
Wesfarmers.com.au. 2019. [online] Available at:
https://www.wesfarmers.com.au/docs/default-source/asx-announcements/2019-annual-
report.pdf?sfvrsn=0 [Accessed 5 Oct. 2019].