Wesfarmers Financial & Sustainability Report: BUACC 5930, 2018

This report provides a comprehensive analysis of Wesfarmers' financial performance between 2016 and 2017, utilizing data from their annual reports to assess improvements in financial position and profitability. It examines key financial indicators such as net profit, earnings per share, revenue a...Read More

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Question 1
Comparing Financial Results for Wesfarmers Annual Reports
Financial accounting provides important organization finance information that is required for
making sound economic decisions. Financial accounting communicates with external
stakeholders of company’s financial performance for a specific period of time (Weil, Schipper,
& Francis, 2013). All for profits organization aim to increase return on investment to achieve
maximization of shareholders’ wealth through improved financial performance (Henderson,
Peirson, Herbohn, & Howieson, 2015). Financial performance is measured by company
profitability and financial ratios (Berk et al., 2013). The following write up compares financial
results of Westfarmers group from 2016 to 2017 financial years. This will involve use of key
results to explain performance and discussion of the improvement or not in financial position
profitability.
Wesfarmers is one of the largest listed companies in Australian Securities Exchange and has it
headquarters in Western Australia. The company history dates back to 1914 when it started as a
farmers’ cooperative (Jones, Comfort, & Hillier, 2014). Wesfarmers has 515000 shareholders
and 223000 employees and operates in Australia, Ireland, New Zealand, and the United
Kingdom. The company has diverse business operations that include supermarkets, home
improvements, departmental stores, industrials, office supplies, coal, and safety products
divisions (Campbell, 2017). The Westfarmers Company is led Michael Chaney as the Chairman
and Rob Scott as the Chief Executive Officer. The Wesfarmers financial year starts on 1st July
and ends 30th June of every year.
The Wesfarmers financial performance for 2016 and 2017 financial year were recorded to have
improved compared to previous financial years. The net profit for Wesfarmers increased by
22.1% in 2017 FY amounting to $2873 million compared to 2016 FY $2353 million recorded.
The low profits in 2016 FY were attributed to high impairment charges in Target and Curragh
Company’s divisions. The Wesfarmers Company earnings per share significantly increased by
21.6% to $2.55 in 2017 FY as compared to $2.09 recorded in 2016 FY. The Company
impressive financial performance in 2017 was as a result of increased revenue to 68444 million
from 65981 million in 2016 financial year. Coles division had the highest revenue recorded for

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both financial year at $39217M in 2017 FY and $39424M in 2016 FY. The department stories
division had the second highest revenues amounting to $8528M in 2017 FY and $8646M in
2016. The Officeworks division recorded $1964M revenues in 2017 FY compared to $1851M in
2016 FY. The industrials divisions also had an increase in revenues amounting to $5161M in
2017 FY compared to $4672M in 2016 FY. The net debt decreased in 2017 FY to $4809 million
from 2016 FY net debt that accumulated to $7103 million. The Wesfarmers shareholders’ equity
amounted to $23941M in 2017 FY which was higher than 2016FY recorded at $22949M.
The Wesfarmers Company financial ratios indicated improvement in financial performance in
2017 financial year compared to 2016 financial year. The company return on average equity
increased in 2017 FY to 12% compared to 9.6% in 2016 FY. This profitability ratio shows that
the company was able to generate more returns in 2017 FY which was an improvement from
2016 FY (Kent, & Zunker, 2013). The net debt to equity ratio for Wesfarmers Company reduced
to 20.1% in 2017 FY from 31% in 2016 FY. This gearing ratio shows that the company’s portion
financed by debts reduced hence reducing leverage risk of the company (Schaltegger, & Burritt,
2017). The return on capital for each division varied with home improvement division having the
highest ratio of 30.3% in 2017 financial year compared to 33.7% in 2016 FY. The department
stores and industrials divisions had the highest improvement in return on capital employed from
2016 financial year to 2017 financial year. The department stores recorded 24.1% increase in
return on capital in 2017 from 7.6% in 2016 FY while industrial division improved from 1.1% in
2016 FY to 27% in 2017 FY.
According to Michael Chaney, the Wesfarmers 2017 FY results are attributed to the
conglomerate structure. The industrial businesses, Bunnings and Kmart in New Zealand and
Australia increased their earnings in 2017 FY and Target reduced losses as compared to 2016
financial year. Michael also added that the focus of the company’s Board and management
constantly provides superior returns to shareholders in the long term.
From Wesfarmers annual financial reports, the company recorded both improvement and no
improvement in certain aspects of the company’s financial position and profitability. The highly
improvement in financial position for Wesfarmers is net debt. The company was able to reduce
net debts by 32.3% which enhances the company stability in financial position. The financial
performance reduced the net debt to equity ratio of Westfarmers by 10% from 2016 to 2017. The

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second highest financial results are revenues and net profits after tax. The Company recorded an
increase in revenues by 3.6% in 2017 from 2016 FY. The net profits improved by 22.1% in
2017. These improvements led to improved earnings per share that was recorded at 21.6% in
2017. The return on equity as improved in 2017 financial year to 12.4%. Another profitability
improvement of the Wesfarmers Company is return on capital employed for industrials and
department stores divisions. These divisions recorded more than 150% improvement from 2016
FY to 2017 FY. On the other side, the Wesfarmers has non-improvement in financial position in
2017. Revenues for Coles and department stores divisions decreased. The revenues reduced but
by less than 1%. The return on capital employed ratio for profitability also reduced for Coles and
Home improvement divisions. Coles return on capital employed reduced by 1.5% while that of
home improvement reduced by 3.4% from 2016 financial year to 2017 FY.
From the comparison of Wesfarmers annual financial results for 2016 and 2017 financial years,
it can be summarized that the company has impressive financial performance. Its reports
recorded increasing levels of earnings, return on equity and operating cash flow that indicate
strength in the company’s financial position and profitability.
Question 2
Sustainability Reports of Wesfarmers
Sustainability is an important part for today’s organizations for long term value. Sustainability
enables a company to operate in harmony with people and planet while earning profits without
compromising needs for the future generations (Cheng, Green, & Ko, 2014). The sustainability
reports records a company’s operations in social, cultural, ethical, environment and economic
spheres to account for its activities towards achieving a sustainable world free of pollution,
discrimination, exhaustion of natural resources and reduced global warming (Klettner, Clarke, &
Boersma, 2014). The following write up compares Wesfarmers sustainability initiatives for 2016
and 2017 financial years to find out which started and which were stopped.
Westfarmers show several sustainability initiatives in their retail businesses. The sustainability
initiatives can be grouped into different categories that include people, sourcing, community,
governance, and environment. The people initiatives aim to provide safety in the workplaces,
provide opportunities to improve job performance and grow their careers, and create inclusive

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work environment that pays attention to indigenous people and gender diversity. The
Westfarmers Company reported a decrease in total recordable injury frequency rate by 16% in
2017 financial year as compared to 2016 financial year. The company also recorded 27%
increase in number of indigenous employees. Secondly, the Wesfarmers ensures ethical sourcing
through respectful and strong relationships along the supply chain for responsible sourcing and
working with suppliers to enhance environmental and social practices. The Company improved it
transparency through factories audit programs by 70% in 2017 financial year. Thirdly, the
Wesfarmers strive to make positive contributions to communities that they operate in and
commit to providing their consumers with safe products. The company has several initiatives for
supporting needy people in the society. The company offered more than $110 Million donated in
2016 FY alone and over $130 Million in 2017 FY. Another Westfarmers sustainability initiative
is caring for the environment. The company strives to reduce emissions to improve the
company’s resilience in climate change. The company has achieved 16% greenhouse emissions
from 2013. The Wesfarmers Company also has a government framework that aim to enhance
sustainability. The company has formulated policies to govern appointments, successions,
political donations, ethical behaviors, anti-bribery, and risk management framework policies to
enhance the organization sustainability.
Wesfarmers Company has started several initiatives to enhance sustainability in its businesses.
One of the initiatives is Target departmental stores introduced safety leadership training. The
module was introduced for store management, development of processes in supply chain and to
deliver safety focus week. This new initiative aimed to implement safety learning training in
support offices, distribution centers, and stores. The second new initiatives in 2017 financial year
were Coles introducing wellbeing pillars in the Mind Your Health Program. These pillars
include, Being Mindful, Staying Connected, Being Active, Keeping Learning, and Giving Back.
These pillars lead to improved people’s mental health in the workplace (Deegan, 2013). Thirdly,
the Westfarmers Company initiated a combined Departmental Stores Ethical Sourcing Program.
This program was established to enhance consistent ethical sourcing procedures and policies
between Target and Kmart. Target also joined the International Finance Company (IFC) and
International Labour Organization (ILO) Better Work Program to improve garment industry
working conditions and enhance the competitiveness of the sector (Libby, 2017). Another new
initiative in 2017 financial year was Kmart trialing a wage monitoring system to all suppliers in

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Bangladesh. This initiative aimed to improve transparency and track wage movement. Lastly, the
Officework through Cartridges 4 Planet Ark Program collected more than a million printer
cartridges for recycling. The program also collected computer, accessories (400) and mobile
phones (+45000). These initiatives were important to improving sustainability in Wesfarmers
Company in 2017 financial year.
I can rate Wesfarmers sustainability at 65% for 2017 financial year. Despite the company’s
commitment to sustainability, there are several sustainability issues that could be done better to
improve people, sourcing, environment, and community in the organization. The rating is about
average because the company has been able to achieve 16% reduced recordable injury frequency,
improved transparency in ethical sourcing of 70%, 27% increased indigenous employees and
16% reduction in greenhouse gas emission. The reason for 35% rating denial is because the
company’s fails to implement new initiatives to improve gender diversity in leadership, poor
water usage and waste disposal and inadequate focus to energy efficiency. The Westfarmers
workforce has 54% of employees being females and 46% male but the percentage of women in
leadership is only 38%. Secondly, waste reduction initiatives are inadequate and hard to maintain
to achieve sustainability. Lastly, Wesfarmers has inadequately launched initiatives to improve
energy efficiency. The company has an opportunity to adopt renewable energy in all its
operations that will significantly minimize footprint (Rowe, Nowak Quaddus, & Naude, 2014).
In summary, it can be said that Wesfarmers is committed to creating its value for shareholders,
communities, and employees for today and generations to come. The company also has
opportunities to improve it sustainability by adopting new initiatives.

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Question 3
Cash Flow Statement for Dural Trade Ltd
Dural Trade Ltd
Cash Flow Statement
For the year ended 31st December 2018
Y 2018
$
Cash flow from operations
Receipts from customers 1416240
Payment to suppliers and employees (863400)
Cash Expenses (401800)
Tax expense (34800)
Net cash flows from operating
activities
116160
Cash Flows from Investing
Payment for property (land) (122,400)
Proceeds from sale of equipment 25400
Proceeds from sale of an investment 117600
Gains on sale of investments 9600
Net cash flows used in investing
activities
30200
Cash Flows from financing activities
Dividend paid (2880)
Share capital 72000
Share premiums 14400
Net cash flows used in financing
activities
83520

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Net increase/(decrease) in cash and
cash equivalents
229880
Cash and cash equivalents at beginning
of year
71,760
Cash and cash equivalents at end of
year
301640
Receipts from customers= sales - increase in account receivables
=1432800-16560= 1416240
Cash payment to suppliers= Cost of goods Sold +( increase in Inventory –increase in account
payable)
=850680+ (22200-9480) =863400
Cash for expenses= (Operating expenses-non cash or depreciation expense)-(increase in accrued
expenses payable)
= (446400-43200)-1320=401800
References

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Berk, J., DeMarzo, P., Harford, J., Ford, G., Mollica, V., & Finch, N. (2013). Fundamentals of
corporate finance. Pearson Higher Education AU.
Campbell, J. (2017). Insights from the company monitor: Wesfarmers. Equity, 31(8), 16.
Cheng, M. M., Green, W. J., & Ko, J. C. W. (2014). The impact of strategic relevance and
assurance of sustainability indicators on investors' decisions. Auditing: A Journal of
Practice & Theory, 34(1), 131-162.
Deegan, C. (2013). Financial accounting theory. McGraw-Hill Education Australia.
Henderson, S., Peirson, G., Herbohn, K., & Howieson, B. (2015). Issues in financial accounting.
Pearson Higher Education AU.
Jones, P., Comfort, D., & Hillier, D. (2014). Environmental and Social Programmes and Rapidly
Growing Retailers. Economia Seria Management, 17(1), 5-17.
Kent, P., & Zunker, T. (2013). Attaining legitimacy by employee information in annual
reports. Accounting, Auditing & Accountability Journal, 26(7), 1072-1106.
Klettner, A., Clarke, T., & Boersma, M. (2014). The governance of corporate sustainability:
Empirical insights into the development, leadership and implementation of responsible
business strategy. Journal of Business Ethics, 122(1), 145-165.
Libby, R. (2017). Accounting and human information processing. In The Routledge Companion
to Behavioural Accounting Research (pp. 42-54). Routledge.
Rowe, A. L., Nowak, M., Quaddus, M., & Naude, M. (2014). Stakeholder engagement and
sustainable corporate community investment. Business Strategy and the
Environment, 23(7), 461-474.
Schaltegger, S., & Burritt, R. (2017). Contemporary environmental accounting: issues, concepts
and practice. Routledge.
Weil, R. L., Schipper, K., & Francis, J. (2013). Financial accounting: an introduction to
concepts, methods and uses. Cengage Learning.

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