Assignment on Financial Report Analysis

Wesfarmers was started in 1914 as Western Australian farmers’ cooperative. It is currently one of the largest companies in Australia. Its headquarters are in Perth, Western Australia. They supply chemicals and fertilizers to the mining and agricultural and industrial sectors. The company also supplies maintenance, repair and operating, packaging and safety products.
Question 1: Annual financial report comparison between 2016 and 2017
In 2016, the company reported a net profit after tax of $407 million while in 2017 financial year, the company reported net profit after tax of $2,873 million which increased by $2,466 million. Below is the reason why profit was higher in 2017 than 2016.
2017 ($M) 2016 ($M)
Revenue from ordinary activities 68,444 65,981
Earnings before interest, tax, depreciation and amortization 5,668 2,642
Earnings before interest, tax, depreciation and amortization (excluding significant items) 5,668 4,903
Depreciation and amortization 1,266 1,296
Earnings before interest and tax 4,402 1,346
Earnings before interest and tax (excluding significant items) 4,402 1,346
Finance costs and income tax expense 1,529 939
Net profit after tax 2,873 407

Reason for the increase:
• In 2017, the interest rate affected revenue from ordinary activities by almost 40 percent and 54 percent in 2016.
• Climate change risks, regulatory reputational and competitive risk in 2016 resulted to increase in profit in 2017. There was an increase in mining activities in 2017.
In 2017, there was 12.4 percent increase in return on average shareholders’ equity and 9.6 percent in 2016. The gearing ratio increased by 20.1 percent in 2017 and 31.0 percent in 2016 which was higher than in 2017. This means that the company was funded more by debt in 2016 as compared to 2017. This means that in 2017, the company was funded more by company’s equity.
The net debt in 2017 was $4,809 million and $7,103 million in 2016 and shareholders’ equity was $23,941 million and $22,949 million in 2016 which was an increase of $992,000 increase in 2017. In 2017, the company increased its revenue in all divisions. It issued shares worth $331 million in 2017 and none in 2016. This lead to increase in equity ratio
In 2016, Wesfarmers recorded a free cash flow of $1,233 million which was decrease of 34.9 per cent. This is because the company acquired Homebase which was worth $665 million. In 2017, the company recorded an increase of 238.443 per cent which resulted to increase in cash flows from operating activities. The acquisition of Homebase in 2016 resulted to increase in free cash flows in 2017.
The gross expenditure in 2017 was $1,681 million and $1,336 million and $1,899 million in 2016 which was 11.5 per cent increase in 2017. In 2017, Wesfarmers opened few stores in Bunnings Australia and New Zealand as compared in 2016. The refurbishment activity was also lower in 2017 than in 2016.
Wesfarmers balance sheet was stronger in 2017 as compared in 2016. The company recorded a net financial debt including interest rate of $4,321 million in 2017 and $5,727 million in 2016. Debt was higher in 2016 since the company borrowed money in order to acquire Homebase and to spend it in working capital investments.
Wesfarmers employed capital in its activities worth $27,663 million in 2016 and $27,582 million which was $81 million decrease. This was because the company sold property in Coles and WesCEF and it had lower intangibles as compared in 2016.
In 2017 financial year, the company paid its debt worth $500 million using its cash at hand and from its bank account. It also paid $900 million of its debt using the amount it received from sale of Coles. In 2016, Wesfarmers did not repay its debt but it borrowed $1,135 million to fund acquisition of Homebase.
Wesfarmers finance costs was $264 million in 2017 and $308 million in 2016, it was a decrease of 14.3 per cent. This was due to decrease in net balance in 2017.
Therefore, Wesfarmers 2017 financial year record was stronger than in 2016. Investors who invested in 2017 received more returns as compared to those who invested in 2016.
Question 2: Comparison between 2016 and 2017 Wesfarmers Sustainability report
Wesfarmers is committed in creating values for its employees, stakeholders and the community at large.
In 2017, Wesfarmers injury frequency decrease of 16 per cent was recorded in this financial year as compared to 2016 which was 33.4 per cent. The company diversity promotion in the workplace was more than 3,300 employees identifying indigenous and 4,231 in 2017 which was an increase of 27 per cent. This helped the company to increase its employee’s morale and productivity.
In 2016, the company increased in its supply chain by more than 3,200 factories and 5,455 factories in 2017 which was 70 per cent increase. The company increased its transparency more in 2017 as compared to previous year. Increase in transparency will help Wesfarmers to increase inventory management, increase customer service request and help to increase its productivity.
In 2016, Wesfarmers community contribution was more than $110 million, this was as a result of customer and team members support. In 2017, the company community contribution was $59 million which was a decrease.
The company also reduced its climate resilience. Its greenhouse gas emissions decreased in 2017 and in 2016.
In 2016, Wesfarmers had a workforce which was made up of 55 per cent of women and 45 per cent men and in 2017, it recorded 54 per cent women and 46 per cent men. This was a decrease in one per cent in women and one per cent increase it women. Since the company aims at increasing the rate of women leadership position, it should focus on increasing the number of women rather than reducing the number as it was recorded in 2017.
In 2017, WesCEF lauched Safe Person Commitment will help to support employees’ expectations especially those who perform tasks with high risk. This will help to reduce human and risk errors that might occur.
Wesfarmers developed a four pillar Health, Safety and well being strategy in 2017. This will help the employees to be careful in physical and psychological wellbeing. In the same year the company developed a safety and health management system which will help them to review current safety and health procedure. It will help to identify which safety and health risk will be given higher priority and assist in identifying acceptable level of risk.
In 2016, about 8per cent of Wesfarmers workforce was covered by collective agreements while in 2017, it recorded 83 per cent which was 3 per cent decrease. In 2017, Coles received workplace relations attention. Its request for new enterprise bargaining agreement which was to cover all Coles store team members was declined by Fair Commission. This means that most employees at Cole were not covered by collective agreements. They were requesting for this since in 2016 a team member submitted an application to terminate their outdated agreement.
In 2017 financial year report, the company recorded payment of its supplier worth AUD 46.4 billion which are more than 18,000 suppliers from 20 different countries. This helped to reduce suppliers’ debt.
Wesfarmers generated revenue which was more than $68 billion which was distributed to the shareholders. The company pays more than $2 billion in tax and royalties. This benefit the community ad country at large since the government uses the tax payers to serve its citizens.
In 2017, Wesfarmers contributed more than $8.8 million to its partners. The company contributes in educating disadvantage students. They were also established four year partnership with Telethon Kids Institute. This will help to benefit the community through available vaccines to vaccinate kids with infectious diseases.
In 2016, the waste recycles increased by 11.8 per cent and landfill waste increased by 10.8 per cent. In 2017, landfill waste increased by 6 per cent and waste their waste recycle increased by 6 per cent which was a reduction by 5 per cent.
In 2017, the company water usage increased by 3 per cent due to company growth such as Homebase which was acquired in 2016 and Bunning UK Ireland stores and 7 per cent increase water usage by Curragh mine since its production also increased. In 2016, Wesfarmers developed water harvesting system in Curraghs industrial water system. Therefore, the company was not able to reduce water usage this year.
There was an announcement that Coles will phase out single use plastic bags from all stores all over the country in June, 2017. This will help to increase waste recycling.
In January, 2016, the company was able to raise more than $497,000 nationally through customers, volunteers and team members’ support. In 2017, it raised over $43 million which was an increase of $42.503 million. Wesfarmers uses the fund raised to help the community by supporting emergency services.
In 2017 and 2018 financial year, Wesfarmers focus on improving working and environment conditions and practices, focus on coming up with quality strategy for delivering consistent quality product to its consumers. The company also wants to partner with organizations that support family and children safety and implement safety leadership training in order to improve target safety record. This will help to improve safety and healthy safety.
In conclusion Wesfarmers focus on maintaining safety and healthy environment for its employees, suppliers and customers.
Question 3: Cash Flow Statement for Dural Trade Ltd for the year ended 31 December 2018

Cash flow statement
Dural Trade Ltd
For the year ended 31st December, 2018

Cash flows from operating activities ($)
Profit before tax 145,320
Accounts receivable 131,760
Accounts payable 82,680
Inventories 152,520
Accumulated depreciation 204560
Income tax 34,800
Change in working capital 658,440
Net cash flows from operating activities 1,275,320
Cash flows from investing activities
Sale of equipment 25,400
Land purchase 122,400
Equipment purchase 461,600
Sales of investment 117,600
Net cash flows from investing activities 727,000
Cash flows from financing activities
Dividend paid 17,280
Share premium 1,584
Net cash flows from financing activities 34,864
Cash and cash equivalent at the end of the year 513,456

Change in working capital = change in current assets – change in current liabilities
= 795,720 – 82,680 -7,320- 17,280
= 658,440

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