BUACC5930 Accounting Concepts and Practices

Question 1.

The 2016 and 2017 Annual reports for Westfarmers are provided on the Moodle Shell. Use these Annual reports to compare the financial results of the Westfarmers group as a whole over the two years (that is 2015 to 2017). You should use any financial information provided in the two annual reports (including ratios, and narratives) to conclude on the improvements or not in financial position and profitability. You discussion should focus on reasons for this.

Dural Trade Ltd Income statement for the year ended 31st December 2018

Additional information:

(v) The directors declared a cash dividend during the year.

REQUIRED:

Answer:

The profitability ratio of Wesfarmers has been increased with the increasing turnover. The major factor of increasing net profit is based on the efficiency of the organization (Popovic, et al. 2017). 

The net profit ratio of company has increased to 15.8 % in 2017 which is 1 % higher as compared to last year data. On the other hand, return on equity of company has increased to 12.25% in 2017 which is 2% higher as compared to last year data. This is analyzed that company has increased its profitability with a view to increase its overall outcomes. Nonetheless, due to the increased business operation costing, it has negatively impacted the gross profit margin of company. With the increase in its profitability, Wesfarmers may focuses on keeping the high financial leverage in its business by increasing the overall debt funding (Robb, & Robinson, 2014).  If Wesfarmers increases its debt funding its business then it will not only lower down the costing of the business but also increase the return on capital employed. The return on equity offered to shareholders has also increased which reflects that company has been offering higher return to its equity shareholders. It is analyzed that company is creating value on its investment and attracting more investors (Uechi, et al. 2015).

Discussion on the improvements or not in financial position and profitability, and reasons

After analysing the financial performance of company, it is inferred that company has increased the share price of company by increasing the overall debt funding. Nonetheless, the increased share price will be the main attractive point shareholders while deciding whether to invest in Wesfarmers company or not.  In addition to this, Wesfarmers has also increased its investment in its other business sectors by entering into the merger with other companies. It will not only assist in increasing the overall market share but also increase the overall outcomes in effective manner. The changes in the key managerial persons and strategic view point will also increase the overall outcomes and efficiency of the business (Yahoo finance, 2017).

References

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.

Popovic, T., Kraslawski, A., Barbosa-Póvoa, A., & Carvalho, A. (2017). Quantitative indicators for social sustainability assessment of society and product responsibility aspects in supply chains. Journal of International Studies 12(1), 15-20

Yahoo finance, 2017, Wesfarmers Plc retrieved  from https://in.finance.yahoo.com/