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ACCT71-600 Accounting Principles Group Company Analysis Project Bond University

25 Pages 6235 Words 714 Downloads

Introduction

This report is prepared to analysis annual reports in of two organisations in order to determine financial performance. Analysis of financial statements are done subject to explain key financial indicators and aspects which are helpful in maintaining healthy and optimum financial health of organisation and reduce the risk factors. A structured format is followed to elaborate the concept. A company analysis report contains the aspects and measures which assist financial growth of organisation in systematic manner.

Objectives

Aim of this report is to analyse the annual report of two Australian Listed organisations. Drives of performance, risk and values, an overall investment recommendation and companies are defined in this context. Educational objectives of this project are to enhance knowledge and skills in understanding financial statements and evaluating data in excel to determine what informations and details are addressed subject to performance and risk and values of organisations and firms.

Overview of organisations

Wesfarmers

Core Business

Wesfarmers deals in supermarkets, hotels, liquor and convince stores for office suppliers departmental stores and an industrials division with business in chemicals, fertilisers and energy and industrial and safety products and coal. Wesfarner is one of the Australia's largest private sector shareholder and employee organisation which has employee strength of approx 550,000.

History

This is a diversified organisation which was established in 1914 as western 'Australian farmers' cooperative. Deane Hammond was the first chairman of the organisation. It was established due to demand of the rural workers union for finer pay and less hours. Basically organisation was formed to enhance and develop living standards of rural workers and farmers. Empowering rural farmers and workers for their rights were main objectives of this Wesfarmers. In 27 June 1914 the organisation get registered and started working with farmers. Soon association started working with various companies under the Western Australian Farmer Act and began trading form two small rooms at 13 Howard Street, Perth. It moved its new head office just after establishment of three years at 569 Wellington street, Central Perth.

Journey

As per growth perspective organisation grown up tremendously. In 1924 it launched first commercial radio station subject to improve lives and livelihood to western farmers. In 1927 it expand organisation with super phosphate Cuming Smith and Mt Lyell Farmers Fertiliser. In 1950 it acquired GASCYNE trading which introduced air conditioned trailers for better condition. It expansion in to collection of art collection in 1977 and launched a takeover bid for CSBP. In 1984 Wesfarmer becomes a public listed company. It acquired 50% shares of Gresham partners. It acquired 100% of CSBP in 1986. there are two major steps was taken by organisation in terms of business expansion plans. It take over Western Colliers which was a mine industry with a new commission and contract.

In 1993 it acquired Dalgety farmers which was 147 years old corporation with $78 million. The major work of Wasfarmers stared after this merger. It started in capital management and securities from acquisition of Lumley insurance. Company expanded its insurance business further in 2006, with the take over of New Zealand insurance broker Crombie Lockwood and OAMPS LTD with the $700 million. OAMPS was the largest public listed insurance broker. It acquired Cole group in 2007 investing $19.3 billion. This was the time of global financial crisis and Cole's shareholders withdrawal investments from organisation.

It introduced first reconciliation action plan in 2009 and $4.6 billion equity. In 2013 capital return subject to improve insurance business. It sold insurance underwriter business in Australia and New Zealand to insurance Australia group. Sale was completed in June 2014.

Performance of Organisation

Operating performance organisation is also in adequate manner such as return on assets for the year 2017 is 7.10%. return on equity is calculated as 12.25% and return on invested capital as 8.48%. return on capital invested decreased from last year which was recorded as 9.25 % overall effect fall upon organisation as .77% change in equal growth.

Woolworths Group

Core Business

this organisation is one of the largest online supermarket business chain. Which deals in multiple customer products and segments. It mostly deals in vegetables, fruit, meat, packaged foods etc. it sells magazines, household products, DVDs and healthy and beauty products. At present organisation is dealing 1000 stores across Australia. It also supplies pet and baby and stationary procures too. It has multinational brand image across the world in respect of providing fresh foods and customer products. Its loyalty scheme contains the number of incentives for acquiring products. One of it's subsidiary provides reasonable petroleum products at Caltex Woolworths petrol stations.

History

Organisation was funded on 5 December, 1924. it opened its business segment in Sydney's Imperial Arcade in the basement. Woolworths opened its second store in 1927 at queen street in Brisbane in rare conditions. It opened first store in New Zealand in 1930, at that time organisation had 16 stores across new South Wales, Queensland and western Australia. In 1937 it introduced its brand image through media channels. This also indicates towards enhancing sustainable growth of organisation. In 1939 it launched staff assurance scheme by giving the team security in their retirement. Till 1940 organisation became able to develop its own warehouse and space for better advancement and growth. Its first ware house was established in 1929 but the size was store was not enough to store products.

Its core business started form the year 1957 when it put steps towards food industry. It launched first food store in Sydney's Dee why in 1957. grocery range was limited but included fresh vegetables. It major food items are packaged fresh meat sold out of refrigerated cabinets. Till 1959 Woolworth able to inaugurate 300thstore in Wentworthville NSW. In 1960 organisation become first Australia's first nationwide retailer. Company achieved its mission to deliver quality and value to every state and territory in the country.

Market Condition And Economic Diverse

This is one of the largest retail sector in Australia. Tesco PLC, Wesfarmers Ltd., Seven & I holdings Co. Ltd and the Kroher Co is most near competitors of organisation. Market cap of woolworths group Ltd was recorded as 26877 and 38625 for seven and I holding co. Ltd. Tesco has also nearest peer which was recorded as 32478. it has largest supermarket chain which is involved in distributing customer satisfactory products and services. It used to trade as Safeway and in all Victorian locations. It has also has private label brands such as Woolworths home brand , Woolworths select, woolworths gold, Woolworths fresh and macro wholefoods market.

Performance of Woolworth Group

Growth rate of last three year was recorded as -2.98% net income growth was calculated as -14.48%. Return on assets was calculated as 6.61% and return on equity was recorded as 17.04%. overall return on assets% is calculated as 6.16% return on equity is calculated as 15.30% and return on invested capital is recorded as 13.14%.

Analysis of Financial Statements

Income Statement of Wesfarmersof Financial Year 2016 and 2017

Sales

30/06/17

30/06/16

Total sales

68444000

65981000

Cost of sales

46774000

45930000

Gross profit

21670000

20051000

Operating expenses

   

Selling general and administrative

13457000

12884000

Others

2931000

2702000

Total Operating Expenses

64428000

62812000

Operating income or loss

4016000

3169000

Income From Continuing Operations

   

Total Other Income/Expenses Net

122000

-2131000

Earnings before interest and taxes

4016000

3169000

Interest expense

-219000

-266000

Income before tax

4138000

1038000

Income tax expense

1265000

631000

Net income from continuing ops

2873000

407000

Net Income

2873000

407000

Net Profit Available For Shareholder

2873000

407000

Income statement of Wasfarmers Ltd is presented above which defines the profitability of organisation. It is seen that total saless get increased in the year 2017 comparison to year 2016. total sales get increased by $2463000 in percentage 3.73% total increment record for the financial year 2017. Cost of sales get increased by $844000 which increased by 1.83% till the year 2017. gross profit increased by 1619000 which was 8.07% increased from the last year.

Operating expensed get increased by 1616000 with the incremental change of 2.57%. operating income get increased by 847000 with the incremental change of 26.73%. in income from continuing ops which is increased by 2466000 due to high corporate tax liability organisation had to bear a loss of saless. Interest expenses was recorded as 1265000 fort the year 2017 and 631000 for the year 2016.

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apart form credibility there are some other aspects also considered in this context such as discontinued operations which were exist in the year 2014 get reduced and bifurcated in subsiding years. There are some essential aspects are covered in respect of analysing the performance of various groups as income tax expenses, income before tax and net income from continuing ops. Quarterly profit was calculated as 5680500 for the month of 2017. and 5361500 for the quarter of before mid year. And half yearly net profitability was recorded as 106000 for the first half year and 648000 for the second half year.

Income Statement of Woolworths Group For The Year Ending 2016 and 2017

Sales

25/06/17

26/06/16

Total sales

55668600

53663700

Cost of sales

39739700

38538600

Gross profit

15928900

15125100

Selling general and administrative

13811800

13905700

Non-recurring

-

-

Others

-244200

-275500

Total Operating Expenses

53307300

52168800

Operating income or loss

2361300

1494900

Income from continuing operations

   

Total other income/expenses net

-228900

-245600

Earnings before interest and taxes

2361300

1494900

Interest expense

-201600

-255900

Income before tax

2132400

1249300

Income tax expense

650400

486400

Minority interest

350100

311300

Net Income From Continuing Ops

1482000

762900

Non-recurring events

   

Discontinued operations

111400

-3110800

Net income

1533500

-1234800

Net Profit Available For Share Holders.

1533500

-1234800

 Profitability condition of Whoolworths group is in favourable condition. As per above given income statement following aspects come in existence such as the total sales was recorded as 55668600 for the year 2017 and 53663700 for the year ended 2016. Sales get increased by 2004900 with the percentage of 3.73%. it is calculated that cost of sales was recorded as 39739700 and 38538600. there is difference is calculated as 1201100 with the percentage change of 3.11%.

Difference between Selling and distributing expenses for the year 2016 and 2017 was calculated as 93900 with the incremental change of 0.67%. total operating expenses was recorded for the year of 2017 was 5,33,07,300 and for the year of 2016 was 5,21,68,800 with the difference of 1138500 and percentage change is recorded as 2.18%. operating income is recorded as 2361300 for the year ended 2017 and 1494900 for the year ended as 2016, difference was recorded as 866400 with the incremental change of 57.95% Quarterly profitability of organisation was recorded in three forms such as gross profit, operating profit and net profit. Gross profit for the first quarter was recorded as 4360500 and 484500 for the net profit.

Analysis of Balance Sheet

Balance Sheet of Wesfarmers Limited For The Year Ended 2016 and 2017

Period Ending

30/06/17

30/06/16

Current Assets

 

 

Other current assets

491000

1185000

Net receivables

1633000

1628000

Inventory

6530000

6260000

Cash and cash equivalents

1013000

611000

Total Current Assets

9667000

9684000

Property plant and equipment

9440000

9612000

Other assets

1369000

1809000

Long-term investments

703000

605000

Intangible assets

4576000

4625000

Goodwill

14360000

14448000

Deferred long-term asset charges

971000

1042000

Total Assets

40115000

40783000

Current Liabilities

   

Accounts payable

6615000

6491000

Other current liabilities

1028000

845000

Short/current long-term debt

5413000

7303000

Total Current Liabilities

10417000

10424000

Long-term debt

4066000

5671000

Other liabilities

1691000

1739000

Total Liabilities

16174000

17834000

Stockholders' Equity

   

Treasury stock

164000

138000

Retained earnings

1509000

874000

Other stockholder equity

164000

138000

Common stock

22268000

21937000

Total Stockholder Equity

23941000

22949000

Net Tangible Assets

5005000

3876000

Balance sheet of Wasfarmer is defined subject to analyse financial position of organisation. As per above analysis of balance sheet of Swarmer current assets for the year 2017 was calculated as 9667000 and 9684000 for the year 2016. current assets get increased by 17000 with the 0.17% percentage. Total assets for the year 2017 was recorded as 40115000 and 40783000 for the year 2016. total assets get increased by 668000 with the incremental change of 1.63%.

Total current liabilities for the year 2017 was recorded as 10417000 and 10424000 for the year ended 2016. total liabilities was recorded for the year 2016 was recorded as 161740009 and 17834000 for the year ended 2017. stockholder's equity was recorded as 23941000 for the year 2016 and 22949000 for the year 2016. net tangible assets were recorded as 5005000 for the year 2017 and 3876000 for the year ended 2013. overall changes are seen towards incremental change in respect of tangible and intangible assets.

Balance Sheet of Woolworths Groups For The Year Ended 2016 and 2017

Period Ending

25/06/17

26/06/16

Current Assets

   

Other current assets

1259700

1156500

Net receivables

410500

433500

Inventory

4080400

4558500

Cash and cash equivalents

909400

948100

Total Current Assets

6994200

7427000

Property plant and equipment

8437500

8262800

Other assets

833100

1113300

Long-term investments

118200

108500

Intangible assets

2316400

2341000

Goodwill

4216400

4249600

Deferred long-term asset charges

372300

497700

Total Assets

22915800

23502200

Current Liabilities

   

Short/current long-term debt

3030500

4361600

Other current liabilities

1168800

1511800

Accounts payable

5068200

4809100

Total Current Liabilities

8824200

8992700

Other liabilities

1438500

1856700

Minority interest

350100

311300

Long-term debt

2774700

3868000

Total Liabilities

13039700

14720300

Stockholders' Equity

   

Treasury stock

252300

246700

Retained earnings

3554700

2876900

Other stockholder equity

252300

246700

Common stock

5719000

5347000

Total stockholder equity

9526000

8470600

Net Tangible Assets

2993200

1880000

Financial position of Woolworths groups shows following results in terms of sustainability. As per balance sheet figures of 2017 and 2016 was recorded in three terms such as current assets, total assets, current liabilities and total liabilities and stock holders equity. Current assets for the year 2017 was recorded as $6964200 and $7427000 for the year 2016. current assets get decreased in the year 2017 by 462800 with the incremental change of 6.23%. total assets were recorded for the year 2017 was 22915800 and 23502200 for the year 2016, difference with 586400 and 2.50% incremental changes.

Current liabilities for the year ended 2017 was calculated as $8824200 and $8992700 for the year 2016. current liabilities get decreased by $168500 in 2017 due to repayment of short term debts and payment to creditors. Total liabilities was recorded as 13039700 for the year 2016 and 14720300 for the year 2016, percentage difference was calculated as 11.41%. stock holder's equity was recorded as 9526000 for the year 2017 and 8470600 for the year ended 2016. this change in stock holders's equity as 11.079%.

Analysis of Cash Flows

Cash Flow Statement of Wesfarners of Financial Year 2016 and 2017

Period Ending

30/06/17

30/06/16

Net income

2873000

407000

Operating activities, cash flow provided by or used in

   

Depreciation

1126000

1175000

Changes in other operating activities

-104000

29000

Changes in liabilities

204000

-88000

Changes in inventory

-296000

-444000

Changes in accounts receivable

87000

17000

Adjustments to net income

-106000

2153000

Total Cash Flow From Operating Activities

4226000

3365000

Investment activities, cash flow provided by or used in

   

Capital expenditure

-1559000

-1794000

Investments

-2000

-2000

Other cash flow from investment activities

-

-

Total cash flow from investment activities

-53000

-2132000

Financing Activities, Cash Flow Provided By or Used In

   

Sale purchase of stock

1000

1000

Net borrowings

-1774000

936000

Dividends paid

-1998000

-2270000

Total Cash Flow From Financing Activities

-3771000

-1333000

Change in cash and cash equivalents

402000

-100000

As per analysis of cash flow statements there are some essential figures and aspects come across subject to analyse rotation of cash during the year 2016 and 2017. cash flow of Wesfarmers is calculated in three major terms such as

  • cash flow from operating activities which contains the over all cash inflow from operating activities. Cash flow from operating activities for the year ended 2017 was calculated as 4226000 and 3365000 for the year 2016. cash flow from operating activities get increased by 861000.
  • Cash flow form investing activities was recorded as -53000 for the year 2017 and -2132000 for the year 2016. this impact fall upon over all changes such as investment in acquiring new assets and sale of old machinery.
  • Cash flow from incest activity indicates towards analysing the dereference between financial activities. As per analysis of financial ratios it is seen that capital expenditures for the year 2017 was recorded as -1559000 and -1794000 for the year 2016 which resulted total cash from financing activity is calculated as -53000 for the year 2017 and -2132000 for the 2016.

Cash Flow Statement of Woolworths Group For The Year Ending 2016 and 2017

Period Ending

25/06/17

26/06/16

Net income

1533500

-1234800

Operating activities, cash flow provided by or used in

   

Depreciation

1037600

985300

Adjustments to net income

441300

1085600

Changes in accounts receivable

2400

29100

Changes in liabilities

382500

-534100

Changes in inventory

367600

204100

Changes in other operating activities

-687500

1881800

Total cash flow from operating activities

3122000

2357500

Investment activities, cash flow provided by or used in

   

Capital expenditure

-1886800

-1938300

Investments

-

-1300

Other cash flow from investment activities

3500

3200

Total cash flow from investment activities

-1431400

-1266700

Financing activities, cash flow provided by or used in

   

Dividends paid

-540900

-1184800

Sale purchase of stock

55500

55500

Net borrowings

-1222400

-365600

Other cash flow from financing activities

-21500

75500

Total cash flow from financing activities

-1729300

-1474900

Effect of exchange rate changes

-600

6700

Change in cash and cash equivalents

-39300

-377400

Cash flow statement of Woolworth Group is defined in respect of analysing cash rotation and requirement during the year. As per analysis of cash flow statement there are following figures are analysed such as cash flow from operating activity was recorded as 3122000 for the year 2017 and 2357500 for the year 2016. this is one of the essential aspect which need to analyse for proper analysis. Cash flow form investing activities was receded as -1431400 for the year 2017 and -1266700 for the year 2016. cash flow form financing activity is calculated as -1729300 for the year 2017 and -1474900 for the year ended 2018.

RATIO Analysis

Wesfarmer Ltd

Ratios

Formula

Results

Current Ratio

Current assets / current liabilities

9667000 / 10417000 = 0.928

Debt equity ratio

Debts / equity

4066000 / 23941000 = 0.1698

Return on assets

Total assets / revenues

(40115000 / 68444000)*100 = 58.61%

Profit ratio

Net profit / revenues

(2873000 / 68444000)*100 = 4.19%

Woolworths Group

 

Ratios

Formula

Results

Current Ratio

Current assets / current liabilities

6994200 / 8824200 = 0.79

Debt equity ratio

Debts / equity

2774700 / 9526000 = 0.29

Return on assets

Total assets / revenues

(22915800 / 55668600)*100 = 41.16%

Profit ratio

Net profit / revenues

(1533500 /55668600)*100 =2.75%

SWOT Analysis

SWOT of Wesfarmer Ltd

Strength

·Strong capital structure

·Impressive and string goodwill

·Community development initiatives

·sales through online features

Weakness

·Being a market leader always chances to loss reputation

·Loss of reputed and functional experiences

Opportunities

·opportunities to grow business at large scale

·Expand the business scale across Australia.

Threats

·strong market competition

·Economic downturn leading to boost the structure

SWOT of Woolworths Group

Strength

·Oldest organisation

·Large number of stock market

Weakness.

·Low international Presence

·late entry in online retail sector

Opportunities

·To grow business at large level

·huge retail industry

Threats

·Loss of slow growth

·huge competition

Recommendation

As per above analysis of financial statements of Werfarmers Ltd some certain points come across at which organisation should pay attention for better financial and operational growth. Organisation need to analyse the financial performance with the help with strong capita l structure and cash inflows. It is require to improve the liquidity to manage the current liabilities and short term debts of organisation. Cis the measure current liability of Wesfarmer Ltd is seen 0.928 which need to improve for the subsiding year. 1 is considered optimum current ratio which is essential subject to evaluate and maintain optimum level of current assets to repay off liabilities.

AS per analysis of financial statements of Woolworths group subject to analyse financial performance of organisation. Liquidity position of organisation is shows following aspects subject terms of current ratio. Current ratio is calculated as 0.79 for the year 2017 and profitability ratio is calculated as 58.16%. it is required to maintain optimum level of net current ratios subject to settlement of short term loans debts and credits.

Conclusion

This report is prepared to analyse the performance of two Australian countries which deals in same segments. Objectives and importance of the report is determined in this report. Financial statements of organisation of last two years are analysed in order to determine the financial position of organisation. Overview of both the organisations calculations and recommendations are given for both the organisations are also determined in this context. Ratio analysis, swot analysis, recommendations are given for better growth and development of organisation.

Reference

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  • Cesari, D. & et. al., 2012. Analysis of raw soils & their re-suspended PM10 fractions: Characterisation of source profiles & enrichment factors.Applied Geochemistry.27(6). pp.1238-1246.
  • Chauton, M.S. & et. al., 2015. A techno-economic analysis of industrial production of marine microalgae as a source of EPA & DHA-rich raw material for aquafeed: Research challenges & possibilities.Aquaculture.436.pp.95-103.
  • Danuletiu, A.E., 2010. Working capital management & profitability: a case of Alba county companies.Annales Universitatis Apulensis: Series Oeconomica.12(1). p.364.
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