FINANCIAL MANAGEMENT ASSIGNMENT
Wesfarmers Limited had its origins in 1914 as a Western Australian farmers' cooperative. Wesfarmers has since grown into one of Australia's largest listed companies with diverse operations covering supermarkets, department stores, home improvement and office supplies, coal mining, insurance, energy and fertilisers and industrial and safety products.
RESOURCES Pages
Managing Directors' review 6-8
Income statement 68
Balance sheet 70
Cash flow statement 71
Notes to the financial statements 73-144
In addition to the above, the following information is extracted from the Wesfarmers Annual Report and provides the 2009 values for certain items. This information is needed to calculate some of the comparative ratios for 2010:
Item 2009 Value$
Shareholders' equity $24,248
Total assets 39,062
Inventories 4665
Receivables 1893
Wesfarmers Limited's share price was $27.48 in 2010 and $31.85 in 2011.
QUESTIONS-
Question 1 - Using the consolidated figures, calculate the following ratios for 2010 and 2011:
Short-term solvency or liquidity ratios-
a) current ratio
b) quick ratio
c) cash flow from operations to current liabilities
Efficiency ratios-
d) debtors' turnover
e) average days sales uncollected
f) inventory turnover
g) inventory turnover in days
Profitability ratios-
h) net profit margin
i) interest cost as a percentage of sales
j) asset turnover
k) return on assets
For this assignment please use the following formula net profit + interest + income tax = average total assets.
l) return on ordinary shareholders' equity
Long-term solvency or financing ratios-
m) debt to equity
n) debt to total assets
o) interest coverage
p) cash flow from operations to total liabilities
Market-based investment and other ratios-
q) price/earnings (P/E)
r) dividend yield
s) dividend cover
t) net tangible asset backing
Note: for this assignment please use following formula: net tangible assets = balance of no. of ordinary shares issued for accounting purposes
Question 2 - Evaluate the performance and financial standing of the company based on the ratios calculated in Question 1. Present the results as either an essay or as an executive report.