Financial And Sustainability Performance Of Wesfarmers Over 2016-2017

Financial Performance of Wesfarmers over 2016-2017

This report reflects the key understanding on the financial performance and Sustainability Report of Wesfarmers since last two years. It is analyzed that Sustainability Report of Wesfarmers focused on creating the business more sustainable and increasing the overall outcomes throughout the time. The financial performance of company has also shown that company has increased its overall business outcomes. In context with the sustainability reporting of company, managing director, Richard Goyder has focused to make its business culture more women in the senior management for the long term sustainability. The sustainability reporting and financial performance assessment of Wesfarmers Company have been done in this report (Klettner,  Clarke, & Boersma, 2014).

There are several tools which could be used to assess the financial performance of company such as capital budgeting tool, ratio analysis, du pont analysis, top down analysis, bottom up analysis. The ratio analysis is the most effective tool which is used to assess the financial performance of company in terms of profitability, efficiency, solvency of company. It is analyzed that liquidity ratio of company has been increased due to the increased investment in the current assets. It is analyzed that Wesfarmers has focused on increasing its investment in the operating assets although, in as compared to 2016, Wesfarmers has decreased its current ratio to .79. This is considered that Wesfarmers might face issue related to less liquidity while discharging the short term and long term liabilities (Meckenstock, Barbosa?Póvoa, & Carvalho, 2016).

Ratio	2013	2014 Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper	2015	2016	2017
Current ratio	.91	.95	.84	.83	.79
Quick ratio	.45	.58	.68	.72	.62

The quick ratio of company has also decreased to .62 points which shows that company has lower down its liquid assets (Cheng, Green, & Ko, 2014).

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). 

Ratio	2013	2014	2015	2016	2017
Net profit ratio	14.4 %	13.5%	14.5 %	15.5 %	15.8 %
Return on equity	8.76 %	10.34 %	9.61 %	10.71 %	12.25 %
Return on assets	22.5 %	22 %	25.5 %	27.5 %	26.5 %

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).

Ratio Analysis of Wesfarmers in 2013-2017

Efficiency ratio

The efficiency ratio of company has also been showing the positive indicator. It is analyzed that the debtor’s turnover ratio of company has increased to 40 times which reflects that company has been effectively managing its cash blockage. In addition to this, inventory turnover is also very low which is an indication towards the less cost of capital. Wesfarmers has faced high cash blockage issue in 2016 which have not only impacted the cost of capital of company but also negatively impacted the return on capital employed available on equity shareholder (Vogel, 2014).

Leverage ratio

This leverage ratio shows the relation between the equity and debt of company. It is analyzed that company has kept average debt to equity ratio which have resulted to higher cost of capital for organization. It is analyzed that company has reduced the debt to equity ratio due to the fear of the sluggish market condition. It is analyzed that company should focus on reducing the equity capital by increasing the overall debt funding if it wants to lower down the cost of capital. There are chances that company could increase its financial leverage to the certain extent.

Ratio	2013	2014	2015	2016	2017
Debt ratio	.19	.17	.12	.16	.12
Gearing ratio	20	25	27	28	26

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).

Essay on Comparative study of 2016-2017 Sustainability Report of Wesfarmers

Wesfarmers is committed to creating value for its employees, communities and shareholders for more than a century. In 2016 Wesfarmers has increased its point with 11 percent in Dow Jones Sustainability index and scored 82 out of 100 and on the other hand in 2017 it scored 78 with its strongest performances in the area of health, cyber security, nutrition, information, corporate citizenship and environmental policy. In 2016 the total recordable injury frequency rate decreased by 15.2 percent with improvements across most divisions and in 2017 this rate was decreased by 16 percent with improvements. The lost time injury frequency rate improved in 2016 by 1.6 percent and in 2017 with 1.4 percent. In 2016 for in the safety initiatives of the company Coles launched a program named ‘Mind your Health’ which is of 5 years plan for ensuring that workplace is focused on mental health. Similarly in 2017, initiatives were taken by WesCEF with the launch of ‘Safe person commitments’ for all the employees performing high risk task. In both the years Wesfarmers gender diversity was same as 55 percent women and 45 percent men was in the workforce and 44 percent of salaried roles and 56 percent of enterprise bargaining agreement or award roles were held by women (Meckenstock et. Al., 2016). Managing director, Richard Goyder thinks that it’s good to have more women in the senior management for the long term sustainability. Wesfarmers made its first public reconciliation action plan 2009 for the divisional indigenous engagement strategies. At 30^th June 2016 it has 3,329 indigenous team members which was representing 1.7 percent of its workforce and at the same date in 2017 it was 4,231 representing 2 percent of its workforce. This was 27 percent increase from the last year. In its last 6 years till 2016 it procured $47 million in services and products from indigenous suppliers. The sourcing of food, grocery, dairy and many other products were supplied by their supporting suppliers and Coles is its largest consumer business which supports in its supply chain. In its supplier list there was 15,000 supplier in the year 2016 and paid around $45 million to them and in the year 2017 it increased with the number of suppliers as 18,000 and paid them $46.4 million to them. In 2016 there were 3,200 factories were there in its audit programme which increased in the year 2017 with 5000 factories. With the support of our team members and customers its community contribution in the year 2016 was $110 million and this increased in 2017 with $ 132 million. In 2017 Wesfarmers created its partnership in the areas of medical research, indigenous program, health and education and with that improvement $8.8 million contributed to our partners. In their attention towards gender diversity they did not include the Torres Strait islander and aboriginal peoples (Klettner, Clarke, & Boersma 2014).

Efficiency ratio of Wesfarmers

Wesfarmers supports the SDGs which is sustainable development goals. In these goals mainly it should focus on to end injustice, inequality and poverty in respond to climate change by 2030. In the statement of CEO Richard Goyder in the coming year for the sustainable growth they need to improve nutrition with the promotion of sustainable agriculture. They should ensure sustainable management and availability of water and sanitation. With their ethical sources and community contribution they need to reduce inequality among the countries (Cheng, Green, & Ko, 2014). There is an urgent need to combat climate change with its climate change resilience. With its climate change resilience it should protect, promote and restore terrestrial ecosystem, forest, halt and reverse degradation, forest, combat desertification and halt biodiversity loss. They should provide opportunity for their people to develop their careers and enhance their job performance. They need to reduce their waste to landfills and water use wherever it is possible. They need to update and review their risk management approaches. They need to contribute on progressive rehabilitation program. There is need to utilize the reclaimed water which will reduce raw river water by five percent. They should continue to improve on year to year in safety performance for the wellbeing of people in its wesCEF program. Customers’ needs to be provided with giving them attractive discounts and excellent services (Popovic et. Al., 2017).

References

Meckenstock, J., Barbosa?Póvoa, A. P., & Carvalho, A. (2016). The wicked character of sustainable supply chain management: evidence from sustainability reports. Business Strategy and the Environment, 25(7), 449-477.

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

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.

Robb, A.M. & Robinson, D.T., 2014. The capital structure decisions of new firms. The Review of Financial Studies, 27(1), pp.153-179.

Uechi, L., Akutsu, T., Stanley, H. E., Marcus, A. J., & Kenett, D. Y. (2015). Sector dominance ratio analysis of financial markets. Physica A: Statistical Mechanics & its Applications, 421(1), 488-509.

Vogel, H. L. (2014). Entertainment industry economics: A guide for financial analysis. 5^th ed, USA Cambridge University Press.

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