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Performance and Financial Standing of Wesfarmers Limited

Question

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 fertilizers 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$ m

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 shown in Note ** to Table 14.1 in your prescribed text: (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.

Summary

This question belongs to finance and discusses about liquidity, efficiency, profitability and financing ratios.

Word count: 1980

 

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