Financial Analysis

Analysis

Q1.

Income Statement:

Income $

Service revenue 168,000

Accounts receivable 8,200

Interest3200

Total income 179,400

Expenses

Rent expense 46,600

Other expenses 10,600

Salaries expense 71,800

Supplies expense 9,400

Total expenses (138,400)

Net profit 27,800

Balance Sheet:

Current Assets $

Cash at bank 18,600

Non-Current Assets

Office furniture 54,000

Motor vehicles 72,400

Total assets 145,000

Current Liabilities

Accounts payable 9,000

Non-Current Liabilities

Bank loan 20,000

Advance payment5000

Payables30000

Total liabilities 64,000

Net Assets 81,000

Owner's Equity

Capital 81,000

Total equity 145,000

Q2.

Part 1.

Wesfarmers was developed in 1914 as a Western Australian farmer's cooperative. It is one of the largest Australian companies (Wesfarmers). It generates profit from its diversified businesses like; departmental stores and supermarkets, Office supplies and home improvement, insurance, coal mining, energy, chemical and fertilizers, and industrial and safety products (Wesfarmers). Small descriptions of Wesfarmers business are as follows:

Coles sector was developed in November 2007. This sector operates more than 2200 retail outlets across Bi-Lo supermarkets and Coles (Wesfarmers). Coles has many other sub units namely: Coles, Coles online, Coles liquor and Coles Express.

Home improvement and office supplies sector was developed in November 2007. Under this division Bunnings and Officeworks are the two giant retailers in Australia and New Zealand (Wesfarmers).

Target division was formed as a result of acquisition of the Coles group in November 2007. It is a leading destination of fashionable home wares and clothing (Wesfarmers).

Kmart is a giant retailer with more than 185 stores, created in November 2007. Wesfarmers resources are a leading metallurgical coal producer and an open-cut miner. This sector operates Curragh mine and with a 40% of share of Bengalla (Wesfarmers).

Wesfarmers Insurance provides risk management and insurance to cooperates, non-profit organization, small medium size business and individuals across New Zealand, Australia and UK (Wesfarmers).

Chemicals, fertilizers and energy division operate fertilizers, chemical and gas businesses that service the variety of sectors in both international and domestic markets. Wesfarmers industrial and safety unit are the leading divisions of Australia and New Zealand (Wesfarmers).

Part 2.

Income Statement:

Sales of good = 55897

Earning before interest and tax = 3044

ROA = Net income/ total asset

2012 = (2126/42312) = 0.05

2011 = (1922/40814) = 0.04

Profit Margin (Net Income/ Revenue)*100

2012 = (2026/58080)*100 = 3.66

2011 = (1922/51887)*100 = 3.70

Vertical analysis of Income Statement 2012

See Appendix

Return on assets of Wesfarmers in 2012 was 0.05, and in 2011 was 0.04, which represent that the company has improved its Return on assets ratio. ROA indicates that the earnings that generate form the capital. Assets of a firm comprise of both equity and debts. Wesfarmers ROA is relatively improved as compared to 2011. As far as vertical analysis of Income statement is concerned, it shows that expenses are -98% of its revenue which seems controllable. Raw material is in negative 68.7% of revenues. The purpose of doing vertical analysis of the income statement is to identify each and individual terms as a percentage of a large scale. Depreciation and amortization are also negative -1.78%. The profit of Wesfarmers is 3.80% of the sale of goods (Wesfarmers), which is supposed to be ...