Sector Dominance Ratio Analysis Of Financial Markets

Current Ratio

The financial analysis of the Westfarmers Company was done in order to review the financial overview and performance of the company. The financial performance of the company has been impressive as the earnings of the company and the return created for the stakeholders for the company has been impressive or the company. The use of ratio analysis was done in order to review the company’s financial position and performance. The key ratio’s analysed as a prospect for the same were current ratio, quick ratio, cash flow, asset turnover, percentage return on equity and net profit margin. The key financial data taken for the financial performance was for the financial year 2015-16 and 2016-17. The performance of the company has been shown with the help of the trend analysis among the financial year (Almamy, Aston and Ngwa 2016).

The current ratio for the company states about the potential of the company in order to fulfil the current obligations/liabilities of the company. The formula for the current ratio is Current Ratio = Current Assets/Current Liabilities. The current ratio for the company is around 0.93 times in both the financial year under the trend period taken. The company should focus more on increasing its current assets of the company in order to service its obligations and remain liquidity in the daily operations of the business (Katsouras, et al. 2015).

The Quick ratio is also called the acid test ratio and is an important source for determining the liquidity of the company. The formula for the Quick Ratio is (Marketable securities+ Cash+ Trade Receivable)/Current Liabilities. The Quick ratio for the company is around 0.41 times in the year 2017, while the same was around 0.32 times in the year 2016 this shows that the liquid assets of the company such as cash and trade receivables of the company has increased substantially (Yu et al. 2014).

The cash flow ratio for the company Westfarmers has shown a significant amount of increase from the year 2015-16 to 2016-17. The formula for the Cash flow ratio is Cash Flow Ratio: Cash Flow from Operations/Current Liabilities. The ratio for the company showed an improvement from 0.32 times to 0.41 times. This shows the company has a sufficient amount of cash flowing from the operating source of their business to cater/service the current liabilities of the company (Rahman and Rahman 2017).

The asset turnover ratio for the Westfarmers Company shows the company efficiency in the utilisation of the assets of the company. The formula for the asset turnover ratio is Asset Turnover Ratio: Sales/ Average Total Assets*100. The efficiency and utilisation of the company has been static and non-volatile while showing growth in the utilisation and delivering better returns to the company assets. The ratio for the company for the year 15-16 was around 1.63 times which has grown to 1.69 times in the year 16-17 (Warrad and Al Omari 2015).

The percentage return on equity for the Westfarmers is calculated via the returns or the wealth the company is generating on the invested capital of the firm. The formula for the Percentage Return on Equity: (Net Income/ Shareholder’s Equity)*100. The return on equity I the key important financial ratio for determining the growth and sustainability of the company. The return on equity for the company has been around 1.77% in the year 15-16 but the same was around 12% in the year 16-17 a considerable amount of improvement for the year (Kijewska

Quick Ratio

The Net profit ratio for the company shows the amount of money the company is earning after paying of all of its expenses and operational expenses. The formula for Net Profit Margin Ratio: (Net Income/Net Sales)*100. The net profit is calculated by dividing the net amount of earning earned by the company after payment of all expenses and after accounting of all incomes by the company. The amount is a crucial factor for determining the importance of the survival and existence of the company in the long term. The ratio for the company has been around 0.62% in the year 15-16 and was around 4.20% in the year 16-17.  The growth in the numbers shows that the company has performed and delivered extensively positive returns for the company.

The financial position of Westfarmers has been consistent while the profitability of the company has shown a considerable amount of increase from the year 2015-16 to the year 2016-17. The financial position of the company and especially the profitability of the company has shown consistent return for the company. Thus we can conclude by the fact that indeed the company has increase its focus on creation of wealth for the stakeholders of the company. The increasing revenue and the decreasing expenses at the same time has made the company realise more profit and generate better returns for the company (Heikal, Khaddafi and Ummah 2014). However after assessing the financial position of the company overall we can say that company has tried to maintain consistency and sustainability in returns which is very good for the long term growth and increases the goodwill and credibility of the company in the market (Mwizarubi et al. 2016).

Creation of wealth along with creation of the long term values in an organisation is only possible if the company serves the community positively and actively. The sustainability report for the company shows the company incitement toward environment and society. The sustainability is an important and a critical role in board level and the corporate governance of the company (Cho et al. 2015). Assessment and sustainability of the opportunities and risk is the responsibility of the management of the company. The sustainability report for the company covers the social accounting, environmental considerations and the accounting for the same. Non-financial reporting and corporate social responsibility were some of the key factors highlighted in the company’s sustainability report (Loannou and Serafeim 2017).

The key material concerns and issues highlighted by the company were the social and the environmental effects that indirectly influences the decisions and the assessment of the stakeholders of the company.  The key focus which was seen in the company’s sustainable report was regarding the safety of employees, ethical outsourcing and the human rights as defined by the act, diversity in the base of gender among the employee base along with the change in the climate and the resistance for the same were the key factor discussed in the project (Silva, Lourenço and Branco 2017). The Westfarmers has always focused on the safety of the employees and the same is done by the company by giving a safety and a safe environment to work in. The main factor which was seen to be as a additive feature n the 2017 financial year report sustainable report was that the company has introduced key factors like equitable pay for all employee base of the company regardless of their gender. The important factors highlighted by the management of the company is regarding the compliance of the company in respect to the corporate governance and the ethical guidelines which the company should focus and maintain and follow it (Tricker and Tricker 2015). The sustainability report has also guidelines and a basic idea about the outsourcing of the company in terms of the relationship and the commitment with the suppliers of the company. The company also focuses on sourcing products responsibly and working with the suppliers of the company to enhance the environmental and social issues and practices. The community perspective of the sustainability report suggests that the company is making a positive and a strong contribution to the communities in which the company operates. The company is addicted by providing its customers with safe and secured products. The company has taken major steps towards preference and securing the environment under, which the company operates. The corporate governance for the company has remained robust and is backed by the ethical rules and guidelines set up by the company. The company places key interest in the safety of the people working in the company along with the type of employee base and the gender equality for the same. The company has reported some key factors in there sustainability reports from the year 2015-16 to the year 2016-17 that the management of the company has significantly reduced injuries employee faces while at working at sites by about 17%. There were certain increase in the safety initiatives taken down by the management of the company that reduces risks of injury among the employees. Gender balance, enhanced recruitment process and improving the talent management were some of the key factors accounted for in the sustainability report of the company. The company has also done some major contributions to the community organisation in different parts of Australia and New Zealand. The donation for the year by the company was around $73 million which was in excess of the fund contributed last year of about 59 million dollars. The company on an overall created 68 billion dollars amount of revenue and paying around 2 billion dollars’ worth of tax making it as the top 10 tax payers (Zahid and Ghazali 2015).

Cash Flow Ratio

Westfarmers on an overall basis plays a vital role in the society and through its employee by acting in the best interest of the company’s policy and guidelines set. The Westfarmers Company has maintained sustainability in the initiatives it takes in the form of environmental concern it has it has the factor of giving more to the nature than it takes (Abdel-Shafy and Mansour 2016). The company has the initiatives towards the people of the society and has several steps taken for the safety and for the rights of the people. The Westfarmers Company had several initiatives which are well laid down in accordance to the corporate governance structure of the company. The following up of ethical corporate governance guidelines also marks the company as ethically responsible (Sustainability.wesfarmers.com.au 2017). The company has not stopped or discontinued from any of the  initiatives it used to took as a part of its corporate sustainable report instead the company has stepped down towards new areas of overall development of the society and the environment where it can cater its service (Sadou, Alom and Laluddin 2017).

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