Assignment questions

You are required to examine the annual reports of both Wesfarmers Ltd and Woolworths Ltd for 2016 and present your answers to the following questions in the form of an executive report which will cover quantitative performance elements in a logical cohesive format.

1. Outline the method used in presenting the statement of cash flows for each company. If the direct method is used, identify whether an appropriate reconciliation has been reported in the notes to the accounts.

2. Examine the information in relation to cash flow from operating activities, cash flow from investing activities and cash flow from financing activities retrieved from the Wesfarmers Ltd and Woolworths Ltd financial reports.

3. Undertake an analysis of the cash flow information given for Wesfarmers Ltd and Woolworths Ltd. Include in this analysis the computation of measuring Cash Adequacy Ratio, Cash Flow Ratio (Liquidity), Debt Coverage Ratio (Solvency), Cash Flow to Sales Ratio (Profitability).

4. Based on the analysis, you are required to make conclusions and recommendation which will answer the following questions:
a. Which business would you expect to be a better short-term credit risk.
b. Do you think both companies have adequate cash resources?
c. Assess both companies' ability to survive in the longer term.
d. Which company is better at generating cash from their sales revenue?