QUESTION: Compare the annual reports of Wesfarmers and Woolworths Limited in the past three years and present the findings in a business report. Your business report should

(a) Evaluate the relative financial performance of the two groups based on the financial analysis results.

(b) Propose business strategies for the two groups respectively, including commenting on the recent announcement by Woolworths Limited to discontinue the Masters.

(c) Comment on the Coles' business decision to allow their customers to exchange the useless Dick Smith gift cards for Coles' own gift cards in 2015. Evaluate this decision from both the financial and ethical perspectives.

FINANCIAL ANALYTICS - GUIDELINES FOR ASSESSMENT

The assessment is on the evaluation of the performance of Woolworths Ltd and Wesfarmers Ltd for the financial years 2013, 2014 and 2015 based principally on information from the annual reports which is quantitative (the financial statements) and qualitative (chairman's report, managing director report, sustainability reports, notes to the financial statements etc).

For financial performance to be evaluated you need to make reference to statements that report financial performance over a period and those that capture financial position. The financial position of a company at a particular point in time influences future financial performance. These two concepts are intertwined. Consequently, I would like you to use the four financial statements that we have covered in this course as part of the data sources for analysis.

In order to calculate some measures of financial performance such as return on equity, information from the Balance Sheet at beginning of the year and end of the year is needed. Thus for you to fulfil the requirement to be able to calculate metrics for 2013 to 2015, you must collect data for four years rather than three i.e. from 2012 to 2015. Data is from Consolidated or Group Statements.
Since the assignment is focusing on three distinct sections I would prefer students to also prepare the report with these clearly and separately shown.

Part A.

• Here is where detailed analysis is needed. You are expected to calculate ratios using a variety of techniques that are in the lecture materials/textbook. These are Horizontal Analysis, Trend Analysis, Common size statements and Financial Ratio Analysis. In financial ratio analysis, FIVE categories of ratios must be calculated (in each category there is more than ratio). The more ratios calculated within each class the better as this enables you to get more information out of that exercise. The aim is to found out what the numbers tell us. I suggest you allocate the technical aspects equitably among the group members in terms of the calculations and also the interpretation of what the numbers mean. The interpretation could be helped to a significant degree by using the qualitative information in the annual reports and other information that you get from your research.

Where possible and data permitting, it would help to calculate segmental ratios and compare between the two companies.

Take note that the financial statements in the annual reports are very detailed. You need to simplify them when you capture them into EXCEL to allow you to perform your analytics. I would like to see all your EXCEL workings. To make life easy, I will provide you with instructions that would allow you to embed your workings as an Excel icon into your WORD document. Instead of putting into the Appendix the ratios calculations, I suggest in the Appendices you list the formulae that you used for calculations.

May I remind you that I need to see your calculations. Ratios that have been obtained from other sources which you have not calculated will result in marks being lost. However, for comparison purposes I will allow you to use industry average figures from external sources.

Part B

This should not be tackled as if it is not related to Part A. Remember Part A was evaluating the performance of Wesfamers and Woolworths. Your evaluation is likely to bring to the fore a number of issues with regards to the performance of the companies that needs addressing. For instance, one company could be struggling with high operating costs. What strategies would you suggest to address this? You would not get high marks if you just suggest general strategies ignoring those that address issues "discovered" in Part A.

If some segmental analysis had been performed in A and it helps in comparing Masters, the hardware business of Woolworths with Bunnings, then make reference to it in this section.

Part C

Also linked to findings in Part A. Given your evaluation of the performance of Wesfarmers in Part A, how do view the issue of the Gift cards? Are there areas of concern - what ethical considerations must be made?

In the Assessments folder I have uploaded a marking RUBRIC which you should use as an important "compass"" as you prepare this report. The Group Assessment is a rigorous exercise. Its importance is seen if you view this as a task you have been given by your Managing director to critically evaluate the performance of the two companies and present it in a 3000 words report. Your firm is an Asset management company and you would want to invest in one of them. Surely you must produce a solid piece of work which your boss would be proud of. The bar is also raised since this report is to be prepared by postgraduate students who should be more analytical and who are expected to display a high level of critical thinking.

I hope I have addressed most of the concerns students had. However, should there be any issues that arise as you begin to work on this project, please do not hesitate to shoot me an email. I would be happy to give guidance.