Accounting and Finance - Woolworths company

Accounting and
finance

Accounting and Finance 1
Executive Summary
The main purpose of this paper is to understand the topic of financial statement analysis. In this
paper, Woolworths has been taken into consideration to summarize the financial performance. In
this report, ratio analysis, horizontal analysis, and vertical analysis have been used to summarize
the financial position. As per the Ratio Analysis, it has been found that financial performance of
Woolworths has been decreases as compare to Wesfarmers. Horizontal analysis states that
Woolworths cost of goods sold has been increases as compare to revenue. Vertical Analysis
depicts that the company invests the less amount in current assets as compare to fixed assets due
to which its liquidity situation has been affected.

Accounting and Finance 2
Contents
Introduction......................................................................................................................................3
Ratio Analysis..................................................................................................................................3
Horizontal Analysis.........................................................................................................................7
Vertical Analysis.............................................................................................................................8
Conclusion.......................................................................................................................................8
References......................................................................................................................................10
Appendix-1....................................................................................................................................11
Appendix-2....................................................................................................................................16

Accounting and Finance 3
Introduction
Financial analysis is the process of analyzing, summarizing and evaluating the financial
position of the company. There are numerous ways in which the company can determine the
financial situation such as Ratio Analysis, Horizontal Analysis, Vertical Analysis and the others.
These techniques helps the company to summaries the financial performance so that it can
improve its position by developing strategies (Robinson, 2020). In this paper, the discussion is
based on the topic of “financial analysis of the company”. Woolworths has been taken into
consideration to assess the financial performance in Australian market. In this paper, the
financial statements of 2018 and 2019 have been selected to evaluate the financial position of the
firm.
Woolworths is a supermarket chain of Australia that provides the grocery services. It was
founded in the year 1924. It is one of the leading companies of Australian supermarket chain.
Wesfarmers is one of its main competitors that have been also analyzing to compare the financial
situation (Woolworths Group, 2018).
Ratio Analysis
Profitability Ratio
Ratio's
Wesfar
mers
Wesfar
mers
Woolwo
rths
Woolwo
rths
AUD in Million 2018 2019 2018 2019
Profitability

Accounting and Finance 4
Ratio
(Net) Profit
margin (a/b) Net Profit 1197 5510 1724 2693
Net Sales 66594 27818 56726 59984
2% 20% 3% 4%
Gross Profit
Margin Gross Profit 20876.00 10578.00 16470.00 17442
Net Sales 66594.00 27818.00 56726.00 59984.00
31% 38% 29% 29%
Return on Assets Net income 1197 5510 1724 2693
Total assets 36933 18333 23558 23491
3% 30% 7% 11%
Return on Equity
Net income after preference
dividends 1197 5510 1724 2693
Average common stock
holder's equity 22238 18981 5835 5941.5
5% 29% 30% 45%
According to profitability ratio of Woolworths, it has been seen that the ability of the firm
to create the revenue has been increases. The net profit ratio of the firm is increasing from 3% to

Accounting and Finance 5
4% in the year 2018 to 2019. But it is observed that net profit margin of Wesfarmers has been
increases with the high percentage such as 2% to 20%. These depicts that Wesfarmers has been
more capacity to generate the revenue.
This graph of Wesfarmers represents that Return on Assets is high as compare to Return
on Equity. Return on Assets depicts that the company uses the assets properly in order to
generate the profit. The ratio of Return on Assets has been increases from 3% to 30% in the year
2018 to 2019. It has been determined that Return on Equity ratio has been increases from the
previous year such as 5% and 29% in 2018 and 2019 respectively. Woolworths gives high
amount of return to shareholders as compare to Wesfarmers such as 30% to 45%. The