Financial Analysis of Woolworths Ltd

Running head: FINANCE AND ECONOMICS
Executive Summary

1
FINANCE AND ECONOMICS
Nature and Background of the Business
The business which is being considered for the assessment is Woolworths ltd which is
engaged in retail business and also runs supermarket chains in different regions of Australia
(Woolworthsgroup.com.au. 2019). The company is known to be a leading brand in the
supermarket industry and the only close competitor of the business if Coles Supermarket.
Together with Coles supermarket, Woolworths ltd accounts for more than 80% of the market
shares of Australia. As per the recent estimate of the market conditions, Woolworths
supermarket serves around 29 million customers in a week which shows the popularity of the
brand in the markets of Australia. The company is also dedicated towards meeting the needs of
the customers and also follows a sustainable approach in managing the operations of the business
(Marketscreener.com. 2019).
Analysis of Key Financial Ratios of the Business
Ratio Analysis 2018 2017
Ratio Company:
Woolsworth Ltd Formula
Absolu
te
Absolu
te
Categor
y
$
Values
$
Values
Liquidity
Current ratio
Current assets 7,181 7,121
Current liabilities 9,196 8,952
Ratio Ratio
0.78 0.80
Quick ratio
Highly liquid current assets 2,948 2,914
Current liabilities 9,196 8,952
(EXCLUDES INVENTORY AND PREPAID
ASSETS)
Ratio Ratio
0.32 0.33
Profitabil
ity
Return on ordinary
shareholders' equity
Profit after tax 1,795 1,593
Average ordinary shareholders' equity 10,849 9,876
Ratio Ratio
16.55% 16.13%
Return on assets
Profit after tax 1,795 1,593
Total assets 23,558 23,043
Ratio Ratio
7.62% 6.91%
Gross profit rate/margin
Gross profit 16,709 15,929
Sales revenue 56,726 54,841
Ratio Ratio
29.46% 29.05%
Profit margin Profit after tax 1,795 1,593

2
FINANCE AND ECONOMICS
Net Sales 56,726 54,841
Ratio Ratio
3.16% 2.90%
Cash return on sales
Net operating cash flow 2,930 3,122
Net Sales 56,726 54,841
Ratio Ratio
5.165% 5.693%
Solvency Debt to total assets
Total liabilities 12,709 13,167
Total assets 23,558 23,043
Ratio Ratio
53.95% 57.14%
Market
Earnings per share
(EPS)
Given Basic EPS disclosed in the income
statement
Ratio Ratio
123.40 110.80
Price-earnings ratio
Share price 26.29 26.50
EPS 1.23 1.11
Ratio Ratio
21 24
Financin
g Debt to Equity Debt/Equity 117% 133%
Interpretation
The table which is shown above reflects the key financial ratios which is shown for the
business of Woolworths ltd. The ratios are computed in the above table for a period of two years
The current ratio of the business has declined slightly which is clearly shown in the table
above which shows that the management of the company needs to think about improving the
liquidity structure of the business for the future of the business (Analytics 2019). the current ratio
of the business which forms part of the liquidity estimates show a slight decrease which suggest
that the business liquidity position of the business has somewhat fallen.
Some of the key ratios are shown in the profitability ratios of the business and the same
are also considered to be most important for judging the performance of the business during the
period. There has also been an increase in the gross profit and net profit margin of the business.
This shows that the focus of the management of the company is on profitability of the business
and has appropriately managed to enhance the same in the business. All the estimates of
profitability ratio for the business shows that the profits of the business have enhanced which is
mainly due to the significant increase in the profitability estimate of the business (Editorial