Financial Evaluation Study Of Woolworths Supermarkets

Added on - 01 Mar 2020

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Accounting andfinancial management
The present study is based on a financial evaluation of Woolworths Supermarkets byconsidering financial and nonfinancial factors of the company. Cited business is primarilyengaged in retailing of groceries along with other household items. At present, the companyis operating with more than 111,000 employees for delivering their vast product rangeinclusive ofdifferent levels of generic brands (Gibson, Michayluk & Van de Venter, 2013).The company prepares their financial statements by considering Australian AccountingStandards to assist stakeholders in making rational decisions. Further, viable assumptions hadmade regarding disclosure of their operational activities.Financial analysis of the company shows that profitability of the company is significantlyreducing due to which their return on assets and return on equity is adversely affected.Consequently, net worth has been reduced due to a reduction in worth of non-current assets.To cope up with the current financial issues; the company had modified their capital structureby increasing non-current debt and reducing debt (Gitman, Juchau & Flanagan, 2015).However; considered strategy is not viable as per their current business situation as they arefacing losses. Thus the company is required to enhance equity to reduce their financialobligations and pay the financial cost as per their profitability status.Through the analysis it has been identified that Plant, property and equipment were the keyfixed assets of the company.Fixed Assets and investments worth $8371.3 million reduced,$1,793 million driven by important items.Closing inventory worth $4,558.5 million alsoreduced.Woolworths recognized impairment of plant, property and equipment of $201.3million pertaining to significant items from continued operations, and $1431.8 millionpertaining to discontinued operations.Woolworths also recognized a liability toward benefitsthat accrue to the employees regarding long service leave and annual leave (WoolworthsGroup, 2016).Property and plant are valued at cost minus amortization/accumulateddepreciation and impairment losses.Inventories are measured at the lesser of net realizablevalue and costA similar result has been shown by ratio analysis of the company. Profitability ratios areshowing declining trend which shows reducing profit earning capacity of the business.However, operational efficiency has been maintained by a company which can be noticedthrough receivable turnover and asset turnover ratio. The company had maintained stability inthis ratio along with attaining slow pace growth (Woolworths Annual report, 2016). Further,presently company does not have appropriate working capital management strategies as their
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