Financial Performance Analysis of Woolworths Limited

The assignment content presents a financial ratio analysis of Woolworths Limited for the years 2015-2017. The analysis reveals that the company has experienced a decline in its overall revenue, gross income, and net margin over the three-year period. Additionally, the debt-to-equity ratio has decreased, indicating that the company has sufficient debt to finance its assets relative to shareholder equity. The interest coverage ratio has also decreased, suggesting that the company may struggle to pay its interest expenses on outstanding debt.

Running head: FINANCIAL STATEMENT ANALYSIS
Financial Statement Analysis of Woolworths
Name of the University:
Name of the Student:
Authors Note:

1FINANCIAL STATEMENT ANALYSIS
Executive Summary
The objective of the paper was to conduct financial ratio analysis along with trend and horizontal
analysis of the company for evaluating the financial position of the organization. It was gathered
from the ratio analysis of Woolworths Limited that the organisation has experienced a significant
decrease in its overall revenue, which has resulted in decreasing gross income of the company
over the three-year period. Net margin of the company is deemed to decrease over past three
years which signifies. ROE of the company is observed to diminish over past three years which
signifies that the company is not able to gather enough profit each dollar of common
stockholders' equity generates. ROA of the company is observed to decrease over the past three
years which signifies that the company employs its assets in gathering profits.

2FINANCIAL STATEMENT ANALYSIS
Table of Contents
1. Introduction..................................................................................................................................3
2. Vertical/ Trend Analysis..............................................................................................................3
3. Horizontal analysis......................................................................................................................8
4. Ratio analysis.............................................................................................................................14
5. Conclusion.................................................................................................................................21
References......................................................................................................................................22

3FINANCIAL STATEMENT ANALYSIS
1. Introduction
Woolworths Group is among some renowned retail organisations in Australia along with
New Zealand. The company initiated its first retail shop on 22nd September 1924 having selected
capital of £85,000 attaining 15,000 shares initial offering to people (Woolworthsgroup.com.au
2017). The company offers distinct retail products types like groceries, liquor, magazines, DVDs
along with stationery items all through 980 stores within Australia. The objective of the paper is
to conduct financial ratio analysis along with trend and horizontal analysis of the company for
evaluating the financial position of the organization.
2. Vertical/ Trend Analysis
Trend analysis of income statement:
Particulars
2017 (in million
$)
2016 (in million
$)
2015 (in million
$) 2015-2016
2016-
2017
Continuing
Operations:
Revenue from goods and
services sales 58,085 58,812 59,812.00 -1.67% -1.25%
Other operating revenue 189.80 189.30 179.30 5.58% 0.26%
Total operating
revenue 58,275.50 59,001.30 59,991.30 -1.65% -1.25%
Cost of sales 0.23% -0.64%

4FINANCIAL STATEMENT ANALYSIS
42,676.70 42,950.90 42,851.90
Gross profit 15,598.80 16,050.40 17,139.40 -6.35% -2.90%
Other revenue 277.50 270.10 270.10 0.00% 2.67%
Branch expenses 11,010.70 10,079.20 10,079.20 0.00% 8.46%
Administration expenses 3,260.40 2,691.40 2,791.40 -3.58% 17.45%
Earnings before
interest and tax 1,605.20 3,549.90 4,538.90 -21.79% -121.15%
Financing costs 245.60 253.30 254.30 -0.39% -3.14%
Profit before income
tax 1,359.60 3,296.60 4,284.60 -23.06% -142.47%
Income tax expense 519.50 995.80 996.80 -0.10% -91.68%
Profit from continuing
operations for the
period 840 2,300 3,287.80 -30.02% -173.87%
Loss from discontinued
operations after tax 3,188 163 164.40 -0.61% 94.87%
Profit/loss over the (2,347) 2,137 -31.57% 191.03%

5FINANCIAL STATEMENT ANALYSIS
period 3,123.40
Earnings per share (97.70) 170.80 171.80 -0.58% 274.82%
From the above table, it could be stated that the organisation has experienced a
significant decline in its overall revenue, which has resulted in fall in its gross income over the
three-year period (Ball 2013). However, there is an increase in overall operating expenses, which
has lead to the fall in gross income and this, in turn, has resulted in negative net income in 2017.
Trend analysis of balance sheet statement:
Particulars
2017 (in million
$)
2016 (in million
$)
2015 (in million
$)
2015-
2016
2016-
2017
Current Assets:
Cash and cash equivalents 948.10 1,333.40 1,233.40 7.50% -40.64%
Trade and other receivables 763.90 885.20 875.20 1.13% -15.88%
Inventories 4,558.50 4,872.20 4,772.20 2.05% -6.88%
Other financial assets 56.00 188.50 178.50 5.31% -236.61%
Assets held for sale 1,100.50 381.60 471.60 -23.58% 65.32%

6FINANCIAL STATEMENT ANALYSIS
Total current assets 7,427.00 7,660.90 7,530.90 1.70% -3.15%
Non-Current Assets:
Trade and other receivables 85.90 116.70 126.70 -8.57% -35.86%
Other financial assets 638.20 497.60 487.60 2.01% 22.03%
Property, plant and
equipment 8,262.80 10,062.10 11,062.10 -9.94% -21.78%
Intangible assets 5,978.30 6,244.50 6,344.50 -1.60% -4.45%
Deferred tax assets 1,110.00 755.00 745.00 1.32% 31.98%
Total non-current assets 16,075.20 17,675.90 18,765.90 -6.17% -9.96%
Total assets 23,502.20 25,336.80 26,296.80 -3.79% -7.81%
Current Liabilities:
Trade and other payables 6,266 6,181 6,281.20 -1.62% 1.35%
Borrowings 490.70 1,645.40 1,645.40 0.00% -235.32%
Current tax payable 0.00% -155.44%

7FINANCIAL STATEMENT ANALYSIS
39.50 100.90 100.90
Other financial liabilities 120.30 161.20 161.20 0.00% -34.00%
Provisions 1,873.50 1,079.90 1,079.90 0.00% 42.36%
Liabilities related with
assets for sale 202 - - 100.00%
Total current liabilities 8,992 9,168 9,268.60 -1.09% -1.96%
Non-current liabilities:
Borrowings 3,870 3,079 3,179.30 -3.25% 20.45%
Other financial liabilities 179.80 1,075.10 1,175.10 -9.30% -497.94%
Provisions 1,382.40 599.40 589.40 1.67% 56.64%
Other 294.50 282.40 272.40 3.54% 4.11%
Total non-current
liabilities 5,727.60 5,036.20 5,216.20 -3.57% 12.07%
Total liabilities 14,720.30 14,204.80 14,484.80 -1.97% 3.50%
Net assets -6.11% -26.76%

8FINANCIAL STATEMENT ANALYSIS
8,781.90 11,132.00 11,812.00
Equity:
Share capital 5,347.00 5,064.90 5,164.90 -1.97% 5.28%
Shares held in trust (94.80) (155.90) (165.90) -6.41% -64.45%
Reserves 93.90 95.10 96.10 -1.05% -1.28%
Retained earnings 3,124.50 5,830.10 5,730.10 1.72% -86.59%
Non-controlling interests 311.30 297.80 287.80 3.36% 4.34%
Total equity 8,781.90 11,132.00 11,113.00 0.17% -26.76%
From the above table, it could be evaluated that the current assets of the organisation
have fallen by -3.15% in 2017 and the trend is inherent in case of non-current assets as well. This
has resulted in decline in the overall asset base of the organisation (Ball 2013).
3. Horizontal analysis
Horizontal analysis of income statement:
Particulars 2017 (in Percentage 2016 (in Percent 2015 (in Percent

9FINANCIAL STATEMENT ANALYSIS
million $) million $) age million $) age
Continuing
Operations:
Revenue
gathered from
goods and
services sale
58,
085
6914% 58,
812.00
6914% 59,
812.00
7120%
Other operating
revenue 189.80
23%
189.30
23%
179.30
6%
Total operating
revenue
58,
275.50
6937% 59,
001.30
6937% 59,
991.30
-2555%
Cost of sales 42,
676.70
5080% 42,
950.90
5080% 42,
851.90
5101%
Gross profit 15,
598.80
1857% 16,
050.40
1857% 17,
139.40
2040%
Other revenue
277.50
33%
270.10
33%
270.10
32%
Branch expenses 11,
010.70
1311% 10,
079.20
1311% 10,
079.20
1200%
Administration
expenses
3,
260.40
388% 2,
691.40
388% 2,
791.40
332%
Earnings before
interest and tax
1,
605.20
191% 3,
549.90
191% 4,
538.90
540%

10FINANCIAL STATEMENT ANALYSIS
Financing costs
245.60
29%
253.30
29%
254.30
30%
Profit before
income tax
1,
359.60
162% 3,
296.60
162% 4,
284.60
510%
Income tax
expense 519.50
62%
995.80
62%
996.80
119%
Profit for the
period from
continuing
operations
840.10
100% 2,
300.80
100% 3,
287.80
391%
Loss from
discontinued
operations after
tax
3,
188.00
379%
163.40
379%
164.40
20%
Profit/loss for
the period
(2,
347.90)
-279% 2,
137.40
-279% 3,
123.40
372%
Earnings per
share (97.70)
-12%
170.80
-12%
171.80
20%
Horizontal analysis of income statement of Woolworths Limited indicated that over the
years from 2015 to 2017 the increased or decreased percentage trend can be observed. Each and
every item on the income statement is indicating an increased trend in percentage except Profit
for the period from continuing operations that indicates a decreasing trend (Bazley et al. 2013).
This indicates that the company is making losses over the years from 2015 to 2017.

11FINANCIAL STATEMENT ANALYSIS
Horizontal analysis of balance sheet statement:
Particulars 2017 (in
million $)
Percentage 2016 (in
million $)
Percentag
e
2015 (in
million $)
Percentag
e
Current Assets:
Cash and cash
equivalents 948.10
13% 1,
333.40
17% 1,
233.40
16%
Trade and other
receivables 763.90
10%
885.20
12%
875.20
12%
Inventories 4,
558.50
61% 4,
872.20
64% 4,
772.20
63%
Other financial
assets 56.00
1%
188.50
2%
178.50
2%
Assets held for sale 1,
100.50
15%
381.60
5%
471.60
6%
Total current
assets
7,
427.00
32% 7,
660.90
30% 7,
530.90
29%
Non-Current
Assets:
Trade and other
receivables 85.90
1%
116.70
1%
126.70
1%
Other financial
assets 638.20
4%
497.60
3%
487.60
3%
Property, plant and
equipment
8,
262.80
51% 10,
062.10
57% 11,
062.10
59%
Intangible assets 5, 37% 6, 35% 6, 34%

12FINANCIAL STATEMENT ANALYSIS
978.30 244.50 344.50
Deferred tax assets 1,
110.00
7%
755.00
4%
745.00
4%
Total non-current
assets
16,
075.20
68% 17,
675.90
70% 18,
765.90
71%
Total assets 23,
502
25,
336
26,
296.80
Current
Liabilities:
Trade and other
payables
6,
266
70% 6,
181.20
618120% 6,
281.20
69%
Borrowings
490.70
5% 1,
645.40
164540% 1,
645.40
18%
Current tax payable
39.50
0%
100.90
10090%
100.90
1%
Other financial
liabilities 120.30
1%
161.20
16120%
161.20
2%
Provisions 1,
873.50
21% 1,
079.90
107990% 1,
079.90
12%
Liabilities related
with assets for sale 202
2%
- -
Total current
liabilities
8,
992
157%
1.00
9,
168.60
77%
Non-current
liabilities:

13FINANCIAL STATEMENT ANALYSIS
Borrowings 3,
870.90
68% 3,
079.30
61% 3,
179.30
61%
Other financial
liabilities 179.80
3% 1,
075.10
21% 1,
175.10
23%
Provisions 1,
382.40
24%
599.40
12%
589.40
11%
Other
294.50
5%
282.40
6%
272.40
5%
Total non-current
liabilities
5,
727.60
39% 5,
036.20
100% 5,
216.20
36%
Total liabilities 14,
720.30
257% 5,
037.20
25% 14,
384.80
121%
Net assets 8,
781.90
153% 20,
299.60
11,
912.00
Equity:
Share capital 5,
347.00
61% 5,
064.90
45% 5,
164.90
46%
Shares held in trust
(94.80)
-1% (
155.90)
-1% (
165.90)
-1%
Reserves
93.90
1%
95.10
1%
96.10
1%
Retained earnings 3,
124.50
36% 5,
830.10
52% 5,
730.10
52%
Non-controlling
interests 311.30
4%
297.80
3%
287.80
3%

14FINANCIAL STATEMENT ANALYSIS
Total equity 8,
781.90
100% 11,
132.00
1 11,
113.00
1
Horizontal analysis of balance sheet of Woolworths Limited indicated that over the years
from 2015 to 2017 the increased or decreased percentage trend can be observed. Each and every
item on the balance sheet is indicating an increased trend in percentage except, shares held in
trust, retained earnings, other financial liabilities that indicate a decreasing trend (Cheng,
Dhaliwal and Zhang 2013). This indicates that the company is making losses over the years from
2015 to 2017.
4. Ratio analysis
Profitability ratios:
Profitability Ratios:-
Particulars Details
Woolworths Group
2017 2016 2015
Revenue A 58,275.50 59,001.30 59,991.30
Operating profit B 1,605 3,549 4,538.90
Net profit C (2,347) 2,137 3,123.40
Shareholders' equity D 8,781.90 11,132.00 11,113.00
Opening total assets E 25,336.80

15FINANCIAL STATEMENT ANALYSIS
26,296.80 24,205.00
Closing total assets F 23,502.20 25,336.80 26,296.80
Average total assets
G=(E+F)/
2 24,419.50 25,816.80 25,250.90
Operating margin B/A 2.75% 6.02% 7.57%
Net margin C/A -4.03% 3.62% 5.21%
ROE C/D -26.74% 19.20% 28.11%
ROA C/G -9.61% 8.28% 12.37%
Table 1: Profitability ratios of Woolworths Limited for the years 2015-2017
(Source: Woolworthsgroup.com.au 2017)
Operating margin of the company is observed to decrease over the past three years. This
indicates that the company is not able to accumulate enough profits to maintain its profitable
position. Net margin of the company is observed to decrease over the past three years which
signifies (Cohen et al. 2013). ROE of the company is gathered to decrease over past three years
which signifies that the company is not able to gather enough profit each dollar of common
stockholders' equity generates. ROA of the company has decreased over past three years which
signifies that the company employs its assets in gathering profits.

16FINANCIAL STATEMENT ANALYSIS
Operating
margin Net margin ROE ROA
-30.00%
-20.00%
-10.00%
0.00%
10.00%
20.00%
30.00%
40.00%
Profitability ratios of Woolworths
Limited for 2015-2017
2017
2016
2015
Figure 1: Profitability ratios of Woolworths Limited for the years 2015-2017
(Source: Woolworthsgroup.com.au 2017)
Liquidity ratios:
Liquidity Ratios:-
Particulars Details
Woolworths Group
2017 2016 2015
Current assets A 7,427 7,660 7,530.90
Inventories B 4,558.50 4,872.20 4,772.20
Current liabilities C 8,992 9,168 9,268.60
Current ratio A/C 0.83 0.84 0.81
Quick ratio (A-B)/C 0.32 0.30 0.30
Table 2: Woolworths Limited’s Liquidity ratios for years 2015-2017

17FINANCIAL STATEMENT ANALYSIS
Current ratio of the company is observed to decrease over the past three years. This
signifies that company is not capable to maintain its working capital to address its debts. Quick
ratio of the company is observed to increase over the past three years which signifies that the
company is not capable to maintain enough working capital to address all its liabilities (Dehaan,
Hodge and Shevlin 2013).
(Source: Woolworthsgroup.com.au 2017)
2017 2016 2015
Woolworths Group
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
Liquidity ratios of Woolworths for
2015-2017
Current ratio
Quick ratio
Figure 2: Liquidity ratios of Woolworths Limited for the years 2015-2017
(Source: Woolworthsgroup.com.au 2017)
Efficiency ratios:
Efficiency Ratios:-
Particulars Details
Woolworths Group
2017 2016 2015
Revenue A

18FINANCIAL STATEMENT ANALYSIS
58,275.50 59,001.30 59,991.30
Opening receivables B 885.20 857.00 617.00
Closing receivables C 763.90 885.20 875.20
Average receivables D = (B+C)/2 824.55 871.10 746.10
Opening Inventories E 4,872.20 4693.2 4694.2
Closing Inventories F 4,558.50 4,872.20 4,772.20
Average inventories G = (E+F)/2 4,715.35 4,782.70 4,733.20
Cost of Sales H 42,676.70 42,950.90 42,851.90
Inventory Turnover 365/(H/G) 40.33 40.64 40.32
Debtors' Turnover 365/(A/D) 5.16 5.39 4.54
Table 3: Efficiency ratios of Woolworths Limited for the years 2015-2017
(Source: Woolworthsgroup.com.au 2017)
Inventory Turnover of the company is observed to decrease over the past three years.
This indicates that the company is able to manage effectively all its inventory over a period.

19FINANCIAL STATEMENT ANALYSIS
Debtors' Turnover of the company is observed to decrease over the past three years which
signifies. This indicates that the company is not that capable to manage effectively all its assets
over a time period (Frias‐Aceituno, Rodríguez‐Ariza and Garcia‐Sánchez 2014).
2017 2016 2015
Woolworths Group
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
45.00
Efficiency ratios of Woolworths
for 2015-2017
Inventory Turnover
Debtors' Turnover
Figure 3: Efficiency ratios of Woolworths Limited for the years 2015-2017
(Source: Woolworthsgroup.com.au 2017)
Solvency ratios:
Solvency Ratios:-
Particulars
Detail
s
Woolworths Group
2017 2016 2015
Non-current liabilities A 5,727.60 5,036.20 5,216.20
Equity B 8,781.90 11,132.00 11,113.00
Operating profit C 1,605.20 3,549.90 4,538.90
Interest expense D 245.60 253.30 254.30
Debt-to-equity A/B 0.65 0.45 0.47

20FINANCIAL STATEMENT ANALYSIS
Interest coverage C/D 6.54 14.01 17.85
Table 4: Solvency ratios of Woolworths Limited for the years 2015-2017
Debt-to-equity of the company is observed to decrease over the past three years. This
signifies the company has enough debt in order to finance assets relative to value amount
indicated in shareholders’ equity. Interest coverage of the organization is observed to decrease
over past three years which signifies that the organization the company is not that capable to pay
their interest expenses on outstanding debt (Hail 2013).
(Source: Woolworthsgroup.com.au 2017)
2017 2016 2015
Woolworths Group
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00
20.00
0.65 0.45 0.47
6.54
14.01
17.85
Solvency ratios of Woolworths
for 2015-2017
Debt-to-equity
Interest coverage
Figure 4: Solvency ratios of Woolworths Limited for the years 2015-2017
(Source: Woolworthsgroup.com.au 2017)