This report analyzes the financial performance and position of Woolworths Ltd., an Australia-based retail company. It includes a trend analysis of profitability, efficiency, and liquidity ratios, along with recommendations for investors.
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WOOLWORTHS – FINANCIAL ANALYSIS Executive Summery Thisreport is prepared to analysethe financialperformanceand thepositionof the WoolworthsLtd.TheWoolworthsLtd.isanAustraliabasedretailcompany.The Woolworths many departmental store across the Australia as well as in New Zealand. The objective of the paper is to analyse the financial performance of the company to recommends the investors for their investment decision. For this the report an analyse the financial performance of the company along with the various other factors of economical and non- financialaspectsoftheWoolworthsLtd.Thisreportusestheannualreportofthe Woolworths Ltd for the year 2018 to analyse the financial performance of the company. Introduction The report titled “Woolworths – Financial Analysis” is prepared to analyse the financial performance of the firm to recommends the potential investors of the company regarding their investment decision. The Woolworth is an Australian based retail company that is a listed company of Australian Stock Exchange. The paper also analyse the various other economical and non- financial performance of the company to measure its performance. The report determines the profitability, liquidity, efficiency and the market performance along with the various other aspect of the firm in the basis of the annual report of the company for the year 2018. The report concludes the analysis and provides recommendation to the potential investors of the firm. Discussion Significant changes in the financial result To analyse the change in the financial performance of the firm, the report perform the trend analysis of the financial data provided by the Woolworths Ltd. for the year 2018 (Woolworths 2019). The report perform the trend analysis for the year 2017 to 2018. The trend analysis reveals that there is various changes reported by the company in 2018 financial information compared to the financial information of 2017. The following are the some important ratios that is changed in the year 2018: - Profitability: -To ascertain the change in the profitability this report calculates the various profitability ratio of the Woolworths Ltd. The ratios are Net profit margin, Operating profit Margin, Return on Equity and Return on Asset (De Luca 2018). The Net profit margin of the firm shows growth in 2018 compared to 2017 as the Margin of the Net profit was 2.86 % that increased to 3.15 %. The operating profit margin of the company also increased in the 2018 and become 4.47 % from 4.18 % of 2017. The return on equity of the firm has become 0.165 in 2018 from the 2017s 0.161 registering a small increase. Return on Assets of the Woolworths Ltd. also reported minor increased in the 2018 and become 0.076 from the 2017’s 0.070. The overall profitability of the firm is increased in the year 2018 compared to 2017. This shows that the company is performing well and shows the potential to grow more in the near future.
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1WOOLWORTHS – FINANCIAL ANALYSIS The reason of these increases in the profitability of the firm is that the company more focused to decrease its cost of sale and controlled their other expenses. This change also reveals that the revenue of the firm is also increased (Riantani and Nurzamzam 2015). Efficiency: -To measure the efficiency of the firm, this report calculated the different efficiency ratios of the firm to determine the changes in the efficiency of the firm. The considered efficiency ratios are the Total Asset turnover ratio, Inventory turnover ratio, Debtors turnover ratio. The Total asset turnover ratio of the firm shows a minor decrease in the current year compare to the last year (Laitinen and Laitinen 2018). The asset turnover ratio of the firm is more or less same in both years as 2.42. The inventory turnover ratio of the firm reported the growth in the 2018 and become 9.68 compare to 2017’s 9.20. The debt turnover ratio of the firm is more or less same in both the year as the firm shows 0.1 decrees in the year 2018 and become 73.71 compare to 2017. The overall efficiency of the firm can be consider as good. As the firm does not reported the growth in the efficiency but at least maintain their efficiency and does not decreased its efficiency. The same performance in the efficiency of the firm may be because of the good and proper management of the firm (Demirgüç-Kunt and Levine 2018). The firm properly used their available resources to generate the revenue for the firm. Liquidity: -To determine the change in the liquidity of the firm, the firm again calculate some major liquidity ratio of the firm for both the 2017 and 2018 period. Here, the current ratio, Liquidity ratio and the Gearing ratio is consider as the liquidity ratio of the firm (Malamud and Zucchi 2019). The current ratio of the firm is more or less same as the firm reported the 0.01 decrease in the year 2018 compared to 2017. The liquidity ratio of the firm also show the same trend like current ratio and reported 0.01 decrease in the year 2018 compared to 2017. The gearing ratio of the firm reported the decrease of 0.08 in the 2018 compare to 2017. The overall liquidity of the firm is decrease in the year 2018 but the amount of change is minor and acceptable. The reason behind the almost same performance of the liquidity is that the liability of the firm is changed in the same value of the change in assets (Hart and Zingales 2015). That does not affect the differences between the asset and the liability of the firm. Conclusion The ratio and the trend analysis of the Woolworths Ltd reveals that the profitability of the firm is increased in the year 2018 compared to the 2017. The other financial performance of the company also shows the growth in the 2018 for example the net profit of the firm is increased by 12.65 %. Hence, thisreport recommendsthe investorsto invest in the Woolworths Ltd. As the company showing growth in the profitability and assets while the current liability of the firm is decreasing. This is good for the firm and it can be expected that the firm will also grow further in the near future.
2WOOLWORTHS – FINANCIAL ANALYSIS References De Luca, P., 2018. Company Profitability Analysis. InAnalytical Corporate Valuation(pp. 43-76). Springer, Cham. Demirgüç-Kunt, A. and Levine, R., 2018.Finance and growth. Edward Elgar Publishing Limited. Hart,O.andZingales,L.,2015.Liquidityandinefficientinvestment.Journalofthe European Economic Association,13(5), pp.737-769. Laitinen, E.K. and Laitinen, T., 2018. Financial reporting: profitability ratios in the different stages of life cycle.Archives of Business Research,6(11). Malamud, S. and Zucchi, F., 2019. Liquidity, innovation, and endogenous growth.Journal of Financial Economics,132(2), pp.519-541. Riantani, S. and Nurzamzam, H., 2015. Analysis of Company Size, Financial Leverage, and Profitability and It’s Effect to CSR Disclosure.Jurnal Dinamika Manajemen,6(2). Robinson, T.R., Henry, E., Pirie, W.L. and Broihahn, M.A., 2015.International financial statement analysis. John Wiley & Sons. Woolworths(2019).[online]Woolworthsgroup.com.au.Availableat: https://www.woolworthsgroup.com.au/icms_docs/195396_annual-report-2018.pdf [Accessed 7 Jun. 2019].