Financial Ratio Analysis of Woolworths Group: Inventory Management and Accounting Quality

Accounting for
Decision Making
Scenario Analysis

EXECUTIVE SUMMARY
This report focuses on the Woolworths group's major financial ratios. The company's
accounting quality and analysis are also examined. It also makes financial performance-based
suggestions to the company. Woolworths Group appears to be a well-known supermarket
chain in Australia, with a significant presence across the entire industrial sector. The
formulation of a clear and straightforward overview of a wide range of organisational aspects
will be aided by such data. Condensing information from a number of credible sources,
several portions were constructed. Ratio analysis reveals insights by comparing line-item data
from a company's financial records.
The main objective of this business report is to evaluate Woolworths Group inventory
management and discuss aspects that accountants should consider when developing
accounting standards for the organisation. Through this, the company's strengths and
shortcomings based on an examination of the 2021 Woolworths annual report, industry
statistics, and market data can be identified. Woolworth's implementation of the periodic
inventory system is highlighted in the study. The cost assumption will also be explored,
particularly in terms of its influence on the profit and loss statement.

Table of Contents
EXECUTIVE SUMMARY........................................................................................................2
INTRODUCTION......................................................................................................................4
PART 2.......................................................................................................................................4
Ratio Analysis........................................................................................................................4
Profitability Ratio...................................................................................................................4
Liquidity Ratio.......................................................................................................................5
Solvency Ratio.......................................................................................................................6
Recommendations..................................................................................................................7
Reasons for increase and decrease in the cash flow of the Woolworth Group......................7
CONCLUSION..........................................................................................................................7
REFERENCES...........................................................................................................................9
APPENDICE............................................................................................................................10

INTRODUCTION
Woolworths Group appears to be a publicly traded private company that produces
revenue through the retail sale of supermarket food and other items on the Australian
Securities Exchange. Woolworths appears to be a large Australian supermarket and food
store network that the Woolworths Group controls directly. Woolworths has been able to
recruit over 1.5 million customers and supply them with a service that is available across all
of Australia thanks to the company's strategy and operations. Financial account and data
analysis is essential for both external and internal stakeholders of the organisation. Ratio
analysis is used to examine the statistics from the income statement and balance sheet. Each
stakeholder has different goals when it comes to financial success (Ayrancı, Küçükceran and
Dundar, 2021). This report focuses on the analysis of some of the fiscal ratios. It also makes
financial performance-based suggestions to the company. It also mentions the reasons due to
which the increase or decrease in the cash flow occurs.
PART 2
Ratio Analysis
The practise of examining the relationship between two or more financial data
components from a company's financial statements is known as financial ratio analysis. It's
most commonly utilised to make fair comparisons over time and between different
organisations or industries. It's important to keep in mind that accounting measures can only
be appropriately assessed if the monetary statements on which they're based adhere to the
same set of accounting principles. This ensures that the rudimentary bookkeeping entries
correspond to the same financial statement line items at all times. Financial ratios are
examined quantitatively rather than qualitatively.
Profitability Ratio
It is used to assess and evaluate the capacity of the Woolworths Group to generate the
revenue from the products and services (Jansons and et. al., 2021).
Profit Margin %
It is one of the most important measures to evaluate the company’s financial
performance. It shows that the net income of the firm has decreased compared to the previous
year in relation to the sales. It is 1.90% for 2020 and 4.60% for 2019. A higher net earnings