Accounting for Managers: Financial Performance of Woolworths Report

This report provides a comprehensive analysis of Woolworths Ltd's financial performance, focusing on key aspects such as revenue recognition criteria, classification of properties, and audit requirements. The report delves into the company's sustainability practices, emphasizing its commitment to diversity, gender equality, and environmental responsibility. Part B of the report examines the efficiency, profitability, and financial leverage ratios of the business. The analysis includes the calculation and interpretation of various ratios, such as the total asset turnover, receivables turnover, net profit margin, return on equity, and debt-to-equity ratio, providing insights into the company's financial health and performance. The report utilizes data from Woolworths' annual reports and other credible sources to support its findings, offering a detailed and insightful evaluation of the company's financial standing.

Running head: ACCOUNTING FOR MANAGERS
Accounting for Managers
Name of the Student:
Name of the University:
Author’s Note

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Table of Contents
Part A...............................................................................................................................................2
Principle Activities of the Business.............................................................................................2
Revenue Recognition Criteria......................................................................................................3
Classification of Properties..........................................................................................................3
Audit Requirements.....................................................................................................................4
Sustainability Practices in the Business.......................................................................................5
Part B...............................................................................................................................................6
Efficiency Ratios.........................................................................................................................6
Analysis of Efficiency Ratios......................................................................................................6
Profitability Ratios.......................................................................................................................7
Analysis of Profitability Ratios of the Business..........................................................................7
Financial Leverage Ratios...........................................................................................................8
Analysis of Debt Position of the Business...................................................................................8
Reference.........................................................................................................................................9

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Part A
Principle Activities of the Business
The main purpose of this assessment is to analyze the financial reports of Woolworths
Ltd which is engaged in the business of retail and its operations mainly in Australia and New
Zealand. The company is regarded to be the second largest company by revenue which is
operating in Australia. The company is also known to be the largest takeover liquor retailer in the
country.
Revenue Recognition Criteria
As per the annual report of the company, the revenue recognition is shown in page 67 of
the annual report of the company for the year 2018. The revenue of the business is recognized
when the significant risks and rewards of ownership have been transferred to the customer, when
it is probable the revenue will be received and the amount of revenue can be reliably measured
(Weygandt, Kimmel and Kieso 2015). The revenue recognition criteria are covered under notes
to accounts section and the relevant note under which the same is covered under the note 1.2.2.
Classification of Properties
The notes to account section of the annual reports of the business shows that the
properties of the business are measured at cost less accumulated depreciation/amortization and
accumulated impairment losses (Woolworthsgroup.com.au. 2019). The borrowings, costs which
are included in the asset are considered to be a part of the asset until the asset is complete. Note

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3.3 covers the aspect of property, plant and equipment of the business and the same is covered
under pages 76, 77 and 78.

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Audit Requirements
The auditor of Woolworths ltd for the year 2018 is Deloitte, which is one of the big four
firms in the field of auditing. The auditor needs to declare his independence so that it can be
established that the auditor is in no way related to client’s business and the same is also required
by the regulations which are applicable in Australia.
The audit should be conducted by an external party so that a level of independence is
maintained in the process of auditing (Louwers et al. 2015). The auditor should be free from the
influence of the management so that a genuine opinion can be formulated for the financial
statement of the business.
Sustainability Practices in the Business
The management of the business needs to formulate appropriate sustainability practices
which focuses on diversity, gender equality and environment sustainability
(Woolworthsgroup.com.au. 2019). The focus of the business is maintaining diversity and
maintaining healthy environment in the community.

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The focus on sustainability is more as the business is trying follow the corporate social
responsibilities of the business and demonstrate that the business is actively involved in
development of the economy.
Part B
Efficiency Ratios
Figure 1: (Efficiency Ratios of the Business)
Source: (Created by the Author)
Analysis of Efficiency Ratios
The efficiency ratios of the business represent total asset turnover ratio and receivables
turnover ratio and both the estimates is shown to have enhanced during the period. The increase
in the receivable turnover ratios shows that the management has improved the debtor’s policy of
the business and therefore the overall efficiency of the business (Kim, Kraft and Ryan 2013).
The company has also effectively managed the assets of the business as the total assets of the
business has also increased.

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Profitability Ratios
Figure 2: (Profitability Ratios of the Business)
Source: (Created by the Author)
Analysis of Profitability Ratios of the Business
The profitability ratio of the business is shown by net profit margin of the business and
return on equity of the business. The net profit margin of the business is shown to be 3.15%
which is increased from previous year which shows that the profitability of the business. The
return on equity of the business is shown to have increased which suggest that the overall
profitability of the business has increased. This is mainly due to reduction in costs of the
business and thus for this reason the profits of the business have increased significantly.

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Financial Leverage Ratios
Figure 3: (Financial Leverage Ratios of the Business)
Source: (Created by the Author)
Analysis of Debt Position of the Business
The above ratios show debt to equity ratio of the business and equity ratio of the
business. The debt to equity ratio of the business shows that there is a fall in the borrowings of
the business which is appropriate for the business (Enekwe, Agu and Eziedo 2014). The equity
of the business has increased which shows that the management of the company is trying to
restructure the capital structure of the business.

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Reference
Enekwe, C.I., Agu, C.I. and Eziedo, K.N., 2014. The effect of financial leverage on financial
performance: evidence of quoted pharmaceutical companies in Nigeria. IOSR Journal of
Economics and Finance, 5(3), pp.17-25.
Kim, S., Kraft, P. and Ryan, S.G., 2013. Financial statement comparability and credit
risk. Review of Accounting Studies, 18(3), pp.783-823.
Louwers, T.J., Ramsay, R.J., Sinason, D.H., Strawser, J.R. and Thibodeau, J.C., 2015. Auditing
& assurance services. McGraw-Hill Education.
Weygandt, J.J., Kimmel, P.D. and Kieso, D.E., 2015. Financial & managerial accounting. John
Wiley & Sons.
Woolworthsgroup.com.au. (2019). [online] Available at:
https://www.woolworthsgroup.com.au/icms_docs/195398_2018-sustainability-report.pdf
[Accessed 29 Jan. 2019].
Woolworthsgroup.com.au. (2019). [online] Available at:
https://www.woolworthsgroup.com.au/icms_docs/195396_annual-report-2018.pdf [Accessed 29
Jan. 2019].