Financial Analysis and Sustainability: BUFIN101A Case Study Assignment

This case study examines the financial performance of Woolworths, analyzing its financial statements including the income statement, balance sheet, statement of changes in equity, cash flow statements, and statement of comprehensive income. It compares financial results from 2019 and 2020 using the gross profit ratio and net profit ratio to evaluate performance, highlighting the impact of changes in revenue and expenses. The study also explores Woolworths' community activities, such as providing free fruits for children, and its sustainability strategies, comparing them to Telstra's sustainability initiatives. Furthermore, the case study delves into internal control failures, identifying causes like lack of coordination and inadequate recording systems, and proposes rectification strategies including improved recording, reporting, and control mechanisms. The analysis provides insights into how these factors influence a company's financial health and operational effectiveness.

ACCOUNTING FOR
BUSINESS CASE STUDY

Table of Contents
1. Financial statements.....................................................................................................................3
a) Main financial statements........................................................................................................3
b) Comparison of financial statements........................................................................................3
c) Community activities...............................................................................................................3
2. Sustainability...............................................................................................................................4
a) Main sustainability strategies..................................................................................................4
b) Reason of counted as top company in the context of sustainability........................................5
3. Internal control.............................................................................................................................5
a) Internal control failure.............................................................................................................5
b) Rectification of problem..........................................................................................................6
REFERENCES................................................................................................................................1

1. Financial statements
a) Main financial statements
It refers to those statements from which the financial performance of the company is being
analysed and presented (Lessambo, 2018). With regard to Woolworths the main financial
statement includes Income statements, Balance sheet, Statement of changes in equity, Cash flow
statements and statement of comprehensive income is used to report its shareholders, Australian
Taxation Officers and ASIC.
b) Comparison of financial statements
Comparison of financial statement enable the company and its stakeholder to analyse the
financial performance along with the company’s financial position. Through this statements
company can evaluate its business operation, likewise investors can take their investment
decisions.
The main ratio of comparison are:
Gross profit ratio:
It refers to that ratio which is being used to evaluate the business performance as well as its
efficiency by dividing the gross profit with the total sales (Gilchrist, 2018). This ratio enable the
investor to analyse that how the company is raising its profit by minimising its cost along with
raising its sales.
It is calculated as: Gross profit/Net sales*100
For 2019:
=17442/59984*100
=29%
For 2020:
=18570/63675*100
= 29.16%
Net profit ratio:
This ratio shows the percentage of profit that is being generated from the net revenue. Through
this ratio company can determine that how much net profit they have earned over the percentage
of sales.
It is calculated as:

Net profit ratio: Net profit/Net sales*100
For 2019:
=2758/59984*100
=4.59%
For 2020:
=1209/63675*100
=1.89%
From the above ratio of gross profit and net profit it can be analysed that the percentage of
gross profit is being raised from 2019 to 2020. However, in case of net profit it is decreased in
the 2020 from 2019 (WOOLWORTHS GROUP, 2020). Thus, it would not be wrong to said that
the main cause of such declining net profit percentage may include poor pricing of the company
or the ineffective cost structure. This means that a raise in the percentage of expenses would lead
to decline in the percentage of profit. However, as the gross profit is being raised so it would be
completely wrong to said that that the company’s performance is in the declining stage. This is
because raising of expenses with the period of time is common but earning of revenue over the
sales is raised so the performance of the company is affected but it would not be considered as in
declining stage.
c) Community activities
It includes all those activities that are concerned with community and performed by the
companies for the betterment of the community. Since community are the base and lead to the
success of every company so performance of community activities are said be a return to them.
Generation of employment for the local people are counted as one of the best community
activities that are usually performed by the listed companies. Hiring of local population is one of
the best strategy or the activity performed by the listed companies. Likewise, building of
community parks, development of roads, reducing the extent of pollution, enabling the best
services to local community are all those activities that are usually performed by the listed
companies with regard to local community.
A likewise positive impact of performance of these activities includes a positive response
of the community towards the companies. As the community support of the people support are

the lead for the success of every business so it would not be wrong to said that the positive aspect
and favour of the community would lead to the growth of the companies.
With regard to Woolworth group which is one of the top listed company of Australia also
perform various community services in the form of availing free fruits for children, S.T.A.N.D.
and also perform some other programmes with reference to food partners like OzHarvest and
Foodbank. Woolworth also help customers to make contribution to charitable institutions so that
people or the poor people could get benefit (Supporting our community, 2021).
Thus, performance of such small-small activities for the community by the listed companies
not only lead to the success of their own business but at a broader scale the whole economy and
the country is also being supported.
2. Sustainability
a) Main sustainability strategies
Telstra is one of the top rated telecommunication company of Australia. This company is
counted as one of the successful company of the telecommunication world. The major
sustainability steps that its adopts includes:
Thriving digital world:
It is one of the important sustainability strategy of Telstra that is converting the entire
world into digital and thereby enabling a better life to people with a solution of their every
problem. This means that it is working towards the concept of digital world and saving the
environment.
Environment safeguarding:
Reduction of the emission of carbon-dioxide and working towards the greenier
environment is also a major strategy of the Telstra. Likewise, adopting and implementing the
practice of reuse and recycle would also be its efficient move.
Supporting young people:
This is also a sustainable move of the company towards the younger community.
Enabling best digital technology and services through the company and making their life easier is
also counted as its effective move.
Compliance of laws and ethics:

Complying laws and regulations and performance of business operation as per the ethical
consideration also assist the company to be sustainable towards the society.
Work-culture:
Enabling best work-culture and satisfying the employees, thinking about them along with
business operation would also be counted as a sustainable move of the company towards the
employees or community at broader scale.
b) Reason of counted as top company in the context of sustainability
The main reason for the success of the company is the outcome of the implementation of
the sustainability concept. As the Telstra is working towards the step of environmental,
employees, ethical and community steps so an outcome in the form of their positive impact
including support or the customer attraction would enable the company to achieve success
(Gelderman, Semeijn and Vluggen, 2017). Likewise, an implementation of the sustainability
concept also enables the company to be market leader and able to beat the market competition
too. In the same manner working with the aim of evolving the economy into digital would also
lead to the success factor with regard to the Telstra.
3. Internal control
a) Internal control failure
Main causes:
With reference to the case of Julie and its business there are various reason that are
responsible for the internal control failure. Lack of co-ordination, lack of reporting structure,
running of business on the basis of trust rather than recording and reporting and carelessness of
accounts receivable are counted as major causes for the failure of internal control. As it is
analysed that there is a major co-ordination gap between the company and the warehouse. For
example: items are sold before invoicing, collection of item directly from warehouse and various
other. Likewise, performance of business on trust of warehouse workers rather than adequate
recording of all the sales and the sold items. Carelessness and non-reporting of the accounts
receivable also become a major cause.
Impact over the business:

However, apart from these causes there is a serious impact over the company in terms of
non-analysing the actual sales or the actual performance because of the non-recording of
transaction. In the same manner due to the persistence of these reasons the company would never
being able to establish the controlling practice because of the lack of actual recording and
reporting. Overall the company’s revenue and the actual profit would be affected due to the
existence of these causes. In addition of this, if these reasons will be continued and not being
corrected then the arrival of the situation of shutting down of the business may also occur
because no business can sustain in a situation of continuous loss.
b) Rectification of problem
The above problem can be rectified by adopting and implementing several steps:
Establish adequate recording system:
By having an establishment of adequate recording of all the stock or the sold product the
problem of internal control failure can be rectified. Adequate recording of all the sales
transaction by the accounts receivable and the warehouse employees would be done.
Reporting:
Establishing reporting framework may also lead to rectify the problem. As per this step
adequate reporting of the warehouse employees to the account receivable would be made.
Likewise, the same reporting structure would also be followed by the account receivable to the
company.
Controlling:
This step would play an important role in terms of the rectification of the problem. An
adequate controlling in the form of cross checking or tallying the records of sales with the
amount of revenue. likewise, a cross checking of company’s record with the accounts receivable
and the warehouse report would also enable the company to point the loophole and the problem.
Timely invoicing:
It is also an important method of rectifying the issue. As per this method making of
invoices at time would enable the company to have adequate recording. As the customers are
collecting or purchasing products directly from the warehouse so an adequate reporting and
timely transacting would also enable the company to overcome this problem.

REFERENCES
Books and journals
Gelderman, C.J., Semeijn, J. and Vluggen, R., 2017. Development of sustainability in public
sector procurement. Public Money & Management. 37(6). pp.435-442.
Gilchrist, R.R., 2018. Managing for profit: The added value concept. Routledge.
Lessambo, F.I., 2018. Financial Statements. Analysis and Reporting.
Online references
Bigger Picture., 2020. [Online]. Available through <
http://exchange.telstra.com.au/wp-content/uploads/2020/09/Telstras-Bigger-Picture-
2020-Sustainability-Report.pdf>
Supporting our community., 2021. [Online]. Available through
<https://www.woolworthsgroup.com.au/page/community-and-responsibility/group-
responsibility/environment/supporting-our-community#:~:text=Some%20of%20our
%20initiatives%20include,contribute%20directly%20to%20charitable
%20organisations.>
WOOLWORTHS GROUP., 2020. [Online]. Available through <
https://www.woolworthsgroup.com.au/icms_docs/195794_annual-report-2020.pdf>
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