University Finance Report: Financial Performance of Woolworths Limited

This report provides a comprehensive financial performance evaluation of Woolworths Group Limited. It analyzes the company's income statements from 2014 to 2018, calculating and interpreting key financial ratios such as gross profit ratio, operating income ratio, and net profit ratio. The analysis reveals fluctuations in revenue and a decline in net income, highlighting the company's financial challenges and areas for improvement. The report also includes a brief literature review and references to relevant sources, supporting the findings with academic and industry insights. The report concludes that the financial performance of Woolworths Group Limited has deteriorated significantly over the last few years.

Running head: FINANCIAL REPORTING AND DECISION MAKING
Financial Reporting and Decision Making
Name of the Student:
Name of the University:
Authors Note:

1FINANCIAL REPORTING AND DECISION MAKING
Contents
Financial performance evaluation:..................................................................................................2
Observation:.....................................................................................................................................5
References:......................................................................................................................................6

2FINANCIAL REPORTING AND DECISION MAKING
Financial performance evaluation:
In order to evaluate the financial performance of Woolworths Group Limited it is
important to conduct a detailed analysis of income statement of the company. Further to assess
whether the company’s financial performance has improved or not over the last few years a
comparative analysis of different items of income statement of the company shall be conducted
(Ives, 2015).
The income statement of Woolworths Group is provided below:
INCOME STATEMENT OF WOOLWORTHS GROUP LTD
AUD in millions 2014-06 2015-06 2016-06 2017-06 2018-06
Gross revenue 60,952.
00
60,868.
00
58,276.
00
55,669.
00
56,726.
00
Less: Direct revenue cost 44,475.
00
44,345.
00
42,677.
00
39,740.
00
40,256.
00
Gross profit 16,478.
00
16,524.
00
15,599.
00
15,929.
00
16,470.
00
Expenditures
General administrative and sale
expenses
11,962.
00
5,511.
00
12,964.
00
13,134.
00
13,804.
00
Operating expenses (Others) 11,172. 18,567. 12,033. 11,686. 11,957.

3FINANCIAL REPORTING AND DECISION MAKING
00 00 00 00 00
Income before interest and tax (6,656.
00)
(7,555.
00)
(9,398.
00)
(8,891.
00)
(9,291.
00)
Less: Interest Expense 278
.00
255
.00
246
.00
194
.00
154
.00
Add (less): Other income /
(expense)
10,449.
00
10,877.
00
11,004.
00
11,217.
00
11,839.
00
Earnings before taxes 3,515.
00
3,068.
00
1,360.
00
2,132.
00
2,394.
00
Taxes 1,057.
00
930
.00
520
.00
650
.00
718
.00
Earnings after taxes from continuing
operations
2,458.
00
2,137.
00
840
.00
1,482.
00
1,676.
00
Taking into consideration the above income statement the following ratios have been calculated:
All ratios are in % 2014-06 2015-06 2016-06 2017-06 2018-06
Gross revenue 60,952.
00
60,868.
00
58,276.
00
55,669.
00
56,726.
00

4FINANCIAL REPORTING AND DECISION MAKING
Gross profit 16,478.
00
16,524.
00
15,599.
00
15,929.
00
16,470.
00
Gross profit ratio 27
.03
27
.15
26
.77
28
.61
29
.03
Gross revenue 60,952.
00
60,868.
00
58,276.
00
55,669.
00
56,726.
00
Income before interest and tax (6,656.
00)
(7,555.
00)
(9,398.
00)
(8,891.
00)
(9,291.
00)
Operating income ratio (10.
92)
(12.
41)
(16.
13)
(15.
97)
(16.
38)
Gross revenue 60,952.
00
60,868.
00
58,276.
00
55,669.
00
56,726.
00
Earnings after taxes from
continuing operations
2,458.
00
2,137.
00
840
.00
1,482.
00
1,676.
00
Net profit ratio 4
.03
3
.51
1
.44
2
.66
2
.95
Overall revenue of the company as can be seen from the above income statement has fluctuated
significantly over the last few years. In fact out of the last five years the company earned

5FINANCIAL REPORTING AND DECISION MAKING
maximum amount of revenue in 2014 with AUD 60,952 million. In comparison the revenue of
the company has reduced to AUD 56,726 million in 2018. Thus, instead of increasing the
revenue of the company has decreased in last four years by almost 7% (Fazzini, 2018).
However, one positive that can be pointed out form the ratio analysis is the fact that the
company’s gross profit ratio has increased in each year. In 2014 it was 27.03% which has
improved to 29.03% in 2018. However, the inability of the company to generate positive
operating income as the company has failed to earn positive operating income in all of the last
five years (Easton and Sommers, 2018). The management must take necessary steps to reduce
the operating expenditures to improve its operating income. The net operating loss as can be seen
has increased in each year to stand at AUD 9,291 million. Net income of the company from
continuing operations has also declined in each subsequent year since 2014 to currently stand at
AUD 1,676 million. Compared to a net profit ratio of 4.03% in 2014 the company only managed
to earn 2.95% (Dalnial et. al. 2015).
Observation:
Thus, from the above discussion it is clear that the financial performance of Woolworths Group
Limited has deteriorated significantly over the last few years.

6FINANCIAL REPORTING AND DECISION MAKING
References:
Dalnial, H., Kamaluddin, A., Sanusi, Z.M. and Khairuddin, K.S., 2014. Detecting fraudulent
financial reporting through financial statement analysis. Journal of Advanced Management
Science, 2(1). Available at:
http://www.joams.com/uploadfile/2013/1225/20131225035355373.pdf [Accessed on 4
November 2018]
Easton, M. and Sommers, Z., 2018. Financial Statement Analysis & Valuation, 5e.
Fazzini, M., 2018. Financial Statement Analysis. In Business Valuation (pp. 39-76). Palgrave
Macmillan, Cham.
Ives, M., 2015. Financial Statement Analysis. In Encyclopedia of Public Administration and
Public Policy-5 Volume Set (pp. 1-7). Routledge.