Financial Performance Analysis of Woolworths Group (2016 Financials)

This assignment analyzes the financial performance of Woolworths Group, an Australian grocery retail chain. It begins with an overview of the company, including its history, operations, and market position. The analysis focuses on the company's financial statements, including the balance sheet, income statement, and cash flow statement. The document highlights the importance of financial statements for decision-making by both internal and external stakeholders. It delves into the accounting policies followed by Woolworths, comparing its performance with competitors using ratio analysis. The assignment examines a financial crisis faced by the company in 2016, presenting key financial data and graphical representations of the company's performance. The analysis also compares Woolworths' financial health to Wesfarmers. The report concludes with references to the annual reports and other sources used in the analysis. This comprehensive analysis provides insights into Woolworths Group's financial position and performance.

Company Analysis – Woolworths Group

About Woolworths Group
Woolworths Supermarkets is a company which is based out in Australia and deals in grocery
retail chains and other conglomerates utilities. It was founded way back in early 1920's. Its
current headquarters is in Bella Vista, Australia. Along with its competitor Coles Woolworths
Supermarkets old around 80% of retail Supermarket industry of Australia. It is located in more
than around 961 locations in the geographical regions of Australia and New Zealand. There are
more than around 111000 employees working for Woolworths group. Woolworths has it's retail
outlet Store in almost every state of Australia. Apart from its food retail chains company has
diversified its business operations in the segment of petroleum, hotels and tourism and spelling
of liquor.
Decision making through financial statements
Maintaining the record of financial position or fund statement is highly relevant for any business
organization. People or groups associated with business get the complete knowledge about the
companies current performance while evaluating these financial statements. Maintaining the
financial records is also a legal requirement for any business enterprise. Additionally, lucky
managers of the company can also work out the differences between the actual performance of
the company and what is desired for meeting their desired goals and objectives. For this variance
is this statement is prepared by the business group and financial manager. Stakeholders of the
business are mainly segregated into two segments. These are internal stakeholders and external
stakeholders. Internal stakeholders include business managers, workers, and employees of the
company, board of director etc. They are interested to evaluate the profitability and current cash
positions of the company in order to ensure the smooth working of the group. They are also
worried about their future while being associated with the company. With the help of financial
statements and other reports, they can figure out their possibility for the future period. On the
other hand, external stakeholders include business investors, shareholders, lenders, creditors etc.
They are interested to know about the financial statement, profitability statement and cash flow
positions of the company. The required information in order to access the knowledge about the
company before investing in the particular portfolio.

Accounting policies followed by Woolworths group
The policies and standard followed by the group are in similarity with the Australian accounting
standards and policies framed up by ASX. There is not much change and deviation in regards to
general laws and regulations. The profitability of the company is affected by it poor marketing
strategies of the managers and bad investment decisions.
Financial Crisis with Woolsworths group
During the financial year, 2016 company suffered the heavy loss of around $ 1.235 billion which
is almost 157.5 percent lower as in comparison to the previous year data. The company has
sacked the jobs of around 800 employees working at different positions during the previous year
as a part of its cost cutting. Major employees were removed from the support departments that is
supply chain department and support department office (Letts & Ong, 2016). The company is
also looking forward to closing its loss making units and stores.
Image 1 – Woolworths group Net profit after tax
Source - (Letts & Ong, 2016)
From the bar charts it has been witnessed that the leading supermarket chain in Australia if
suffering from the crisis. The marketing strategy of the company has resulted out in failure it
resulted in out as a trigger of change towards negative direction which might affect the fortune of
the company. The last year financial figures were not satisfactory and another disappointment
has been added to the company's portfolio when the quarter 1 figures were not up to the mark.
The company has to revive its losing market and brand reputation as soon as possible yes it will

result out in a financial injury. Due to the financial disappointment, the company is regularly
shutting down its loss making units and retail stores. This is adding a threat for the Woolworths
to lose the leading position in the Australian retail segment that the company has dominated for
the long span of time.
Image 2 – Directors of Woolworth’s group
Source – Annual Report, (2016)
Ratio analysis table of Woolworths
 The below mentioned table showcase the financial ratios of Woolworths group over the
period of time
 With the help of below table the liquidity position or financial health of the group can be
evaluated out.
Liquidity/Financial Health 2012-06 2013-06 2014-06 2015-06 2016-06 Latest Qtr

Current Ratio 0.86 0.91 0.95 0.84 0.83 0.83
Quick Ratio 0.22 0.23 0.21 0.23 0.16 0.16
Financial Leverage 2.64 2.46 2.36 2.34 2.77 2.77
Debt/Equity 0.57 0.47 0.4 0.28 0.46 0.46
The liquidity position of the company is adversely affected which is displayed through the
decline in current ratio and quick ratio. The ultimate cash position of the company is greatly
affected. In addition to that debt equity ratio of the company displays the fact that business
organisation has taken heavy debt during the previous year.
Ratio analysis comparison Woolworths and Wesfarmers

The debt segment of the Woolworths group is on the higher side as in comparison to that of
Wesfarmers. This showed the fact that the Woolworths group financial position is on the weaker
side as in the overall comparison through the key financial health and liquidity proportion.
Additionally the Woolworths Company’s current ratio is on lower side as in comparison to that
of Wesfarmers.
The profitability of both the groups lowered in the year 2016, the issue has been raised due to
downfall in particular industry and entrants of new dynamic online retailer chains.