Financial Performance Analysis of Woolworths Limited (2015-2016)

This report provides a financial performance analysis of Woolworths Limited for the years 2015 and 2016. The analysis utilizes data from Woolworths' annual reports to assess profitability, liquidity, and capital structure. Profitability is evaluated using gross profit ratio, return on assets, and return on equity, revealing Woolworths' performance compared to industry peers. Liquidity is assessed through current and quick ratios, highlighting the company's ability to meet short-term obligations. Capital structure is examined using debt-to-equity and equity ratios to understand the company's financing choices. The study concludes that the company's financial performance records poor profit results that in turn act as an indicator that there is problem with overall performance of the firm and also discusses the impact of the Masters venture on the company's financial standing.

Running head: ACCOUNT AND FINANCIAL MANAGEMENT
Account and Financial Management
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2ACCOUNT AND FINANCIAL MANAGEMENT
Summary of findings
This study deals with examining the financial performance of a publicly traded company
known as Woolworths Limited for the year 2015 and 2016 (Woolworths.com, 2017). For this
study, information is generated from the annual reports of Woolworths Limited for the year 2015
and 2016.
The main motive of business is to generate profit with the resources available to the
company. The financial manger is responsible for assessing the profitability of a business in
order to evaluate whether or not adequate returns can be generated on its assets as well as
investments (Deegan, 2013). To that, there are different ratios that can be used for evaluating the
profitability. In this study, the profitability ratio used is gross profit ratio, return on assets and
return on equity. In the year 2015, gross profit of Woolworths Limited arrives at 40.96% and
40.59% in the year 2016. Return on assets is one of the profitability ratios that allows for
assessing the way on how efficiently assets of Woolworths Limited are being managed and looks
at the ability of the management team for controlling the expenses. In the year 2015, return on
assets of Woolworths Limited arrives 0.075 and 0.087 in the year 2016. The figures show that
Woolworths Limited has achieved better results as compared to its peer groups or industry.
Therefore, Woolworths Limited earned more operating profit per dollar of investment in assets
as compared to its peer groups. After analyzing the financial ratio for the year 2015 and 2016, it
is understood that Woolworths Limited records poor profit results that in turn act as an indicator
that there is problem with overall performance of the firm (Chan et al., 2016).
Liquidity ratio is calculated as it predicts the ability of any business whether they can pay
their short-term obligations, bills and pay down debt on time. Here, it is important to assess the

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liquidity position of Woolworths Limited and compare it with the industry standards. In this
study, current ratio and quick ratio are calculated for the year 2015 and 2016. To explain in
detail, current ratio is calculated by taking current assets and dividing it by current liabilities. In
the year 2015, current ratio of Woolworths Limited arrives at 0.91 and 0.94 in the year 2016. The
industry average is 2:1. Hence, Woolworths Limited is trailing slightly behind in terms of overall
liquidity. It is important to note that neither Woolworths Limited nor the industry average shows
enough liquidity for covering all liabilities without the need for raising additional funds. By
looking at ratios, it is quite evident that Woolworths Limited has managed a current ratio closer
to 1. The reason behind the figure is poor sales results as well as high venture caused by the
Masters venture. It is because of cost incurred in business and cost of operating an
underperforming business (Bushman, 2014).
Capital structure ratio is also known as solvency ratio that indicates in which firm’s
selection are made to finance their assets, either through debt or equity. In this study, debt to
equity and equity ratio are calculated for Woolworths Limited that explains the solvency position
of the business organization (Beatty & Liao, 2014).

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Reference List
Beatty, A., & Liao, S. (2014). Financial accounting in the banking industry: A review of the
empirical literature. Journal of Accounting and Economics, 58(2), 339-383.
Bushman, R. M. (2014). Thoughts on financial accounting and the banking industry. Journal of
Accounting and Economics, 58(2), 384-395.
Chan, S. H., Song, Q., Rivera, L. H., & Trongmateerut, P. (2016). Using an educational
computer program to enhance student performance in financial accounting. Journal of
Accounting Education, 36, 43-64.
Deegan, C. (2013). Financial accounting theory. McGraw-Hill Education Australia.
Woolworths.com. (2017). Very | Womens, Mens and Kids Fashion, Furniture, Electricals &
More!. [online] Available at: http://www.woolworths.com [Accessed 27 Aug. 2017].