SBM3108 Financial Accounting Assignment 2: Ratio Analysis of Companies

This report presents a financial ratio analysis of Woolsworth and Westfarmers, based on their 2017 annual reports, as required by the SBM3108 Financial Accounting assignment. The analysis includes the calculation and comparison of profitability ratios (Return on Equity and Return on Assets), liquidity ratios (Current Ratio and Quick Ratio), and debt ratios (Debt Ratio and Debt-to-Equity Ratio) for both companies. The report also compares these ratios against industry averages to assess the companies' relative performance. Furthermore, the report provides a comparative analysis of the two companies to determine which is a better choice for investment, considering the calculated ratios and industry benchmarks. The findings highlight each company's strengths and weaknesses, providing insights into their financial health and performance within the competitive landscape.

FINANCIAL
ACCOUNTING
Woolsworth SA and Westfarmers
Limited

Profitability Measure
Return on Equity Return on Assets
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
18.00%
20.00%
12.00%
10.42%
18.00%
7.75%
Westfarmers
Woolsworth

Return on equity
Westfarmers Limited 30/06/17 Woolsworth SA
Profit after
tax 2873
Industry
average
Profit after
tax 1777
Shareholder
s equity 23941
Profit after
tax/
Shareholde
r equity Net worth 9526
Return on
Equity 12.00% 8.54%
Return on
Equity 18.00%

Return on Assets
Westfarmers Limited Woolsworth SA
Net profit 2873 Net profit 1777
Total
Assets 40115
Net Profit /
Total assets
Total
Assets 22916
Return on
Assets 7.16% 10.42%
Return on
Assets 7.75%

Solvency measure
Debt to equity ratio Debt ratio
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
0.67
0.40
1.41
0.58
Westfarmers
Woolsworth

Debt ratio
Westfarmers Limited
Total
Liabilities /
Total assets Woolsworth SA
Debt ratio 0.4 Debt ratio 0.58

Debt to equity Ratio
Westfarmers
Limited Woolsworth SA
Debt to
equity
ratio 0.67
Debt to
equity
ratio 1.4

Liquidity measure
Current Ratio quick ratio
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
0.92
0.25
0.79
0.29
Westfarmers
Woolsworth

Current ratio
Westfarmers Limited Woolsworth SA
2017 30/06/17 2017
Industry
average
Current
Assets 9667
Current
Assets 6994
Current
liabilities 10417
Current
Assets /
Current
Liabilities
Current
liabilities 8824
Current
Ratio 0.92
Current
Ratio 0.79

Quick ratio
Current
Assets 9667
Current
Assets 6994
inventories 6530 inventories 4080
prepaid
expenses 0
prepaid
expenses 334
Current
liabilities 10417
Current Assets –
Inventories –
Prepaid expenses /
Current Liabilities
Current
liabilities 8824
quick ratio 0.25 1.2 : 1 quick ratio 0.29

Comparison
Westfarmers
Limited Woolsworth SA
2017 2017
Current Ratio 0.92 0.79
Quick ratio 0.25 0.29
Return on Equity 12.00% 18.00%
Return on Assets 10.42% 7.75%
Debt to equity ratio 0.67 1.41
Debt ratio 0.40 0.58

Industry average
Westfarmers
Limited Woolsworth SA Industry average
Current Ratio 0.92 0.79 2
quick ratio 0.25 0.29 1.21
Return on Equity 12.00% 18.00% 10.42
Return on Assets 10.42% 7.75% 8.54
Debt to equity ratio 0.67 1.41 3.5
Debt ratio 0.40 0.58 4.2