MBS539 Assignment: Financial Analysis Report on Woolworths Ltd.

This report conducts a financial analysis of Woolworths Ltd., a major Australian retail company. It begins with an overview of the Chairman's outlook, focusing on innovation, community contributions, and shareholder value. The report then performs vertical and horizontal analyses of the 2018 annual report, highlighting growth in key financial areas like revenue and profit. Account analysis focuses on financing costs, profit for the period, total assets, and total liabilities, evaluating their trends. Various financial ratios, including profitability, liquidity, and financial ratios, are calculated and assessed to provide insights into the company's performance. The report recommends investment based on the analysis, concluding that Woolworths demonstrates good profitability, but could improve its liquidity position. The overall performance of Woolworths Group is better compared to its competitors.

Running head: FINANCIAL ANALYSIS OF WOOLWORTHS LTD.
FINANCIAL ANALYSIS OF WOOLWORTHS LTD.
Name of the Student:
Name of the University:
Author Note

1FINANCIAL ANALYSIS OF WOOLWORTHS LTD.
Table of Contents
Introduction................................................................................................................................2
Discussion..................................................................................................................................2
Chairman’s outlook for future................................................................................................2
Vertical and Horizontal analysis............................................................................................2
Account analysis....................................................................................................................3
Ratio analysis.........................................................................................................................3
Recommendation........................................................................................................................4
Conclusion..................................................................................................................................4
References..................................................................................................................................5
Appendix....................................................................................................................................5

2FINANCIAL ANALYSIS OF WOOLWORTHS LTD.
Introduction
The report is prepared to analyse the financial performance of the choosing company
Woolworths Ltd (Woolworthsgroup, 2019). Woolworth Group is one of the largest retail
company of Australia. The company have extensive retain chain in Australia and New
Zealand as well as in various other country. The report analyse the prospective of the
company in the basis of the Chairman’s Letter. Further, this report perform the vertical and
horizontal analysis of the annual report of the company for the year 2018. Finally, the report
calculate and analyse the various financial ratio of the firm to recommends the investors
about their investment decision. The Chairman of Woolworths Ltd, in the annual report of
2018, mainly focuses in the innovation, community and shareholder values. The Chairman
discuss the growth in the innovation in the last few year as well as the future- plans of the
company (Crowther, 2018). Secondly, the Chairman discuss the contribution of the company
towards the community and the environments. Lastly, the Chairman discuss about the value
of the shareholders in the firm. The Chairman also discuss the future- plans of the firm in
respect of the shareholders and the contribution towards the community and the
environments.
Discussion
Vertical and Horizontal analysis
The horizontal analysis of the firm shows the growth in the financial performance of
the firm in the year 2018 compared to 2017 (Pellinen, Teittinen & Järvenpää, 2016). The each
section of the financial report shows the growth in the year of 2018 that means company
increase its efficiency and profitability in their business operation. This growth is favourable
for the company to sustain the business in the future.

3FINANCIAL ANALYSIS OF WOOLWORTHS LTD.
The vertical analysis of the company reveals that income or the inflow terms have the
more weightage in the financial statements of the company than the expenses or the outflow.
This shows that revenue earned by the firm is much more than the expenses made by the
company hence company earned an attractive profit for the year 2018.
Account analysis
In the basis of the horizontal and the vertical analysis, this report chooses the
following accounts to analyse :-
 Financing Cost: - The report choose the financing cost to analysis from the profit
and loss statement of the company for the year 2018. The reason behind choosing the
financial cost is that this is the only cost, which is decreased in the year 2018 form
2017. The amount of the financing cost was $ 194 million in the 2017 that reduces in
the year 2018 and become $ 154 million in the year 2018.
 Profit for the period:- The second one is profit for the year. This is chosen because
this is the most important part of the income statement. The value shown by the
company in the 2017 was $ 1,593 million, which increased in the year 2018 and
become $ 1,795. This growth in the profit shows that the company is performed well
in the year 2018 in terms of profitability.
 Total Asset: - The reason behind choosing this is that it is the main aspect of the
balance sheet and figure of asset in 2017 was $ 23,043 million, which become $
23,558 million in the year 2018.
 Total Liability: - Just like the asset, liability is another main aspect of the balance
sheet hence, it is chosen here. The value of the total liability in 2017 was $ 13,167
million, which increased in the 2018 and become $ 12,709.

4FINANCIAL ANALYSIS OF WOOLWORTHS LTD.
Recommendation
In the basis of the above analysis the report recommends the investors that they can
invest in the Woolworths as the company constantly performing well and showed the growth
in terms of the profitability.
Conclusion
The paper concludes that the Profitability ratio the profitability ratio of the firm shows
the Gross margin of 29%, Net profit margin of 3%, Return on Asset as 0.1 and the return on
equity 0.2. The figures shows that company has the good profitability but need to focus in
return of asset. The return on equity is high that attract the investors. Liquidity Ratio, the
current ratio of the firm cannot consider as good as the ideal current ratio is 1 (Robinson,
2015). The inventory turnover can be consider as good. Financial Ratio, the debt to equity
ratio of the company is 1.2, which is little high and company need to focus in it. Market
performance Ratio, earning per share as shown by the company in the final report is high
with distinction $ 123.4 compared to its competitors. The company with figure of earnings
per share easily attract the investors. This paper concludes that the company has the good
profitability but need to focus in its liquidity. The Chairman of the company is focused in the
innovation, community and the shareholder’s values. The vertical analysis as well as the
horizontal analysis of the financial report also shows that the company showed the growth in
their profitability. The overall performance of the Woolworth Group is better compare to its
competitors. This high growth in the future can be expected from the company.

5FINANCIAL ANALYSIS OF WOOLWORTHS LTD.
References
Crowther, D. (2018). A Social Critique of Corporate Reporting: A Semiotic Analysis of
Corporate Financial and Environmental Reporting: A Semiotic Analysis of Corporate
Financial and Environmental Reporting. Routledge.
Pellinen, J., Teittinen, H., & Järvenpää, M. (2016). Performance measurement system in the
situation of simultaneous vertical and horizontal integration. International Journal of
operations & production management, 36(10), 1182-1200.
Robinson, T. R., Henry, E., Pirie, W. L., & Broihahn, M. A. (2015). International financial
statement analysis. John Wiley & Sons.
Woolworthsgroup. (2019). Retrieved from
https://www.woolworthsgroup.com.au/icms_docs/195396_annual-report-2018.pdf
Appendix