Detailed Financial Performance Analysis of Woolworths Ltd.

This report presents a financial analysis of Woolworths Ltd., focusing on its performance in 2018. The analysis examines key financial aspects, including profitability, liquidity, and efficiency ratios, to evaluate the company's financial health. The report uses Woolworths' 2018 annual report to perform trend analysis and assess significant changes in financial results compared to 2017. It evaluates profitability through net profit margin, operating profit margin, return on equity, and return on assets, highlighting improvements in these areas. Efficiency is assessed using total asset turnover, inventory turnover, and debtors turnover ratios. Liquidity is evaluated using current, liquidity, and gearing ratios. The report concludes with recommendations for potential investors based on the company's financial performance and growth potential.

WOOLWORTHS – FINANCIAL ANALYSIS
Executive Summery
This report is prepared to analyse the financial performance and the position of the
Woolworths Ltd. The Woolworths Ltd. is an Australia based retail company. The
Woolworths many departmental store across the Australia as well as in New Zealand. The
objective of the paper is to analyse the financial performance of the company to recommends
the investors for their investment decision. For this the report an analyse the financial
performance of the company along with the various other factors of economical and non-
financial aspects of the Woolworths Ltd. This report uses the annual report of the
Woolworths Ltd for the year 2018 to analyse the financial performance of the company.
Introduction
The report titled “Woolworths – Financial Analysis” is prepared to analyse the
financial performance of the firm to recommends the potential investors of the company
regarding their investment decision. The Woolworth is an Australian based retail company
that is a listed company of Australian Stock Exchange. The paper also analyse the various
other economical and non- financial performance of the company to measure its performance.
The report determines the profitability, liquidity, efficiency and the market performance
along with the various other aspect of the firm in the basis of the annual report of the
company for the year 2018. The report concludes the analysis and provides recommendation
to the potential investors of the firm.
Discussion
Significant changes in the financial result
To analyse the change in the financial performance of the firm, the report perform the
trend analysis of the financial data provided by the Woolworths Ltd. for the year 2018
(Woolworths 2019). The report perform the trend analysis for the year 2017 to 2018. The
trend analysis reveals that there is various changes reported by the company in 2018 financial
information compared to the financial information of 2017. The following are the some
important ratios that is changed in the year 2018: -
Profitability: - To ascertain the change in the profitability this report calculates the various
profitability ratio of the Woolworths Ltd. The ratios are Net profit margin, Operating profit
Margin, Return on Equity and Return on Asset (De Luca 2018). The Net profit margin of the
firm shows growth in 2018 compared to 2017 as the Margin of the Net profit was 2.86 % that
increased to 3.15 %. The operating profit margin of the company also increased in the 2018
and become 4.47 % from 4.18 % of 2017. The return on equity of the firm has become 0.165
in 2018 from the 2017s 0.161 registering a small increase. Return on Assets of the
Woolworths Ltd. also reported minor increased in the 2018 and become 0.076 from the
2017’s 0.070. The overall profitability of the firm is increased in the year 2018 compared to
2017. This shows that the company is performing well and shows the potential to grow more
in the near future.

1WOOLWORTHS – FINANCIAL ANALYSIS
The reason of these increases in the profitability of the firm is that the company more
focused to decrease its cost of sale and controlled their other expenses. This change also
reveals that the revenue of the firm is also increased (Riantani and Nurzamzam 2015).
Efficiency: - To measure the efficiency of the firm, this report calculated the different
efficiency ratios of the firm to determine the changes in the efficiency of the firm. The
considered efficiency ratios are the Total Asset turnover ratio, Inventory turnover ratio,
Debtors turnover ratio. The Total asset turnover ratio of the firm shows a minor decrease in
the current year compare to the last year (Laitinen and Laitinen 2018). The asset turnover
ratio of the firm is more or less same in both years as 2.42. The inventory turnover ratio of
the firm reported the growth in the 2018 and become 9.68 compare to 2017’s 9.20. The debt
turnover ratio of the firm is more or less same in both the year as the firm shows 0.1 decrees
in the year 2018 and become 73.71 compare to 2017. The overall efficiency of the firm can
be consider as good. As the firm does not reported the growth in the efficiency but at least
maintain their efficiency and does not decreased its efficiency.
The same performance in the efficiency of the firm may be because of the good and
proper management of the firm (Demirgüç-Kunt and Levine 2018). The firm properly used
their available resources to generate the revenue for the firm.
Liquidity: - To determine the change in the liquidity of the firm, the firm again calculate
some major liquidity ratio of the firm for both the 2017 and 2018 period. Here, the current
ratio, Liquidity ratio and the Gearing ratio is consider as the liquidity ratio of the firm
(Malamud and Zucchi 2019). The current ratio of the firm is more or less same as the firm
reported the 0.01 decrease in the year 2018 compared to 2017. The liquidity ratio of the firm
also show the same trend like current ratio and reported 0.01 decrease in the year 2018
compared to 2017. The gearing ratio of the firm reported the decrease of 0.08 in the 2018
compare to 2017. The overall liquidity of the firm is decrease in the year 2018 but the amount
of change is minor and acceptable.
The reason behind the almost same performance of the liquidity is that the liability of
the firm is changed in the same value of the change in assets (Hart and Zingales 2015). That
does not affect the differences between the asset and the liability of the firm.
Conclusion
The ratio and the trend analysis of the Woolworths Ltd reveals that the profitability of
the firm is increased in the year 2018 compared to the 2017. The other financial performance
of the company also shows the growth in the 2018 for example the net profit of the firm is
increased by 12.65 %. Hence, this report recommends the investors to invest in the
Woolworths Ltd. As the company showing growth in the profitability and assets while the
current liability of the firm is decreasing. This is good for the firm and it can be expected that
the firm will also grow further in the near future.

2WOOLWORTHS – FINANCIAL ANALYSIS
References
De Luca, P., 2018. Company Profitability Analysis. In Analytical Corporate Valuation (pp.
43-76). Springer, Cham.
Demirgüç-Kunt, A. and Levine, R., 2018. Finance and growth. Edward Elgar Publishing
Limited.
Hart, O. and Zingales, L., 2015. Liquidity and inefficient investment. Journal of the
European Economic Association, 13(5), pp.737-769.
Laitinen, E.K. and Laitinen, T., 2018. Financial reporting: profitability ratios in the different
stages of life cycle. Archives of Business Research, 6(11).
Malamud, S. and Zucchi, F., 2019. Liquidity, innovation, and endogenous growth. Journal of
Financial Economics, 132(2), pp.519-541.
Riantani, S. and Nurzamzam, H., 2015. Analysis of Company Size, Financial Leverage, and
Profitability and It’s Effect to CSR Disclosure. Jurnal Dinamika Manajemen, 6(2).
Robinson, T.R., Henry, E., Pirie, W.L. and Broihahn, M.A., 2015. International financial
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Woolworths (2019). [online] Woolworthsgroup.com.au. Available at:
https://www.woolworthsgroup.com.au/icms_docs/195396_annual-report-2018.pdf [Accessed
7 Jun. 2019].