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Case Study on Woolworths Financial Report

Woolworths is a supermarket and grocery store chain that is based in Australia by Woolworths Group which was founded in the year 1924. The respective organization is considered as the biggest chain of supermarkets in Australia with a market base of 33% as of the year 2019. Woolworths is engaged in providing a wide variety of groceries like fruits, vegetables, meat, packaged foods, etc., and also offers healthy as well as beauty products, magazines, household products, stationery, DVDs, and pet and baby supplies. The company prides itself on operating its business functions closely with Australian farmers and growers in order to make sure that higher quality products are offered to market share.

Woolworths Group 

Woolworths Financial Condition

Woolworths is performing better in terms of its financial condition as the adjusted operating profit of the organization raised by 34.0% to R780 million which leads to an operating margin of 11.6% for the accounting period. The Woolworths food business increased turnover as well as concession sales by 3.8% for half and by 5.8% within the last six weeks of the financial period. During the Australian accounting year 2021, Woolworths Group has identified that the company has made overall food sales of 44.44 billion Australian dollars.

Financial Report

Woolworths Annual Report Analysis

Financial reports are a set of documents that represent the financial situation of an organization at the end of a financial year and include how much profit or loss the company has made. These reports cover the disclosure of the accounting information to multiple stakeholders regarding financial performance as well as the position of an organization over a particular time period.

WOW Ratio Analysis

Ratio Analysis

In order to analyze the financial report of Woolworths, the technique of Ratio Analysis is to be considered which will provide assistance to the managers of the company in evaluating the financial status of the business. Therefore, the financial position of Woolworths is estimated with the support of a Ratio Analysis. For purpose of assessing the financial report of Woolworths, there are several factors that will be estimated.

Valuation Ratios:

Valuation Ratios

Analysis: Valuation Ratios state how the market values the stock of the company in comparison to the assets, earnings, or other measures. This provides assistance in the process of determining if a stock is overvalued or undervalued or at a fair price. The above table shows the valuation ratios of Woolworths Ltd and from the table, it can be analyzed that the respective organization is overvalued by 9%.

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Profitability Ratios:

Profitability Ratios

Analysis: Profitability Ratios assess the ability of an organization in order to earn profits from its sales operations, shareholder’s equity, or assets on the balance sheet. These ratios represent how efficiently an organization generates profit as well as value for the shareholders. The above table shows the profitability ratios of Woolworths Ltd and from the table, it can be analyzed that the respective organization has a profit margin of 13.78%. The net profit from continuing operations as well as excluding one-off costs reduced to A$795 million ($575 million) within the half year to January 2, 2022.

Earnings Per Share Ratios:

Earnings Per Share Ratios

Analysis: Earnings Per Share Ratio helps an organization in the process of determining the financial position of the company. It is one of the indicators that ensure whether a company is going in the right direction or not. This helps investors search for stocks that are currently trading at higher or lower prices than their real value. In context to Woolworths Ltd, the EPS ratio of the company shows that the respective company has an effective EPS of 1.64X and it states that the financial position of the organization is good.

Efficiency Ratios:

Efficiency Ratios

Analysis: The efficiency ratios of an organization state the ability of a company to use its assets for the purpose of income generation. These ratios play a significant role within a business and represent that higher efficiency ratios of a company with its resources state a greater level of profitability within the business. The asset efficiency of Woolworths decreased in the year 2021 from 11.9% to 18.6%.

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Income Statement

Income statements of an organization are those financial statements that represent the income as well as expenditures of the business. They also indicate whether an organization is generating profit or incurring losses within a specific period of time.

The Income Statement of Woolworths Ltd is given as follows:

Income Statement

Income Statement revenue

Analysis: Woolworths Group Ltd has reported its earnings results for the half year which ended on January 2, 2022. For the half year, the respective organization reported its net income which was AUD 7063 million as compared to AUD 1135 million a year before.

Balance Sheet

The balance sheet is a financial statement that includes details of the overall assets and liabilities of an organization at a particular point in time. It is considered a core financial statement that is used by a company to evaluate the financial performance of its business.

The Balance Sheet of Woolworths Ltd is given as below:

Balance Sheet

Balance Sheet of Woolworths

Analysis: From the above Balance Sheet of Woolworths Ltd, it is analyzed that the assets of the company in the year 2021 were 39236 while in the year 2022 it is decreased to 32823. It shows that the organization has used or consumed its assets in conducting its business operations. The total liabilities of Woolworths Ltd in the year 2021 were 37857 while in the year 2022, they were 27257 which shows that there was the use of funds and is representing cash outflow.

Woolworths Financial Summary

The basic earnings per share which were earned from continuing operations was AUD 0.547 in comparison to AUD 0.673 a year before. The diluted earnings per share from the regular business operations was AUD 0.544 as compared to AUD 0.676 a year before. The basic Earnings Per Share (EPS) which was attributable to the equity holders of the parent entity was AUD 5.71 in comparison to AUD 0.905 a year before. The Diluted Earnings Per Share (EPS) which was attributable to equity holders of the parent entity was AUD 5.68 in comparison to AUD 0.901 a year before.

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Frequently Asked Questions (FAQs)

1.What things do financial reports cover?

Within Financial reports, there are four key things included and these are cash flow data, asset and liability evaluation, shareholder equity analysis, and profitability measurements.

2.Give the significance of the financial report.

The significance of a financial report is that it monitors income and expenses for ensuring the organization tracks liabilities continuously for remaining transparency within a competitive marketplace.

3.What are the three main financial statements in the financial report?

Answer: The three main financial statements within a financial report are the income statement, balance sheet as well as cash flow statement.

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