Exapmle-Woolworth

Exapmle-Woolworth - Financial Analysis Woolworths Financial...

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Financial Analysis - Woolworths Financial Analysis Woolworths
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Financial Analysis - Woolworths Page # 2 Executive Summary A detailed discussion of the performance and trends of Woolworth Limited (WOW) is presented in this paper. In order to understand the current financial position of the company it becomes necessary to analyze the profitability, liquidity, long-term solvency, and cash flow of the company over a period of time. Such analysis can be made from the published financial statements. (Elliot & Elliot 2003,p.22) In the case of WOW, such an analysis reveals the following: The returns on assets and equity employed have shown a marked decline in the last two years. However, this may be due to the gestation period associated with new investments and the picture may improve in future years. The gross margin has been more or less static over the years, while the net margin has shown small increases. However, there seems to be scope for improvement in these figures, which are less impressive than those of the competitors. Inventory management is good and is characterized by a high inventory turnover that compares favorably with other companies in the industry. The short-term liquidity position, while not being alarming, has scope for improvement. The capital structure indicates that the company has reached its limit for long-term borrowing, and further increase in debt funds, without corresponding increases in equity, could signal a vulnerable long-term solvency position. Introduction and purpose of analysis “Financial Analysis is a diagnostic tool in assessing financing, investing and operating activities, and is an evaluation tool for managerial and other business decisions.” (Bernstein and Wild 2004, p.4.) This paper will analyze financial indicators for Woolworth Ltd. over a period of five years ending June 30, 2006 in order to assess the informational requirements of key potential users,
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Financial Analysis - Woolworths Page # 3 including financial institutions, strategic investors, small investors and fund managers. WOW will be evaluated in terms of profitability, financial stability and cash flow position. Company and Industry Background Company Starting as a low price, variety retail operator, Woolworth opened its first store in 1924, and later became the first company to establish nationwide operations in the early 1960s. (IBIS World Report Retail Industry in Australia 2007) The company started diversifying into other businesses in 1983 with the acquisition of Dick Smith Electronics. Two years later, it bought into Safeway, a Victoria based supermarket chain. The 1990s saw the trend continue and strengthen as Woolworth joined the Australian stock Exchange, and forayed into a series of new business ventures that included Plus Petrol outlets NSW, Internet HomeShop service in Sydney, and Banking services in Queensland. Continuing the trend into the new millennium, Woolworth Ltd. expanded its list of businesses with
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This note was uploaded on 03/02/2011 for the course BUS 500 taught by Professor Dr.spitz during the Spring '11 term at Deep Springs.

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Exapmle-Woolworth - Financial Analysis Woolworths Financial...

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