Woolworths Financial Perfomance Case study

HSC Business Studies
Financial Statement Analysis
Task 1:

Liquidity – The current Ratio = - Current ratio = Current Assets/ Current Liabilities

2013:
Total current assets = 6226.1
Total current liabilities = 6866

Total current assets / Total current liabilities
=
6226.1/6866 = 0.9068016312
= 0.9 (1dp)

2012:
Total current assets = 5802.1
Total current Liabilities = 6766.2

Total current assets / Total current liabilities
=
5802.1 / 6766.2 = 0.8575123408
= 0.86 (2dp)

Liquidity levels have improved a satisfactory amount meaning Woolworths are readily available to pay off their short-term liabilities at a better easier.

Figures from: http://www.investing.com/equities/woolworths-limited-balance-sheet

Gearing (leverage) = - Debt to equity (gearing) ratio = Total liabilities/ Owners Equity

2013:
Total liabilities = 13221.8
Owners equity = 9028.4

Debt to equity (gearing) ratio = total liabilities / Owners Equity
=
13221.8 / 9028.4 = 1.46446768
= 1.5% (1dp)

2012:
Total Liabilities = 13392.9
Owners Equity = 8188.2

Debt to equity (gearing) ratio = total liabilities / Owners Equity
=
13221.8 / 8188. 2= 1.614738282
= 1.6% (1dp)

The gearing levels has deteriorated from 2012 to 2013 by 0.1% meaning there is less risk for investors but also less a chance of higher profits.

Figures from: http://www.investing.com/equities/woolworths-limited-balance-sheet

Profitability = - Gross Profit Ratio = Gross Profit/ Sales

2013:
Gross profit = 15603.8
Sales = 58674.1

Gross profit ratio = Gross profit / Sales
=
15603.8 / 58674.1 = 0.2659401678
= 0.26 (2dp)
= 26%

2012:
Gross profit = 14461.0
Sales = 54916.0

Gross profit ratio = Gross profit / Sales
=
14461.0 / 54916.0 = 0.2633294486
= 0.26 (2dp)
= 26%

The figures over the two financial years has remained the same meaning Woolworths has maintained its effectiveness of pricing, sales, discounts and valuation of stock.
Figures from:

References: Anon, (2014). . finance, (2014). Should you buy Woolworths Limited in 2014?. [online] Available at: http://finance.ninemsn.com.au/newsbusiness/motley/8791060/should-you-buy-woolworths-limited-in-2014 [Accessed 22 Jun. 2014]. Hassan, N., Hassan, N. and profile, V. (2011). Maximising Shareholders Wealth: Cheap Debt or Equity Finance????. [online] Maximisingshareholderswealth.blogspot.com.au. Available at: http://maximisingshareholderswealth.blogspot.com.au/2011/04/cheap-debt-or-equity-finance.html [Accessed 22 Jun. 2014]. investing.com, (2014). Woolworths Ltd Balance Sheet | WOW Stock - Investing.com. [online] Available at: http://www.investing.com/equities/woolworths-limited-balance-sheet [Accessed 22 Jun. 2014]. Pettis, M. (2014). What Do Bank Share Prices Tell Us About Growth?. [online] Carnegie Endowment for International Peace. Available at: http://carnegieendowment.org/2014/02/16/what-do-bank-share-prices-tell-us-about-growth/h18j [Accessed 22 Jun. 2014]. Riffle-Lash, C. (2014). What Affects Stock Prices?. [online] Capitalexchangeblog.com. Available at: http://www.capitalexchangeblog.com/whataffectsstockprices/ [Accessed 22 Jun. 2014]. The Student Room, (2014). Revision:Gearing - formula and uses - The Student Room. [online] Available at: http://www.thestudentroom.co.uk/wiki/Revision:Gearing_-_formula_and_uses [Accessed 22 Jun. 2014]. Tutor2u.net, (2010). Q&A - Is there an optimal level of gearing?. [online] Available at: http://www.tutor2u.net/blog/index.php/business-studies/comments/qa-is-there-an-optimal-level-of-gearing [Accessed 22 Jun. 2014]. - Business Class Notes - Woolworths income sheets / Balance sheet 2012-2013 (figures)