Woolworths Limited is a popular retail brand that extensively operates in Australia and New Zealand. The brand is considered as second largest company in Australia after retail conglomerate Wesfarmers (Woolworths Limited, 2016). Moreover, the firm is also considered as the largest liquor firm of Australia (Woolworths Limited, 2016). The company has been established on 1924 and its’ headquarter is located in New South Wales Australia. The firm has a employee base of 202,000 (Woolworths Limited, 2016). Woolworths Limited mainly operates as supermarket in Australia and New Zealand. However, it has diversified operations in hospitality and liquor retailing.
This report intends to focus on an in-depth financial analysis of Woolworths Limited for the last six years. In order to perform the financial analysis, items from income statement, balance sheet and cash flow statement has been performed. In addition, ratio analysis has also been conducted to analyse the financial health of the company. The recent stock performance has been assessed in the report.
Income statement depicts the financial performance of the firm over a certain accounting period of time (Laurent, 2009). It reveals the revenues and expenses of the firm that enables the analysts to determine the profitability of the company for a particular period of time. In this section, three key items from income statement of Woolworths Limited has been analysed.
Total revenues: Revenues are considered as one of the most significant component that enables the individuals to analyse the business performance of the company over a certain time period. Total revenues of Woolworths Limited for the last six years have been represented as under:
Figure 1: Total revenues of Woolworths Limited (in $ billions)
(Source: Woolworths Limited, 2015; Woolworths Limited, 2013; Woolworths Limited, 2011)
From the above data it can be inferred that the revenues of the company has experienced a positive growth for the period of last 6 years. In the last 6 years’ time period, Woolworths Limited has been able to enhance the revenues by almost $10 billion. This positive growth can be considered as the result of high demand of retail product. In addition, diversified operation has also enabled the company to maximise turnover.
Operating income:
Figure 2: Operating income of Woolworths Limited (in $ billions)
(Source: Woolworths Limited, 2015; Woolworths Limited, 2013; Woolworths Limited, 2011)
Operating income of the company has represented a positive growth in all the years except 2013. In the last year, the firm has experienced a positive growth of $ 0.13 billion. It indicates that Woolworths Limited has managed its operating expenses in a much better manner during the specified time period.
Net Profit:
Figure 3: Operating income of Woolworths Limited (in $ billions)
(Source: Woolworths Limited, 2015; Woolworths Limited, 2013; Woolworths Limited, 2011)
Net income of the company has shown a sign of instability over the concerned time period. In this context, (Altman, 2008) cited that net profitability of the firms are the indicator of a company’s sustainability. Decrease in the net profit by almost 13% in 2015 may be result of increased cost of operation.
Analysis of the balance sheet provides an idea to the investors about what the firm owns and what is owes (Edmister, 2013) In addition, it also presents the amount of fund invested by the shareholders. In this report, total assets, total liabilities and shareholders’ equity of Woolworths Limited has been discussed for the period of last 6 years:
Total assets:
Figure 4: Total assets of Woolworths Limited (in $ billions)
(Source: Woolworths Limited, 2015; Woolworths Limited, 2013; Woolworths Limited, 2011)
Above data indicates the increasing trends of total assets for the company. From this data, it may be inferred that Woolworths Limited has increased its investment in fixed assets such as in plants and equipments. On the other hand, it can also be revealed that current assets of the firms such as cash and cash equivalents. It can enable the firm to repay the short-term obligations of the company in an effective manner.
Figure 5: Total liabilities of Woolworths Limited (in $ billions)
(Source: Woolworths Limited, 2015; Woolworths Limited, 2013; Woolworths Limited, 2011)
Except, 2013, total liabilities of the company has experienced a positive growth in all the years of the concerned time period. It can be inferred that due to the expansion of business, the firm has increased the acquirement of both the short-term and long-term borrowings.
Shareholders’ equity:
Figure 6: Shareholders’ equity of Woolworths Limited (in $ billions)
(Source: Woolworths Limited, 2015; Woolworths Limited, 2013; Woolworths Limited, 2011)
Shareholders’ equity of Woolworths Limited has recorded a significant positive growth for the period of last 6 years. It indicates that the firm has been able to attract the shareholders in the recent times with its attractive business performance and dividend policy.
In order to understand the operational position of the company, sources of money and expenditures cash flow statement plays a vital role (Horrigan, 2008).
Cash flow from operating activities:
Figure 7: Cash flow from operating activities of Woolworths Limited (in $ billions)
(Source: Woolworths Limited, 2015; Woolworths Limited, 2013; Woolworths Limited, 2011)
Cash flow from the operating activities has experienced volatility over the period of last 6 years. Differences in the payment of taxes may be considered as one of the major factor that has contributed in the increase of cash outflow from the operating activities.
