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Essay on Financial Analysis of Woolworths Ltd

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Financial Analysis of Woolworths Limited 10 October 2011 By: Huatong (Claire) Liu To: Potential investors Executive Summary The primary purpose of this report is to determine whether Woolworths Limited is an appropriate and profitable company to invest in. Specific objectives include analysis of annual reports of Woolworths and its competitors (Wesfarmers) as well as interpretation of relevant government and industry statistics, stock exchange, market information and media comments. Further, Woolworths’s financial strengths and weaknesses are identified. The potential growth prospects for Woolworths, the future of the food and staples retailing industry, and the risks versus the benefits of investing in Woolworths are all …show more content…

Although the aim of this report is to be as detailed and comprehensive as possible, there are still some limitations exist. First of all, any estimates or projections of future economic performance are impacted by numerous factors, such as market behavior, that are inherently uncertain. Therefore future outcome may not unfold as expected. Further, events may have occurred since I prepared this report which may impact on it and its findings. Moreover, Woolworths and Wesfarmers have some differences in accounting policies. For instance, Wesfarmers values inventories at the lower of cost and net realisable value. Woolworths values short life retail stocks in the same way, but for long life retail stocks, the retail inventory method are used to determine cost by reducing the value of the inventory by the appropriate gross margin percentage which takes into account markdown prices. Different method of recording and valuation may influence the final financial results. Conclusion Having examined Woolworths Ltd financial performance through analyses and comparisons we come to conclusion that Woolworths has a number of financial strengths as well as several weaknesses. Strengths • Strong and trusted brand name • High product quality and safety (persistent implementation of “Fresh Food People” strategy) • Very efficient management (efficient at using assets to generate sales, collecting money

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