Woolworths Financial Perfomance Case study

1593 Words Jun 8th, 2014 7 Pages
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
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Based on the financial report of Woolworths, It can be seen that Woolworths’ liquidity levels have risen 0.04% from 2012 to 2013 (Woolworths Balance Sheet 12/13). Woolworths have consistently made sure they avoid the problems listed above through their Multiple Earnings Streams meaning they always have a consistent cash flow. Although firmly based in the retail sectors, Woolworths has multiple income streams that allow the company overall to continue to perform. In the worst of times, people always have to eat, so combined with Woolworth’s discounting business model, this earnings stream should perform reasonably well no matter what happens.
Woolworths also operates discount department stores, consumer electronics outlets, as well as home improvement and hardware outlets such as Big W, Dan Murphy’s (director’s report 2013). The retail nature of the business also means mainly cash sales so they business always have a source of cash flow coming into company. Woolworths have a steady rate of liquidity meaning they shouldn’t have to deal with a cash flow problem allowing their profitability levels to reach their potential and also allowing their share price to continue rising. This share is definitely reliable because the company have secured ways to avoid any liquidity problems so that shareholders can receive maximum dividends.

The profitability of the business is essential in deciding wether or not to invest in shares

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