Woolworths Financial Ratios

In accordance to the annual report of Woolworths Limited 2016, the current accounting practice that is applied to the business regarding its inventory disclosure includes; a perpetual inventory system which continually updates the information by increasing or decreasing inventory from reports throughout the year to verify accounting records (Bragg 2016). A perpetual inventory system in comparison to a periodic inventory system is more efficient and effective for larger corporations. With entities like Woolworths, many transactions occur between themselves and other stakeholders, so by utilising a perpetual inventory system, it saves time and also money (Woolworths 2016)

Woolworths Limited was foundedin 1924, and is Australia's second largest employer. Colloquially referred to as 'Woolies', the company has grown to be Australia's leading supermarket retailer. Woolworths has also gained a strong foothold in the retail markets in New Zealand. Woolworths officially listed on the Australian Stock Exchange (ASX) on 12 July 1993, and trades with the issuer code 'WOW'. Woolworths Limited (Woolworths) is Australia's most recognised and trusted retail brand.

Total asset turnover : This ratio measures the efficiency of a company’s use of its assets

Financial leverage is the ability of the company to maneuver with financing options to meet the obligations (Investopedia, 2012). There are two leverage ratios that were analyzed for this financial statement 1) debt ratio and 2) debt-to-equity ratio.

Asset turnover depicts investment efficiency, because it shows how many sales dollars are generated for every dollar invested in the company’s assets. Lowe’s had relatively lower asset turnover ratios than Home Depot because their recent investment in PP&E.

Return on Assets shows the Company’s ability to generate a profit based on assets and equity. In 2009, the Company’s profit margin was 3.07% and in 2011 it had fallen to 1.91%.

For this capability, strong financial support and effective saving processes as fundamental resources enable Woolworths Ltd to provide products at relatively lower prices. The effective saving processes include the global sourcing process and direct store deliveries also play an important role to achieve competitive prices by reducing inventory costs and operating costs. Besides, the long term and good relationships with suppliers makes Woolworths get this capability to get lower cost products. Then combining the online network and existing delivery system makes customers purchase more conveniently. Last, Woolworths Ltd is also engaging in product expansion in different industries.

Woolworths is a supermarket chain situated within Australia and New Zealand and is owned by Woolworths Limited. Established in 1924, as a single basement store in Sydney Australia, Woolworths has become the largest food retailer within Australia,

Woolworths is a conventional supermarket owned by Woolworths Limited. It started as a basement store in Pitt Street in 1924, and is now one of the leading competitors in the supermarket business. With over 850 stores in Australia, and 110,000 Woolworths staff, they provide

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

Inventory turnover in days is an assistant figure of inventory turnover. The shorter of the days, the faster of the inventory turning to cash, and the better use of short-term capital. This figure of the firm was very high in 2001 and began to fell down from 2002,then lower than industry in 2004 and 2005.This indicates the management of the firm became better.

A third activity ratio is the inventory turnover ratio, which indicates the effectiveness with which the company is employing inventory. Since inventory is recorded on the balance sheet at cost (not at its sales value), it is advisable to use cost of goods sold as the measure of activity. The inventory turnover figure is calculated by dividing cost of goods sold by inventory:

The liquidity position of a company can be evaluated using several ratios which evaluate short-term assets and liabilities and a firm’s ability to settle short-term debts (Gibson, 2011). These ratios can provide insight into a firm’s ability to repay its debts in the short term (Gibson, 2011). In turn they suggest a firm’s capacity for debt-satisfying capabilities into the future (Gibson, 2011). This paper will use financial statement data as cited in Gibson (2011) from 3M Company (3M) to better understand liquidity measures to evaluate a firm’s total liquidity position. The following paper will focus on various liquidity calculations, their meaning, and their interpretation relative to 3M. Finally, an overall view of 3M’s liquidity

Another ratio we will look at is total asset turnover rate. Total asset turnover rate measures how efficiently a company uses its assets to generate sales. In 2001 the total asset turnover rate was 1.079 and in 2000 it was 1.193. The fixed asset turnover ratio is similar to the total asset turnover ratio but includes only fixed assets. The fixed asset turnover rate measures the capacity utilization and the quality of fixed assets and was 3.771 for 2001 and 3.854 for 2000.

In this ratio he explains about the three types of business inventory like raw materials, work in progress and finished goods. Formula to find the inventory turnover ratio and average age of inventory is: - inventory turnover = costs of goods sold/average inventory, Average age of inventory = 360 days/inventory turnover ratio.