Woolworths Ltd
WOOLWORTHS LTD.
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❖ Financial Planning Cycle at Woolworths
o Woolworths supermarkets experience a cyclical flow of funds in accordance with predictable consumer and retail cycles o It: - assesses current performance prior to planning - records transactions to summarise trading data - analyses the data so that actual financial performance is assessed against targeted performance
❖ Financial Markets Relevant to Woolworths
o Woolworths Ltd. Is a publicly listed company. o Thus, the ASX is a financial market that is of importance to Woolworths. This is because Woolworth’s shares and their prices are dependant on investors and market forces, where the medium is the stock exchange. E.g. in 2006, the share price rose from $16.65 ( $22.19 ( a huge rise in the value of invested capital.
❖ Debt and Equity (Gearing) At Woolworths
2006 2007
Total Debt $9088.8 m $8901.4 m
Total Equity $4257.6 m $5514.7 m
Debt to Equity Ratio 2.13:1.0 1.61:1.0
Summary of gearing indicating financial stability of Woolworths
o Relatively high gearing. But Woolworths is in a time of growth and tend to borrow to fund that growth. i.e. the increase from 756-766 supermarkets nationally in a year.
❖ Assessment of Ratios for Woolworths
1) Liquidity (Working Capital Ratio)
• Approximately 0.76:1 in 2007 • Bulk of Woolworths current assets come from stock. • Bulk of current liabilities are from trade creditors • Low WCR is of no concern, as stock can be sold quickly
2) Profitability
• (Gross Profit Ratio): 25% ( 25 cents is the mark up • (Net Profit Ratio): 4% ( low rate, volume of turnover is so high that it becomes profit anyway, thus low rate is of no concern • (Return’s on Owner’s Equity): 34% ( highly profitable for investors
3) Efficiency
• (Accounts Receivable Turnover Ratio) ▪ Benchmark ratio is 12 times per year, and
[pic]
❖ Financial Planning Cycle at Woolworths
o Woolworths supermarkets experience a cyclical flow of funds in accordance with predictable consumer and retail cycles o It: - assesses current performance prior to planning - records transactions to summarise trading data - analyses the data so that actual financial performance is assessed against targeted performance
❖ Financial Markets Relevant to Woolworths
o Woolworths Ltd. Is a publicly listed company. o Thus, the ASX is a financial market that is of importance to Woolworths. This is because Woolworth’s shares and their prices are dependant on investors and market forces, where the medium is the stock exchange. E.g. in 2006, the share price rose from $16.65 ( $22.19 ( a huge rise in the value of invested capital.
❖ Debt and Equity (Gearing) At Woolworths
2006 2007
Total Debt $9088.8 m $8901.4 m
Total Equity $4257.6 m $5514.7 m
Debt to Equity Ratio 2.13:1.0 1.61:1.0
Summary of gearing indicating financial stability of Woolworths
o Relatively high gearing. But Woolworths is in a time of growth and tend to borrow to fund that growth. i.e. the increase from 756-766 supermarkets nationally in a year.
❖ Assessment of Ratios for Woolworths
1) Liquidity (Working Capital Ratio)
• Approximately 0.76:1 in 2007 • Bulk of Woolworths current assets come from stock. • Bulk of current liabilities are from trade creditors • Low WCR is of no concern, as stock can be sold quickly
2) Profitability
• (Gross Profit Ratio): 25% ( 25 cents is the mark up • (Net Profit Ratio): 4% ( low rate, volume of turnover is so high that it becomes profit anyway, thus low rate is of no concern • (Return’s on Owner’s Equity): 34% ( highly profitable for investors
3) Efficiency
• (Accounts Receivable Turnover Ratio) ▪ Benchmark ratio is 12 times per year, and