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Case Study Report- Woolworths Group Ltd.
Table of Contents
Financial Analysis...........................................................................................................................2
Current Ratio...............................................................................................................................8
Organizational Future....................................................................................................................14
External factors that need to be taken into consideration in case of a merger or acquisition........17
Recommendations..........................................................................................................................18
1 References......................................................................................................................................19
Case Study Report- Woolworths Group Ltd.
Financial Analysis
Return on Equity is calculated to determine the shareholders earning on the organizational profit
according to per unit of investment done by the shareholders (Easton & Monahan, 2016).
The formula for the calculation of the Return on Equity is:
Return on Equity = Net Income / Shareholder Equity
Net Income
1,800.00
1,600.00
1,400.00
1,200.00
1,000.00
800.00
600.00
400.00
200.00
0.00
3 2018 2017 2016
10,000.00
8,000.00
6,000.00
4,000.00
2,000.00
0.00
2018 2017 2016
Case Study Report- Woolworths Group Ltd.
Return on Equity
0.18
0.16
0.14
0.12
0.10
0.08
0.06
0.04
0.02
0.00
2018 2017 2016
Growth Percentage
Particulars 2018 Growth (%) 2017 Growth (%) 2016
Net Income 1,605.00 12.87 1,422.00 95.87 726.00
Total Shareholders' Equity 10,481.00 10.03 9,526.00 12.47 8,470.00
Return on Equity 0.15 0.00 0.15 66.67 0.09
4
It can be seen that the return on equity is at a similar pace in the last two years but from 2016 to
2017 thee have been a significant rise of 66.67 %. It can be seen as the Net Income of the
Woolworths Group Ltd. has seen a tremendous rise of 95.87 % from 2016 to 2017. The Net
Income of the organization has seen a tremendous rise but it is not due to a high rise in the sales
figure but it is cause due to decrease of expenses. It can be seen that the in total revenue have
decreases as the total sales figure have decreases from 2015 and it is rising but till now the sales
figure is still quite less than that of 2015 sales figure. The sales figure have dropped as and there
was also seen some unusual expenses during the phase of 2015 and 2016. This is the reason the
expenses increased and the net profit also got decreased. Woolworths ruled off the Masters
debacle in 2016 as it was incurring loss this is the reason the sales deceased and the unusual
expenses got increased.
Return on Assets is calculated to determine the organizational profitability against the total assets
of the organization. It helps to determine whether the organization is efficiently using the assets
and are the assets providing sufficient among of profit (Heikal, Khaddafi & Ainatul, 2017).
Net Income
1,800.00
1,600.00
1,400.00
1,200.00
1,000.00
800.00
600.00
400.00
200.00
0.00
2018 2017 2016
Total Assets
23,400.00
23,200.00
23,000.00
22,800.00
22,600.00
22,400.00
22,200.00
2018 2017 2016
Case Study Report- Woolworths Group Ltd.
Return on Assets
0.08
0.07
0.06
0.05
0.04
0.03
0.02
0.01
0.00
2018 2017 2016
Growth Percentage
Particulars 2018 Growth (%) 2017 Growth (%) 2016
Net Income 1,605 12.87 1,422 95.87 726
Total Assets 23,287 2.72 22,671 -1.46 23,006
Return on Assets 0.07 9.88 0.06 98.76 0.03
It can be seen that the organization is performing quite well in the return in assets and it have
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increase from 2016 to 2017 and slightly increase in 2018 also. It can be seen that there have been
a huge increase in the net income and slight decrease in the total assets of the organization in the
year 2017. It can be seen that the have been a decrease in the building in 2015 to 2016. The
machinery & equipment and other property, plant & equipment have decrees in 2017. The
depreciation can also be seen in machinery & equipment from 2016 to 2017. This is because the
organisation has shut down one of their branches in 2016 due to heavy losses.
Current Ratio
Current ratio is calculated to determine the organizational ability to clear the due of the current
liability and for that it is important to sell of the current assets and gain a quick cash to pay off
the current liabilities (Susilowati, 2015).
Current assets
7,500.00
7,400.00
7,300.00
7,200.00
7,100.00
7,000.00
6,900.00
2018 2017 2016
9
Current liabilities
9,250.00
9,200.00
9,150.00
9,100.00
9,050.00
9,000.00
8,950.00
8,900.00
8,850.00
8,800.00
2018 2017 2016
Case Study Report- Woolworths Group Ltd.
Current Ratio
0.83
0.82
0.81
0.80
0.79
0.78
0.77
0.76
0.75
2018 2017 2016
Growth Percentage
Particulars 2018 Growth (%) 2017 Growth (%) 2016
Current assets 7,181.00 0.84 7,121.00 -4.13 7,428.00
Current liabilities 9,196.00 2.73 8,952.00 -0.46 8,993.00
Current Ratio 0.78 -1.83 0.80 -3.69 0.83
It can be seen that the current ratio is below 1 in all the years which is not a good sign for the
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organization. The current liabilities are more than the current assets and the current liabilities.
Both current assets and current liabilities are increasing at a very nominal rate but the rate at
which the current liabilities are higher than the current assets this is the reason the current ratios
Interest coverage ratio helps an organization to measure the organizational ability to pay the
interest from the debt the organization has taken for the business operations (Fitri, Supriyanto &
Oemar, 2016). The lower the interest coverage ratio will be the higher there will be chance of
Interest Coverage Ratio (ICR) = Earnings before Interest & Tax (EBIT) / Interest Expenses
Profit and Loss Accounts (EBIT & EBT) (All values AUD Thousands.)
Profit and Loss Accounts (Interest Payable) (All values AUD Thousands.)
EBIT
2,350
2,300
2,250
2,200
2,150
2,100
2,050
2,000
12 2018 2017 2016
Interest Expense
1,000.00
900.00
800.00
700.00
600.00
500.00
400.00
300.00
200.00
100.00
0.00
2018 2017 2016
Case Study Report- Woolworths Group Ltd.
Growth Percentage
Organizational Future
The organizations Woolworths Group Ltd. is doing quite well in the current business context and
has been successfully identified the flaws in the business till now. There were some major
problems with the organizational business and was incurring heavy losses in one of their
business Masters Hardware business model. The organization have suffers huge an interim loss
of $973 million and had to cut of man powers, properties and machineries form the accounting
book of the organization (Woolworths unveils $1.235 billion loss, 2018). After the shut-down of
the Woolworths Masters Hardware business the organization bounced back and regained their
market position. The future of the organization seems to be very bright as the management have
enough experience to analyse the market trends and if required cut off certain thing so that it
does not harm the profitability of the Group. The sales figure is continuously increasing so the
14 net profit which is a good sign for an organization as the main motive of any organization is to
increase the revenue and the sales. To gain success in future the organization needs to perform an
extensive research and development to identify the gap in the market and needs to identify those.
Woolworths Group Ltd. is a very reputed organization in Australia and has a high goodwill in
the market. It is very important to have goodwill in the market as it helps the organization to
raise funds that will help in the future growth and development process.
Case Study Report- Woolworths Group Ltd.
The current market trend is very competitive so it is important to analyse the market regularly
and develop market strategies according to it. The major problem that is faced in Australia in
terms of government and political environment is the free trade policy in Australia. In case of
free trade police any organization of any foreign country can set up their business in Australia so
the completion level rises even more (Elijah et al., 2017). Due to this factor Woolworths not only
faces a huge completion from the internal companies but from global market also. Woolworths
being an retail chain outlet organization needs to increase the market presence to capture and
target more market. There are huge competitions and majority of the places are already booked
by Woolworths itself or by some competitor. Price also plays and important role as due to high
competition the organization cannot increase the price as any slight difference may cause loss of
15 customers. There is one other major reason that might be very impact full for the organization it
is the increasing demand of the online delivery system. In case of online delivery system
Woolworths has also started delivering the grocery and supermarket items to the customer home.
But the main problem in the competition as to set up an online delivery business there is no
Insolvency is the main reason that an organization requires a high amount of current assets thane
current liabilities. Current liabilities are the liabilities those are for a short period of time mainly
for one year or less. Liabilities are the due of the organization that the organization needs to pay
off within the provided financial year. Current Assets are the short term assets of the
organization those can be easily sold off or en-cashed to gain easy liquid cash (Gitman, Juchau &
Flanagan, 2015). In case of insolvency the organization needs to pay off the entire liabilities by
selling the assets of the organization. The ethical consideration in case of an organization
becomes insolvent is to sell off all the assets and generate all the cash. In the beginning it is
important to pay of the current liabilities holders as those are short term liabilities and needs to
be cleared first. Secondly all the dividends need to be paid to the preference shareholders and
16 debenture holders. The long terms liabilities need to be calculated and pay off and then if there is
any amount left it needs to be distributed among the shareholders based on the ratios of the
External factors that need to be taken into consideration in case of a merger or acquisition
Merge and acquisition are an important part of the business as it is very important for the growth
and development. Generally in case of a small scale company and a large scale company
acquisition takes places (Greve & Man Zhang, 2017). Where the large scale organization
purchases the small scale organization and owns the small scale organization. This is mainly done
for reducing the completion, improving the current organization, increasing the market
capitalization, increasing the customer base and diversifying the product range (Arikan & Stulz,
2016). There are many small scale organization those have new technologies and techniques that
might be helpful for the organization to increase the productivity or reduce the cost of production.
Acquisition means the organization acquiring the other organization will gain the market and the
customer base of the organization too. So there will be gain of market and customer and hence
17 new market can be used to sell the product of the mother company and the customers can also be
In case of merge two or more organization combines together to form a separate identity.
Generally it happens in case of organization those have quite similar financial strength. The
name of the organization will totally be changed as there the will be no existence of the
organization those are merging together (Venzin, Vizzaccaro & Rutschmann, 2018). It may
happen between two or more small scale organization, two or more medium scale organization,
one small scale and one medium scale organization and two or more large scale organization.
Very rarely it can be seen that a large scale organization is merging with medium or small scale
organisation. In both the cases either merge or acquisition is it important to perform an extensive
market research and financial analysis. It will helps to calculate the profit, loss, risks, gains,
potential profitability and cost that can be expend for the merge and acquisition (Gitman, Juchau
& Flanagan, 2015). Any slight miss calculation might result a huge loss. In case of acquisition
Case Study Report- Woolworths Group Ltd.
huge losses will be beared by the mother company and in case of merge both the organization
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Case Study Report- Woolworths Group Ltd.
Recommendations
Woolworths is one of the most reputed organizations in Australia and is the top super market and
grocery retail store chain in Australia with more than 1000 store all across the country. Still there
are huge changes for growth in the market and the recommendations for the organization are:
Penetrate in the global market – Globalization has bought a tremendous growth and
development options for all the organization in the world. Woolworths being a very
reputed organization can uses this goodwill to expand the market globally. It will help the
organization to penetrate new markets and will also the organization to increase the
customer base.
Increase the current ratios of the firm – It is important to have at least twice the amount of
current assets than the amount of current liabilities but the organization have less than
currents assets then current liabilities which is financially bad for the organization.
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Case Study Report- Woolworths Group Ltd.
References
https://www.woolworthsgroup.com.au/page/investors/our-
performance/reports/Reports/Annual_Reports
Arikan, A. M., & Stulz, R. M. (2016). Corporate acquisitions, diversification, and the firm's life
Easton, P. D., & Monahan, S. J. (2016). Review of Recent Research on Improving Earnings
Elijah, A., Kenyon, D., Hussey, K., & van der Eng, P. (Eds.). (2017). Australia, the European
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Union and the New Trade Agenda. ANU Press.
Fitri, M. C., Supriyanto, A., & Oemar, A. (2016). Analysis of debt to equity ratio, firm size,
inventory turnover, cash turnover, working capital turnover and current ratio to
2013). Journal Of Accounting, 2(2).
Gitman, L. J., Juchau, R., & Flanagan, J. (2015). Principles of managerial finance. Pearson
Greve, H. R., & Man Zhang, C. (2017). Institutional logics and power sources: Merger and
Heikal, M., Khaddafi, M., & Ainatul, U. (2017). REVIEWER; Influence analysis of Return on
Assets (ROA), Return on Equity (ROE), Net Profit Margin (NPM), Debt of Equity Ratio
(DER) and Current Ratio (CR), againts Corporate profit growth in Automotive in
Banking, 4(2).
Venzin, M., Vizzaccaro, M., & Rutschmann, F. (2018). Making Mergers and Acquisitions Work:
https://www.news.com.au/finance/business/retail/woolworths-unveils-1235-billion-
loss/news-story/5a6cd1f33658f536b47d95b305c5bc67
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