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Assignment example - Woolworths Ltd
Finance & Accounting
Pages 4 (1004 words)
Woolworths Limited operates 1074 supermarkets in both Australia and New Zealand (Woolworths Ltd 2013a, p. 47). The company currently operates the largest chain of supermarkets in Australia where it currently has 872 stores (Woolworths Ltd 2013b)…
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The aim of the company is to grow its business by increasing its leadership in the area of food and liquor, maximize shareholder value, continue its record of building new businesses, while putting in place enabling factors in order to facilitate a new growth era (Woolworths Ltd 2013b). During the year ended June 30, 2013 the company expanded its operations through the addition of 32 hotels, 22 home improvement stores, 25 supermarkets in Australia and 6 in New Zealand (including a franchise), 14 petrol outlets, 15 Dan Murphy’s, 14 BWS and 6 BIG W (Woolworth Ltd 2013a). The company’s main competitor is Coles- a supermarket chain operated by Wesfarmers Ltd. Analysis of Financial Performance According to BPP (2009) return on capital employed (ROCE) is considered to be one of the most important ratios and so it is not possible to assess profitability without relating it to assets employed. Woolworths’ ROCE was unstable for the most part, declining from 25.58% in 2011 to 22.59 in 2012 and then increasing to 23.75% in 2013 (See Appendix 1 for calculations). A return of over 20% is considered good when compared to current interest rates. When compared with Wesfarmers Ltd ROCE is also better. In fact, Wesfarmers’ ROCE indicates instability, increasing from 10.07% in 2011 to 11.24% in 2012 and then declining to 10.92% in 2013 (See Appendix 1 for calculations). ...
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