Also, there were more cash sales within the period 2003-2005, but this figure started rising again in 2006, meaning that the company has either increased its credit extension period, say from 60 to 90 days or it is facing difficulties in collecting receivables in recent times. This is a warning signal that there will soon be a problem of managing working capital. This is clearly depicted by the drop in the ratio of cash flows from operating activities to sales in 2007. The company is facing liquidity difficulties and so care should be taken if one has to invest in it.
The sales growth for Coles has been mixed as it varied over the period of time. As expected, inventory has moved almost in the same direction as sales for Coles but Receivables/Sales as well as Cash flow/sales have not shown the same correlation between the two variables. However, other ratios can be used to evaluate the companies based on the data provided for both companies for 2006 and 2007. These can be summarised in the table below.
From the above ratios, we can safely assume that the Coles is less leveraged company as compared to Woolworth.