Case Study (Part Two)
This assessment is an individual assignment and is worth 40% of the total mark in this unit. The assessment must be submitted through Turnitin within the Assessment tab on Blackboard. The word limit for this assessment is 800 words. Please see below for more details.
Scrutinize your chosen company’s Annual Report and other reports for performance trends of the companyover the past two consecutive years. In particular, investigate the Energy and Water disclosure performance record (i.e., GRI 302 and 303) and financial performance record of your chosen company. Identify possible reasons for the disclosure or non-disclosure of the GRI disclosures.
Read the following articles and GRI standards to inform your response to this assessment
Fifteen Top Financial Ratios to Evaluate Jordanian Banks’ Performance, Journal of
Applied Finance &Banking, 7(1), 119-141.
In addition, refer to your chosen company’s Annual Report and information from other sources such as other reports and websites.
Case Study Format:
The Case Study submission is to contain:
The report must:
This report reveals the key understanding on the financial performance and voluntary disclosure index of the Woolworths Company. It has supermarket/grocery store chain owned by Woolworths Limited. Founded in 1924 having headquarter in Bella Vista in Australia. The company has marked its name as the largest supermarket store and having more than 990 employees. As far as company’s revenue standing is analysed, the company is having good amount of profitability. The current report analyses the financial condition of the organisation along with GRI 302 and 303 disclosures made by the Woolworths Company
Calculation of Financial Ratios and Voluntary Disclosure Index
|ASSET, RECEIVABLE AND INVENTORY MANAGEMENT|
|Days inventory||(Current inventory/operating revenue)*365||29||27||27|
|Days debtors||(Debtors/operating revenue)*365||3||3||3|
|Days creditor||(Creditor/operating revenue)*365||30||33||34|
|Asset turnover||Total sales/ average total assets||2.48||2.43||2.41|
It is analysed that company has kept effective efficiency in deploying it assets and resources. There is a completely visible improvement in the efficiency of entity’s operations. A fall in day’s inventory shows improvised efficiency in current asset management of Woolworths Company (Woolworths Company. (2016). Reduced days inventory signifies lower stocking of organisation’s inventory stating lower days of stocking, i.e. faster sales. The stable day’s debtor shows no changes in the days for collections from receivables. The rise in day’s creditor shows slower rate of payment to creditors. The rise in asset turnover is a signal of improved efficiency in managing the assets of business, i.e. higher sales are generated per rupee of asset employed.
|Current ratio||Current assets/ current liabilities||0.83||0.79||0.78|
|Quick ratio||Quick assets/ current liabilities||0.15||0.15||0.18|
There is a drastic downfall observed in the current ratio as well as quick ratio signalling lower amount of current assets being employed. There is a need to bring up more current assets in business as the standard ratio demands the current assets to be at least 2 times the current liability. Also the quick assets i.e. highly liquid assets has increased by .03 points due to the increased liquidity assets.
|Gross profit/ Sales||1.000||1.000||1.000|
|b. (Net) profit margin||Net profit after tax/ total revenue||1.44%||2.66%||2.95%|
|c. return on equity||net income/ shareholder's equity||4.26%||14.00%||14.85%|
|d. return on assets ratio||net income/ total assets||3.24%||7.16%||1.00%|
The profitability of business has increased by 200% since last three years. Except the gross profit margin the company’s profitability has been continuously increasing. The net profit margin has highly increased. The increase in net income as analysed from the annual report is on account of application of AASB 138 intangible assets. Most of the expenses have been observed as capital expenditure. . The return on equity and return on assets has increased because of increase in the profit (Woolworths Company. (2015).
|Debt ratio||Total debt/ total assets||0.64||0.58||0.56|
|Debt to equity ratio||Total debt/ total equity||2.50||3.50||8.50|
The company’s capital structure has changed. There is a fall in the company’s level of debt, equity as well as assets. However, the fall in debt observed is high in comparison to the assets as well as equity. This has led to a fall in the company’s debt ratio as well as the debt to equity ratio. Woolworths has kept low financial leverage and having good debt management policy being employed in business.
As per the requirements of Global Reporting Initiative 302 and 303, Woolworths Company is required to disclose performance record in relation to Carbon Disclosure Project (CDP), an investor-driven disclosure initiative enabling it to strengthen its eco-supporting company. It reports on the basis of the risk identification and mitigation processes related to climate change in the business process. The details relating to the disclosures made by the organisation for the same are as follows:
GRI 302: GRI 302-1 requires the organisation to disclose about Energy Consumption within the organisation and GRI 302-3 requires the organisation to report about the intensity of energy emitted.
The company has strived to manage and disclose the financial disclosures relating to climate in accordance with the recommendations provided by Task Force on Climate-related Financial Disclosures (TCFD) (Zentes, Morschett, and Schramm-Klein, 2017). The company’s operations have led to a decrease in the emissions of CO2e by 2437 thousand tonnes. There is a reduction in the greenhouse gas emissions because of installation of nitrous oxide abatement technology. Production of GHG omissions has reduced by 243756 tonnes. The organisation has initiated a Carbon Disclosure Project (CDP) as a benchmark tool for investors to analyse performance of climate change (Pulker, Trapp, Scott, and Pollard, 2019).
GRI 305: through GRI 303-1 the entity reports organisation’s Direct (Scope 1) GHG emissions withdrawal by source and GRI 305-3 required the organisation’s other indirect (Scope 3) GHG emissions needs to be reduced. For financial year 2018, the entire group’s usage of process and increased GHG emissions had increased by 22%. This draws attentions towards a decline of 19% in the safe environment in comparison to prior financial year. The reason as per the reporting made by the organisation is based on the GRI standards. The Waste by type and disposal method has been implemented by Woolworths to reduce its GHG emissions. (Bayne, Purchase, and Tarca, 2019).
The group has also initiated GHG emissions intensity test in its process to lower down the negative impact of GHG gas emission. The newly adopted Waste by type and disposal method had been introduced earlier an approach to reduce the possible wastage in process (Antonini, 2016).
|1||Governance of Woolworths||26|
|2||Financial historical results||47|
|3||Key non-financial statistics||25|
|4||Projected information about the GHG emission||40|
|5||Management disclosure and transparency of company||50|
VD score= Total sore earned by Company/ total maximum score
Therefore, it could be inferred that company has kept .36 voluntary disclosure which is quite average as compared to other rivals in market.
Possible reasons for level of Voluntary Disclosure
The possible reasons that have advanced corporations including Woolworths Company to voluntarily disclose information are as follows:
The recommendations to help the organisation in improving its financial performance as well as the quality of voluntary disclosures are as follows:
The current report has completely shows a financial as well as sustainable insight into Woolworths’ business. The disclosures have been discussed limited to GHG emissions intensity usage by the organisation, yet the company is well ahead in disclosing the other requisite details as required by GRI matrix. The business is strong enough, though is facing high cost of capital. The reason seems to be application of new accounting standards and less efficiency in its business process.