Abc Assignment Help

Understanding Financial Performance And Voluntary Disclosure of Woolworths Company Assessment Answer

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.

Assessment Requirement:

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


  • Atoom, R., Malkawi, E. & Al Share, B. 2017. Utilizing Australian Shareholders’ Association (ASA):

            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:

  • A completed Assignment Cover Page attached to the front of the portfolio (available in the Assignments folder on Blackboard);
  • A table of contents is NOT required for this report. However, an introduction paragraph and a concluding paragraph are required. Please see the marking rubric for the Case Study, which is available in the Assessments folder in Blackboard.
  • A reference list. All your references must be properly cited in your report and included in thereference list at the end of report. Students shall use the APA 6th referencing style when preparing the report. 
  • The maximum length of the Case Study is 800 words (word count is inclusive of tables and figures but excludes the cover page, references, and appendix). Do not exceed the word limit or use inappropriate formatting such as using smaller font size, inappropriate spacing, or narrower page margin. Note that it is the quality, not the length of the report that determines the grade of the assignment.

The report must:

  • Use 12-point Times New Roman font;
  • 1.5-space format, 1-inch margins;
  • paragraphs (not dot points)

Answer

Introduction

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

Financial ratios

RATIOFORMULAWoolworths
201820172016
ASSET, RECEIVABLE AND INVENTORY MANAGEMENT
Days inventory(Current inventory/operating revenue)*365292727
Days debtors(Debtors/operating revenue)*365333
Days creditor(Creditor/operating revenue)*365303334
Asset turnoverTotal sales/ average total assets2.482.432.41

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.

LIQUIDITY
Current ratioCurrent assets/ current liabilities0.830.790.78
Quick ratioQuick assets/ current liabilities0.150.150.18

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. 

PROFITABILITY
  1. Gross profit
Gross profit/ Sales1.0001.0001.000
b. (Net) profit marginNet profit after tax/ total revenue1.44%2.66%2.95%
c. return on equitynet income/ shareholder's equity4.26%14.00%14.85%
d. return on assets rationet income/ total assets3.24%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).

CAPITAL STRUCTURE
Debt ratioTotal debt/ total assets0.640.580.56
Debt to equity ratioTotal debt/ total equity2.503.508.50


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.

Voluntary disclosure performance

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. 

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). 

Computation of the voluntary disclosure index of the Woolworths Company

NumberCategoryPoints
1Governance of Woolworths26
2Financial historical results47
3Key non-financial statistics25
4Projected information about the GHG emission40
5Management disclosure and transparency of company50


VD score= Total sore earned by Company/ total maximum score

183/500= .366

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:

  • Disclosing information about the initiatives such as Retrofitting our stores with energy efficient LED and Changing the way heating, ventilation and air-conditioning equipment is controlled in our stores that organisations take in light of their sustainability brings them in limelight and provides a kind of positive publicity against the stakeholders. The public image of the organisation improves. Due to voluntary disclosure of emissions footprint and its related eco-support system, the competitiveness of the entity within the industry raises. This leads to improved profitability over years and also better share price (Gallego-Álvarez, and Quina-Custodio, 2016). 
  • Woolworths has made several other major steps in reducing the carbon emission and it is highly visible to the stakeholders. It is analysed the due to the transparency work practice and high disclose their actions voluntarily, they might tend to incur greater costs because of high influence exerted upon them by the society and political environment. They are always expected to explain their actions and the manner in which they are performing.  Also it is required from them to explain their manner of using resourced obtained from external environment (Woolworths Company., 2018).
  • Woolworths has taken GHG emissions intensity in its business process related products and offerings. The market sensitivity towards the information disclosed by these organisations is comparatively high for the implementation of GHG emissions intensity test. 
  • Transparency about the company’s operations rises in the perception of stakeholders due to the disclosures the entity makes. This is important to retain the stakeholders over the life of entity’s operations (Giacosa, Ferraris, and Bresciani, 2017). 

Recommendations

The recommendations to help the organisation in improving its financial performance as well as the quality of voluntary disclosures are as follows:

  • The focus of the Woolworths should be diverted towards increasing the current assets under holding especially the liquid assets to bring an improvement in the current ratio and the quick ratio.
  • A serious requirement is to improve the profitability of the concern. This could be done in several ways. One of the possible ways is improvised marketing tools. An integrated approach of marketing can attract many customers towards business. It needs to strengthen the transparency of the recorded items by following AASB 138.
  • The communication matrix as well as reporting should be made easier. A reduction should be made in the reporting of the GRI disclosures. This would also increase the communication speed. This will result in faster as well as much accurate disclosure of information (Christensen, Kent, Routledge, and Stewart, 2015).

Conclusion

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. 

Customer Testimonials