My way of Viewing Woolworths

A powerful way of viewing business is separating financial activities and operational activities.

                                                 Woolworth’s NOA and NFO

	2013 $m	2012 $m	2011 $m	2010 $m
Net Operating Assets(NOA)	10026	9179	8760	7854
Net Financial Obligation(NFO)	726	732	240	225

The Key benefit of restating Woolworth’s balance sheet is separating NOA and NFO. The above table clearly shows that Woolworth's NOA is continuously increasing from $m7854 in 2010 to $m10 026 in 2013. At the same time its investment that is NFO is far too low compared to NOA. 



   

Annual Reports

1. http://www.woolworthslimited.com.au/annualreport/2012/pdf/WW_AR12_Full.pdf
2. http://www.woolworthslimited.com.au/annualreport/2013/downloads/WoolworthsLimited_AnnualReport_2013_FullReport.pdf
3. http://www.woolworthslimited.com.au/icms_docs/129899_Annual_Report_2011.pdf

KCQ's

Key Questions

1. Question1:

When restating the Woolworth's Balance sheet, Net Operating Assets and Equity plus Net Financial Obligation are always equal. What do you understand from this?

2. Question2: 

When viewing the business, calculating ratios are not uncertain like NPV. It is comparing different figures already present in financial reports. Why can't we consider it as a powerful way of viewing business?

3. Question3:

Dirty surplus are added in Comprehensive income statement. The purpose of restating the statement of changes in equity is to add dirty surplus. 
Is restating the statement of changes in equity necessary when a firm provides comprehensive Income statement?

 

Reflection on "Introducing Financial Statements"

There are 4 inter-connected Financial Statements join together show the Economic and Business reality of a business. They are Balance sheet, Income Statement, Changes in Equity and Cash Flow statements.

This introductory part of financial statements is making me think that to analyse financial statements, ratios are better option as it focus on the relationships between different items of a firm’s financial reports. As financial reports are audited it can be trusted. Whereas PV is not a reliable option as it is present value of future cash flows and future is uncertain.

Reflections on "A way of viewing Business"

A way of viewing Business;

A firm's accounts are their Economic and Business realties, through which the management is trying to show what is really happening in the firm. For instance, investors want to invest in a company which have the capacity to increase its profit in future.  They will know if the firm they are interested in, has that capacity through their accounts.

I think because every business is different, it is not enough just viewing the business reality using accounting entries, there should be someone with accounting knowledge to transform the way we actually see the economic realities of a firm who can then understand what is really going with their business and suggest actions accordingly. That will eventually lead to the success of their business. That is why half of the managing directors of listed companies have some sort of accounting background, because they can easily identify the economic reality of their business and be successful. An example I could bring from my company Woolworths is that the Managing Director and Chief Executive Officer Grant O’ Brien started as an accountant in Purity Supermarkets in Tasmania.

My Favourite Blogs

Blog1: Aireen Doodson
http://doodsonaireen.blogspot.com.au/2014/03/schaffer-corporation-limited.html?showComment=1394012678408#c8164461052891569297
She had taken great effort to analyse the annual Reports and also to fulfil assignment requirements. It looks like she grasped a lot from others blogs and questions. Her blog and discussions with others show that she is got a very good understanding in this subject.
Blog2: Anna Meresi Towan
http://annatowanacct11059.blogspot.com.au/2014/03/study-guide-chapter-1-activity-question.html
The reason for liking this blog is it is informative. When you look at it you can learn lots and recall everything you learnt. Great Work.
Blog3: Erikai Guerrini 
http://erikaiguerrini.blogspot.com.au/2014/03/ebet-gaming-solutions-company.html#comment-form
I like this blog, because she analysed Ebet's Financial report very well. She discussed about her company's performance and gave the reason for their achievement. Good.
 

Woolworths

Woolworths is Australia’s largest food retailer, it brings Australians outstanding fresh food and value. It operates around, 3000 stores and support sites across Australia and New Zealand. It serves 28 million customers each week. This Australian company was founded in 1924 in Sydney. The Founding CEO was Percy Christmas.

Growth Plans:

Woolworths' growth plan is based on four key strategic priorities.

1. Extend leadership in food and liquor

2. Act on our portfolio to maximise shareholder value

3. Maintain our track record of building new growth businesses

4. Put in place the enablers for a new era of growth 

Some of Australia's most recognised & trusted brands managed by Woolworths

1.   Supermarkets and Petrol

2.    Danmurphy’s Liquor Group

3.    BIG W

4.    Masters Home Improvement

5.    ALH Group Hotels

6.    Woolworths Money Financial Services

7.    Everyday Rewards

8.    Ezibuy

Equity

                                                                      Equity

Year	2011 $m	2012 $m	2013 $m
Total Assets	21095	21581	22,250
Total Liability	13,249	13,135	12,950
Equity	7,846	8446	9300

Woolworths achieved a continuous increase in its Equity from $m7846 in 2011 to $m 9300 in 2013.
Subsidiaries:Woolworths has got a long list of 100% owned subsidiaries and 5 partly owned subsidiaries.



Please check the Balance sheet in annual reports.
Annual Reports:

1.   http://www.woolworthslimited.com.au/annualreport/2013/downloads/WoolworthsLimited_AnnualReport_2013_FullReport.pdf

2.  http://www.woolworthslimited.com.au/annualreport/2012/pdf/WW_AR12_FinReport.pdf

3.  http://www.woolworthslimited.com.au/icms_docs/129899_Annual_Report_2011.pd       

 Following are some of Woolworths Assets, Liabilities and equities and my explanations for them.

1. Cash and cash equivalents: Cash at hand and at bank.
2. Intangible assets: saleable assets but not material or physical. 
3. Deferred Tax assets: An asset used to reduce any subsequent period's income tax expense. Deferred tax assets can arise due to net loss carryovers. It is carryover losses-revenue. Any leftover losses will be carried forward to the next year.

    Liabilities:

1. Trade and other payables: Goods bought on credit
2. borrowings: Loans
3. current Tax Liabilities: Tax payable immediately.

Equities:

1. Shares held in Trust: Woolworths retains some shares for its employees in Trust.
2. Retained Earnings: Profit not distributed to shareholders.
3. Reserves: Account set aside by Woolworths to meet unexpected expenses which arise in future. 

Issues Woolworths is facing:

1.      Climate change: Climate change and its impact on fresh food production is the most critical environmental issue facing Woolworths and the sustainability of our business. Efforts taken by Woolworths to overcome climate change are minimising our carbon footprint, using electricity and fuel more efficiently, investigating alternative energy and fuel sources, minimising disposing of waste.

2. Direct use of water and the effect of drought. Woolworths has committed to roll out the Water Wise project to all our Australian supermarkets saving around 200 ML of water per year. 
3. Sourcing of our private label products and ingredients as well as other products and services. Woolworths is committed to improvement by finding cost-effective ways to reduce packaging and minimise waste from private label products, whilst continuing to deliver quality products to customers at low prices. 
4. Packaging – including consumer packaging in our private label products and distribution packaging.
5. Waste generation from all our stores. Woolworths sent nearly 84,000 tonnes of waste to landfill in Australia’s eastern seaboard states and New Zealand, generating around 160 kt of CO -e emissions.
6. Store development (design, construction, equipment and materials specification). Woolworths build all new supermarkets according to its sustainable design guidelines to minimise energy use and environmental impacts, works with Green Building Council to develop a star rating tool for supermarket interiors. So all stores developed since 2008 are green stores.

Please check this link:

http://www.woolworthslimited.com.au/icms_docs/130514_Doing_the_Right_Thing.pdf
The way Woolworths is facing its key challenges are really excellent. It is really interesting to read through them.

Woolworths claims that it makes a profit of 6.79% before tax. Please check this link.

http://www.woolworthsfacts.com.au/