Ratio | Industry benchmark ratio| Woolworths’ ratio| Brief Comment| Current Ratio| 1. 2:1| 0. 80:1| The current ratio ofWoolworth is considerablybelow industry average themovement from it is 33. 33% (1. 2-0. 8)/1. 2*100) Which is not really good for business| Liquid ratio| 0. 7:1| 0. 34:1| The Liquid ratio of Woolworth is considerably below industry average. The movement is 51. 43 %. It is showed that the business may have problem in paying their debt. (0. 7-0. 34/0. 7*100)| Gross Profit ratio| 25. 9%| 26. 03%| The gross profit ratio of Woolworth is above industry average. Is higher by 0. 3% Which indicate a good thing for business| Net Profit ratio| 2%| 3. 95%| The net profit ratio of Woolworth is nearly double of industry average. Is higher by 1. 95%. | Return on Investment| 8. 1%| 10. 15%| Return on Investment of Woolworth is above the industry average by 2. 05% that mean is very good for Woolworth in term using their asset to make a profit. | Accounts Receivable collection Period| | 1. 70 days| | Inventory turnover ratio| 16. 6 times| 11. 20 times| The Inventory turnover ratio of Woolworth is below the industry average, which is still quite good while Woolworth still have high net profit because the sales increase. Debt to Equity ratio| 89. 6%| 63. 22%| The debt Equity Ratio of Woolworth is below the industry average by 26. 38% which is indicating good for the business. It is show that Woolworth have ability to pay their debt with capital| Times Interest cover| 3. 6 times| 9. 2 times| The times interest cover of Woolworth is higher compare the industry benchmark by 5. 6 times. Which is showing that Woolworth have a capability to pay their interest from their loan| | | | | | | | | Report * Liquidity : The current ratio and the liquid ratio are both below the industry average by 0. indicating potentially minor liquidity problem in the future. Might suggest that the business is not well placed to pay its debts. It might be required to raise extra finance or extend the time it takes to pay creditors. Woolworth had a very high account payable as show in the annual report. To increase this ratio, Woolworth have to decrease the account payable using their profit or capital. As the inventory turn over of Woolworth is below the average, means Woolworth did not held too much inventory as it is affect this ratio. * Profitability : Gross profit and net profit ratio are above the industry average.
Also the return on net investment is higher, measures the efficiency with which the company is managing its investment in assets and using them to generate profit. It is very good sign from on investor’s point of? view. It means that management has able to handle the operating cost and other cost. As a? result company has generated more profit compare the last 5 years. For the gross profit, it might be Woolworth had decrease a cost price by negotiating price down with their supplier and somehow increasing the price when the cost price is too high. For the net profit Woolworth had 2% above the average.
This happen because Woolworth had a decrease their operating expenses with an increasing of sales. * Activity: the inventory turnover ratio is below the average by 5. 4, indicating that Woolworth is not as efficient as the rest of industry. Or the sales of Woolworth as not high as other company which is turnover very quickly. In fact of that Woolworth is still doing well base on the profit they make compare to benchmark * Leverage : The debt equity ratio and interest times cover is above the average, it is very good in the term borrowing another f und to expand their business.