The major part of operations as discussed in this financial analysis assignment of Woolworth's Limited is in Australia and New Zealand. The company belongs to consumer goods industry (Woolworth's, 2019)

1. 1
Financial analysis assignment: Analyzing the Business
strategies of various companies
Company Background
Company-A i.e. Myer Holdings Limited engages in the business of manufacturing, sales
and marketing of steel pipes, sheets, and allied products in China. This company operates in the
basic material industry (Mayer, 2019). Company-B is Woolworths Limited which engages in the
business of retail sales. The company operates 1008 super markets and metro stores. In addition
to this, the company also operates 1545 liquor stores 323 hotels. The major part of operations as
discussed in this financial analysis assignment of Woolworths Limited is in Australia and
New Zealand. The company belongs to consumer goods industry (Woolworths, 2019).
The gross domestic product and inflation are the two primary macro-economic factors
that have great bearing on the performance of Myer’s and Woolworth’s performance. The GDP
of China is growing at 6.4% with inflation rate being 2.50% (Trading Economic, 2019). On the
other hand, the GDP of Australia is observed to be increasing at the rate of 0.2% which is lower
as compared to China.
The industry wide factors such as competition and bargaining power of the buyers are
expected to affect the performance of both the companies. The competition is increasing day by
day and bargaining power of the buyers is also increasing.
Two specific factors as discussed in this assignment on financial analysis that can affect
the company’s business performance for Myer are demand in the market and liquidity crunch. In
the same way, two specific factors for Woolworths Limited are market share and increased
competition.
Lending Decision Memorandum
The company-A i.e. Mayer Holdings Limited has sought loan for a sum of $ 233,596
thousands ($583,989 thousands*40%) to be payable over the period of 10 years. Therefore, it is
to be a long term loan agreement. In this connection, it is inevitable to analyze the financial
performance and position of the company.
The profitability position of the company described in this assignment on financial
analysis is not good as observed from the downward trend shown by the profitability ratios. The
company has incurred losses in the year 2018 amounting to $486 million. Further, the net profit
margin of the company is very weak. In the year 2016, the company had net profit margin of
1.84% which further reduced to 0.37% in 2017 and went negative 15.67% in 2018. However, the
gross profit margin of the company is good which shows that the company has capability to

2. 2
generate profits (Subramanyam, 2009). The gross profit margin has been observed to be approx
55% in the past three years.
In addition to the above mentioned part in this financial analysis assignment, the
analysis into liquidity and solvency is also important. The liquidity position of the company is
not good as depicted from low current ratio and quick ratio. The current ratio was 0.92 times in
2016 which improved slightly upward to 0.95 times in 2018. However, the ratio is still less as
compared to the industry standards of 2 times. The quick ratio is also too low at 0.16 times.
The most crucial ratios for loan decision are times interest earned and debt to total assets.
The time interest earned was 6.17 times in 2016 which reduced to 3.64 times in 2017 and went
negative 51.29 times in 2018. This clearly shows that the company’s position regarding
repayment capacity is not sound (Guo et al., 2016). However, the portion of debt in the total
assets appears to be controlled. The debt to asset ratio is 0.48 times which is good; however,
further increase in debt may create problems for the company.
Thus, based on the overall analysis in this financial analysis assignment, it could be
articulated that the profitability position of the company is not good. The liquidity and solvency
position does not appear to be sound too. The company is not able to generate enough cash
profits to prove its loan repayment capacity. Hence, the loan application of the company is to be
rejected.
Investment Decision Memorandum
The amount for private placement considered by Capital Investment Limited is 30% of
equity which works out to be $175,197 thousands ($583,898 thousands*30%) for company-A
(Mayer) and $3,255 million ($10,849*30%) for company-B (Woolworths). The Capital
Investment Limited has to decide as to where to invest the funds.
In the case of company-A described in this assignment for financial analysis, it has been
observed that the profitability position of the company is not good and it is also struggling with
its finances. Further, the EPS is also -59.20 cents with PE ratio of -0.78 times. The sale is on
decline showing adverse conditions in the market. Further, it is expected that the demand of steel
would take time to stimulate in China (Worldsteel.org, 2019). Thus, there are a lot of concerns
about the improvement in the financial performance and position of company-A in the future
years.
However, the company has good reputation in the market and it is equipped with the
required resources so if the demand picks up, the company may accelerate and get back on track.
Thus, for the short to medium term investment outlook, the Capital Investment Limited should
not invest in the equity of company-A.

3. 3
The profitability of company-B (Woolworths) has been observed to be improving over
the period of three years. The net margin improved from -4.39% in 2016 to 3.16% in 2018. The
return on equity has also shown improvement from -26.74% in 2016 to 17.32% in 2018. The
gross margin of the company has also been observed to be good at around 30%. However, the
liquidity position is not as good as it is supposed to be but yes the company has good backing.
The times interest ratio is found to be rising from 6.09 times in 2016 to 16.55 times in 2018.
The EPS has been found to be increasing from 58 cents in 2016 to 123 cents in 2018
showing sound returns for the shareholders. The company is providing the return on equity of
17.32% which seems to be quite attractive (Chandra, 2017). Further, the Price Earnings ratio has
gone down from 36 times in 2016 to 25 times in 2016. The reduction in the Price Earnings ratio
shows that the shares are undervalued and hence it is best time to invest. Further, the sale is also
growing. However, there is intense competition in the retail sales market but the company is
equipped with all the necessary resources to overcome the challenges and enable itself to
enhance the market share. Thus, based on the overall analysis in this financial analysis report
assignment, it could be articulated that Capital Investment Limited should invest in equity shares
of company-B.

4. 4
Appendix
Ratio
Company A:Myer Formula
Absolu
te
Absolu
te
Absolu
te
Categor
y
$
Values
$
Values
$
Values
Liquidity
Current ratio
Current assets
441,97
3 430,567
479,73
8
Current liabilities
466,31
4 487,014
520,58
5
Ratio Ratio Ratio
0.95 0.88 0.92
Quick ratio
Highly liquid current assets 75,134 58,193 83,441
Current liabilities
466,31
4 487,014
520,58
5
(EXCLUDES INVENTORY AND
PREPAID ASSETS)
Ratio Ratio Ratio
0.16 0.12 0.16
Inventory turnover
Cost of sales
1,387,9
03
1,421,3
94
1,527,5
52
Average inventory
369,60
7 384,336
396,29
7
Ratio Ratio Ratio
3.76 3.70 3.85
Average days in
inventory
365 365 365 365
Inventory turnover 3.76 3.70 3.85
Ratio Ratio Ratio
97 99 95
Net Credit Sales 3,100,5 3,201,8 3,289,5

5. 5
54 66 68
Average net receivables 27,109 32,743 37,883
Receivables
turnover
Ratio Ratio Ratio
114 98 87
Average days
receivables
365 365 365 365
Receivables turnover 114 98 87
Ratio Ratio Ratio
3.19 3.73 4.20
Profitabi
lity
Return on ordinary
shareholders'
equity
Profit after tax
-
486,00
2 11,939 60,543
Average ordinary shareholders' equity
828,42
9
1,090,3
17
1,107,7
65
Ratio Ratio Ratio
-
58.67% 1.10% 5.47%
Return on assets
Profit after tax
-
486,00
2 11,939 60,543
Average total assets
1,615,7
64
1,917,4
36
1,956,3
42
Ratio Ratio Ratio
-
30.08% 0.62% 3.09%
Gross profit
rate/margin
Gross profit
1,712,6
51
1,780,4
72
1,762,0
16
Sales revenue
3,100,5
54
3,201,8
66
3,289,5
68
Ratio Ratio Ratio
55.24% 55.61% 53.56%
Profit margin
Profit after tax
-
486,00
2 11,939 60,543
Net Sales
3,100,5
54
3,201,8
66
3,289,5
68
Ratio Ratio Ratio
-
15.67% 0.37% 1.84%
Cash return on
sales
Net operating cash flow
109,20
1 149,278
149,49
0

6. 6
Net Sales
3,100,5
54
3,201,8
66
3,289,5
68
Ratio Ratio Ratio
3.52% 4.66% 4.54%
Asset turnover
Net Sales
3,100,5
54
3,201,8
66
3,289,5
68
Average total assets
1,615,7
64
1,917,4
36
1,956,3
42
Ratio Ratio Ratio
191.89
%
166.99
%
168.15
%
Solvenc
y
Times interest
earned
Profit before interest & tax
-
485,76
3 41,036 95,236
Interest expense 9,471 11,259 15,447
Ratio Ratio Ratio
(51.29) 3.64 6.17
Debt to total assets
Total liabilities
769,00
9 805,661
848,57
7
Total assets
1,615,7
64
1,917,4
36
1,956,3
42
Ratio Ratio Ratio
0.48 0.42 0.43
Market
Earnings per share
(EPS)
Given (use the basic EPS disclosed in
the income statement)
Ratio Ratio Ratio
-59.20 1.50 7.70
Price-earnings ratio
Share price
0.46 1.34 0.77
EPS
(59.20) 1.50 7.70
Ratio Ratio Ratio
(0.78) 89.33 0.10
Ratio
Company B: Woolsworth Formula
Absol
ute
Absol
ute
Absol
ute
Catego
ry
$
Value
s
$
Value
s
$
Value
s

7. 7
Liquidit
y
Current ratio
Current assets 7,181 6,994 7,427
Current liabilities 9,196 8,824 8,993
Ratio Ratio Ratio
0.78 0.79 0.83
Quick ratio
Highly liquid current assets 2,948 2,787 4,559
Current liabilities 9,196 8,824 8,993
(EXCLUDES INVENTORY AND
PREPAID ASSETS)
Ratio Ratio Ratio
0.32 0.32 0.51
Inventory turnover
Cost of sales
40,25
6
39,10
5
38,53
9
Average inventory 4,220 4,383 4,559
Ratio Ratio Ratio
9.54 8.92 8.45
Average days in inventory
365 365 365 365
Inventory turnover 9.54 8.92 8.45
Ratio Ratio Ratio
38.26 40.91 43.17
Net Credit Sales
56,72
6
55,47
5
53,47
4
Average net receivables 773 754 764
Receivables turnover
Ratio Ratio Ratio
73.38 73.53 70.00
Average days receivables
365 365 365 365
Receivables turnover 73.38 73.53 70.00
Ratio Ratio Ratio
4.97 4.96 5.21
Profita
bility
Return on ordinary
shareholders' equity
Profit after tax 1,795 1,593 -2,348
Average OSE equity
10,36
3 9,329 8,782
Ratio Ratio Ratio
17.32
%
17.08
%
-
26.74
%
Return on assets
Profit after tax 1,795 1,593 -2,348
Average total assets
23,23
7
23,20
9
23,50
2

8. 8
Ratio Ratio Ratio
0.08 0.07 -0.10
Gross profit rate/margin
Gross profit
16,47
0
16,37
0
14,93
5
Sales revenue
56,72
6
55,47
5
53,47
4
Ratio Ratio Ratio
29.03
%
29.51
%
27.93
%
Profit margin
Profit after tax 1,795 1,593 -2,348
Net Sales
56,72
6
55,47
5
53,47
4
Ratio Ratio Ratio
3.16% 2.87%
-
4.39%
Cash return on sales
Net operating cash flow 2,930 3,122 2,358
Net Sales
56,72
6
55,47
5
53,47
4
Ratio Ratio Ratio
0.05 0.06 0.04
Asset turnover
Net Sales
56,72
6
55,47
5
53,47
4
Average total assets
23,23
7
23,20
9
23,50
2
Ratio Ratio Ratio
2.44 2.39 2.28
Solven
cy
Times interest earned
Profit before interest & tax 2,548 2,326 1,495
Interest expense 154 194 246
Ratio Ratio Ratio
16.55 11.99 6.09
Debt to total assets
Total liabilities
12,70
9
13,16
7
14,72
0
Total assets
23,23
7
23,20
9
23,50
2
Ratio Ratio Ratio
0.55 0.57 0.63
Market
Earnings per share (EPS)
Given
Ratio Ratio Ratio
123 111 58
Price-earnings ratio Share price 31 25 21

9. 9
EPS 123 111 58
Ratio Ratio Ratio
25 23 36
References
Chandra, P., 2017. Investment analysis and portfolio management. McGraw-Hill Education.
Guo, Y., Zhou, W., Luo, C., Liu, C. and Xiong, H., 2016. Instance-based credit risk assessment
for investment decisions in P2P lending. European Journal of Operational Research, 249(2),
pp.417-426.
Mayer. 2019. Annual Report of Mayer Holdings Limited for 2019. [Online]. Available
at:http://investor.myer.com.au/DownloadFile.axd?file=/Report/ComNews/20181025/02038710.p
df [Accessed on May 13, 2019].
Subramanyam, K.R., 2009. Financial statement analysis. Includes index.
Trading Economic. 2019. China GDP Annual Growth Rate. [Online]. Available at:
https://tradingeconomics.com/china/gdp-growth-annual [Accessed on May 13, 2019].
Woolworths. 2019. Annual Report of Mayer Holdings Limited for 2019. [Online]. Available at:
https://www.woolworthsgroup.com.au/icms_docs/195396_annual-report-2018.pdf [Accessed on
May 13, 2019].
Worldsteel.org. 2019. Global steel demand continues to grow in slowing economic environment.
[Online]. Available at: https://www.worldsteel.org/media-centre/press-releases/2019/worldsteel-
short-range-outlook-april-2019.html [Accessed on May 13, 2019].