Cover sheet for submission of work for assessment SCHOOL: Vocational Business Education Office use only Program name Associate Degree in Business / Diploma of Commerce Program code AD010 / DP003 Course/unit name Accounting in Organizations and Society Course/unit code ACCT2213/2189 TAFE National Module Unit of Competency (UOC) name Assignment no. 1 TAFE National Module Unit of Competency (UOC) ID NA Due date 2 October 2020 NA School date stamp Name of lecturer/teacher Miss. Ngoc Le Chow AUSCY Campus Class day/time Monday (3:305:30) NA Tutor/marker’s name (14:30-16:30) STUDENT/S Family name Given name Student number Pham Linh Trang s3794125 DECLARATION AND STATEMENT OF AUTHORSHIP 1. I/we hold a copy of this work which can be produced if the original is lost/damaged. 2. This work is my/our original work and no part of it has been copied from any other student’s work or from any other source except where due acknowledgement is made. 3. No part of this work has been written for me/us by any other person except where such collaboration has been authorised by the lecturer/teacher concerned. 4. I/we have not previously submitted this work for this or any other course/unit. 5. I/we give permission for this work to be reproduced, communicated, compared and archived for the purpose of detecting plagiarism. 6. I/we give permission for a copy of my/our marked work to be retained by the school for review and comparison, including review by external examiners. I/we understand that: 7. Plagiarism is the presentation of the work, idea or creation of another person as though it is my/our own. It is a form of cheating and is a very serious academic offence that may lead to exclusion from the University. Plagiarised material can be drawn from, and presented in, written, graphic and visual form, including electronic data and oral presentations. Plagiarism occurs when the origin of the material used is not appropriately cited. 8. Plagiarism includes the act of assisting or allowing another person to plagiarise or to copy my/our work. Student signature/s I/we declare that I/we have read and understood the declaration and statement of authorship. Trang Cover sheet for submission of work for assessment page 1 of 1 Further information relating to the penalties for plagiarism, which range from a notation on your student file to expulsion from the University, is contained in Regulation 6.1.1 Student Discipline and the Plagiarism Policy which are available on the Policies and Procedures website at www.rmit.edu.au/policies. Copies of this form can be downloaded from the student forms web page at www.rmit.edu.au/students/forms. RECOMMENDATION REPORT FOR WOOLWORTHS GROUP TABLE OF CONTENTS: 1. 2. 3. 4. 5. Executive summary Introduction Body Conclusion Reference 1. Executive summary The purpose of this report is to analyze the performance of the Woolworths and Australian Fresh Ltd groups to provide recommendations for investment clients. The results of the analysis of the financial statements show that the two companies are almost similar in terms of profitability, asset use efficiency, capital structure, market performance and working capital. However, Woolworths would be a better choice than Australian Fresh Ltd for an investor as it is a bit more liquid and profitable. In addition to analyzing the activities of both organizations, the article also provides investment clients with Woolworths' sustainability strategies as well as social responsibility. 2. Introduction Woolworths Group is a locally owned publicly traded company. On December 5, 1924, Woolworths officially opened its business at Sydney's Imperial Arcade. Woolworths did not initially intend to develop into a chain of stores, but when provided with a bargain ground on Brisbane's Queen Street, Woolworths had to accept the development of a 'chain'. Since then, Woolworths has become a 'chain' of stores when the second one opened on August 6, 1927. In 1929, they opened their first store in New Zealand and by 1930, they had 16 Stores across New South Wales, Queensland and Western Australia. In 1960, Woolworths became the first national retailer in Australia. The Woolworths Group has a chain of retail grocery, wine and general goods stores in supermarkets and hotel operations. 3. Body “ Corporate social responsibility “ refers to the responsibility an entity has to all stakeholders, including society in general and the physical environment in which it operates. Sustainability is development that can meet current needs without compromising the ability of future generations to meet their own needs. An organization's sustainability needs to be measured, reported and ensured. These specialized areas of course belong to the role of accountants. Accounting plays a very important role in the sustainable development of a company. Therefore, the three roles mentioned above are one that any accountant must play. First of all, when reporting, the accountant must statistically record the company's financial situation and the team's sustainable activities, in addition to the environmental and social information should also be mentioned in the report. there. Secondly, when measuring or analysing costs, accountants must briefly explain economic, social and environmental information and then incorporate that information into the decision-making process. Last but not least, the assurance, the accountant needs internal controls to ensure the integrity of information. The 3 pillars in sustainability of Woolworths are: people, planet and prosperity development. First of all, for people, The Woolworths Group values the power of human diversity. The goal of the corporation is to maintain an inclusive and supportive culture, so for them, they value diversity in all forms, especially the workforce of the corporation. Workforce are the ones who give a corporation the strength, skills, and ability to support, maintain, and drive a better experience for customers and the community. It is also the Woolworths Group's commitment to its People pillar. Secondly, The environment is also one of the major influences for every business and the Woolworths Group is no exception. The Woolworths Group recognizes that the Woolworths’s environmental has impacted the entire value chain and will work with their service providers and operations to innovate for a healthy planet. They will move to a circular economy, environmentally sustainable economy. For example, they will change their packaging to eco-friendly and reusable packaging. Besides, they will also prepare options to respond to climate change. Finally, Prosperity is also one of the decisive factors for the sustainable development that Woolworths Group is aiming for. For Woolworths, that prosperity has to be built on trustworthy relationships. They commit that they will focus on building and maintaining strong relationships with their suppliers and customers. To be able to build those relationships they have to be based on mutual trust, communication, fairness, values, and loyalty. They believe that by listening, learning and cooperating they will have a prosperous and sustainable development. As mentioned above, there are three core pillars that Woolworths is working on to reduce its overall environmental impact and support communities: transition to a circular economy, supply to the environment sustainable commodities and climate change response. Firstly, to reduce environmental impact Woolworths has been moving into circular economics. There are two things that Woolworths has committed to: no food waste goes to the landfill and improves the brand's reuse of packaging. As for the commitment that no food waste will go to the landfill, Woolworths goes to the next step which is to continually improve their processes to reduce the food waste that goes to the landfill. Next, on its commitment to improving packaging reuse, Woolworths is continuing to work towards synchronously eliminating single-use plastics from their products. Both of these commitments have progressed. Secondly, in order to source environmentally sustainable goods, Woolworths pledges that they will source key raw materials and goods that are sustainable to independent standards by 2020. The next step in this commitment is that They will focus on sourcing seafood from sustainable sources. On the other hand, Woolworths is also committed to achieving zero deforestation in the supply chain for 'high impact' items in their own brand products. To fulfill this commitment they will expand their focus on other sources. Both of this strategy's commitments have progressed materially. Finally, Woolworths also makes two commitments to responding to climate change: by 2020, they will reduce their carbon footprint below 10% of 2015 levels and improve natural refrigerants and reducing refrigerant leaks in their stores 15% less CO2e below 2015 levels. To complete these two commitments Woolworths are implementing innovative initiatives to reduce energy footprint. The result is that commitment has been achieved. Social and environmental performance plays a rather important role for a company especially when investors analyze that company. When investors analyze a company, they not only look at its financial performance, but they also evaluate its environmental and social performance. For example, they will analyze how harmful the company affects the environment and society from its operations. Investors will want to know that the company is responsible for examining the consequences of the actions it produces and how to fix it effectively. Through the environmental and social activities, investors can also know the ethics of a company because ethics is also a must-have element of every business. On the other hand, environmental and social factors also bring certain benefits to stakeholders and communities. Social and environmental factors can help reduce business risk and gain a better reputation. Nowsadays, the environmental and social concern can also increase sales. Many customers prefer to buy from ethical and responsible companies. In general, environmental and social factors can have a positive impact on stakehholders and communities if they know how to use them properly. Profitability Analysis Australian Fresh Ltd (AFL) had a profit margin of 3.98% in 2020, which was a decrease from 4.23% in 2019. The decline was a result of lower sales revenue in 2020 than 2019. Woolworths had a slightly higher profit margin than AFL at 4.13% in 2020 but lower than AFL at 3.92% in 2019. Return on Assets (ROA) was also lower in 2020 than 2019 for ACL at 8.24% and 10.62% respectively. The trend was the same for return on equity (ROE) at 11.96% in 2020 and 27.59% in 2019. Woolworths had higher ROA than AFL in 2020 which are 8.42% and 8.24% but in 2019 the ROA of Woolworths was less than AFL with 7.59% and 10.62% respectively. This trend continues to happen to ROE, by 2020, Woolworths’s ROE will still be higher than AFL with the rate of 12.39% and 11.96%. In constrast of 2020, Woolworths’s ROE is lower than AFL with 21.47% and 27.59% in 2019. Overall, Woolworths had a higher profitability in 2020 Capital Structure AFL’s debt ratio has significantly increased from 53.45% to 76.39% between 2019 and 2020. It means the total assets and total liabilities had a positive change. Nevertheless, the assets are adequate to pay all the liabilities in case of liquidation. Woolworths has the same problem as AFL. Woolworths' Debts ratio also has a strong growth from 56.16% to 76.61% between 2019 and 2020. Woolworths is better positioned to pay its short-term and long-term liabilities using the existing resources than AFL. Market Performance AFL had EPS of 129.4 cents and 91.34 cents in 2019 and 2020 respectively. The decline is solely attributable to the reduction in net earnings as the number of share remained the same. On the other hand, Woolworths had EPS of 114.3 cents and 92.7 cents in 2019 and 2020 respectively. The decrease is also due to the drop in net earnings. Nevertheless, the two companies recorded a decline in their EPS between 2019 and 2020. Working Capital AFL’s debtors’ days decreased from 7 days in 2020 to 5.35 days in 2019, meaning that the company was taking no longer to collect cash after credit sales. Woolworths had more debtors’ days than AFL with only 4 days and it did not change from 2019 to 2020. The liquidity of both companies is unhealthy as the currents assets would be insufficient to pay the current liabilities if necessary. However, Woolworths is in a better liquidity position than AFL. Conclusion and Recommendations AFL and Woolworths are both large and potential companies. However, the ratio analysis has revealed that Woolworths is more profitable that ACL. Woolworths also utilises its assets more efficiently to generate profit. AFL is highly leveraged, which could be an indication that lenders are more confident with its ability to generate adequate cash flows to pay for the finance costs and the loan principal. Evidently, the two companies are largely similar in many aspects, but Woolworths seems to be a better choice for investors as its EPS are higher in 2020. Works Cited “ Woolworths Annual Report 2019.” https://www.woolworthsgroup.com.au/icms_docs/195582_annual-report-2019.pdf “Woolworths Annual Report 2020.” https://www.woolworthsgroup.com.au/page/investors/ourperformance/reports/Reports/Annual_Reports “Woolworths Sustainability Report 2020.” https://www.woolworthsgroup.com.au/page/investors/ourperformance/reports/Reports/CR_Reports
