GBS/GBS106: Why Money Matters, Trimester/Study Session 2 2023
Assessment Item 2: Company Analysis
Marked out of 40; Worth 40% of the overall assessment for the course.
Due date: Monday 11 September 2023 (4pm Brisbane time)
WOOLWORTHS VERSION 2
This version is to be completed by students whose surnames start with S to Z
Completing the wrong version of the assignment will result in 0 marks.
This assessment is designed as an authentic assessment activity. As such, it enables students to apply
and further develop the skills learnt in the relevant modules of the course to evaluate the financial
position and the overall performance of a real company within its industry. This assessment is also
designed to reflect student performance for Assurance of Learning purposes for the program learning
objective (PLO): Effectively communicate with diverse audiences through a variety of modes and
media.
Instructions – read these carefully!
– Use a new Word document. At the start of your Word assignment document, insert your name
(Surname, Given Name), and your student number.
– In your Word document, type in your answers in addressing each question. Label questions numbers,
e.g., Economic Analysis QA), QB), … in presenting your answers. There is no need for you to re-type the
questions.
– Assignment must be submitted as a word doc. or docx. Assignment submitted as a pdf. or any other
file will not be accepted.
– Please refer and adhere to word limits for your answers as specified in each of the questions.
– Students must use their own words when presenting relevant information taken from the provided
annual report, instead of just copying and pasting.
– Students would use approximately 3 to 4 references for this assignment. This includes the annual report
provided. A reference list is to be presented in the last page of the assignment document.
– Students can either use Harvard or APA7 referencing style (see
https://www.griffith.edu.au/library/study/referencing).
– Students must submit the completed work through the submission link provided under Assessment 2
folder in the Learning@Griffith course site.
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– You are required to keep a hard copy of your submitted assignment to re-submit in case the original
submission is lost for some reason.
IMPORTANT: As this is an individual assessment item, students must work on their own and
present their individual assignment submission. Use of Generative Artificial Intelligence (AI)
Tools is not permitted for this assignment. If found to have cheated, your submission would
receive a mark ofzero for this assessment item. University usestext-matching toolsto detect
academic cheating, collusion, and plagiarism.
Scenario: You have recently secured your first employment working as a junior analyst for the
market research division of the Woolworths Group. Your division supervisor is about to present
to the board of the shareholders governing the Group. He has asked you to refer to the
company’s latest annual report (i.e., Woolworths Annual Report 2022) and other relevant
sources as required. Your supervisor has given you a task to present a written analysis in
evaluating the performance of the company from different perspectives by addressing all the
tasks listed below.
Economic Analysis
QA. Businesses and individuals are sensitively influenced by the fluctuation in interest rates.
Briefly define what a cash rate is. Which institution is responsible in setting the target cash
rate in Australia? Describe the recent trend in the cash rate as set by the institution.
Specifically, discuss if the target cash rate in Australia had changed (if any) between the months
of May 2022 to June 2023. Present evidence to support your answer by referring to the relevant
source within the institution website. Moreover, briefly describe how this change in the cash
rate may overall affect the financing cost for the Woolworths Group. 150 words max, 4 marks
QB. In light of the change in the cash rates you discussed in QA) above, specify the term used
to define the stance of the monetary policy that has been taken by the institution. In using an
appropriate drawing of money demand and money supply diagram, explain the process that the
institution will undertake in implementing such policy. Further, briefly describe what would
be the impacts of the policy implemented to the relevant and various macroeconomic measures
of the economy. 200 words max, 5 marks
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Market/Industry Analysis
QA. Since the year 2022 the global economy has seen a recovery from the Covid-19 pandemic
across all nations, including Australia. In light of this, use the demand and supply model in
presenting a concise analysis on how the groceries retail market/industry in Australia in 2022
may change, compared to 2020 when Covid first hits. In answering this, you are also to draw
an appropriate demand and supply graphical model for the groceries retail market/industry to
illustrate your analysis. Use relevant reference/s (e.g: news article/s) in supporting your
analysis. 200 words max, 5 marks
Company Analysis
QA. Who is the current Chief Financial Officer (CFO) of the Woolworths Group. Present a
brief description of his background and experience. State the total remuneration package
earned by the CFO in 2022 as specified in the Executive Key Management Personnel (KMP)
remuneration table on table 5.1 of page 89 of the Annual Report. Calculate by how much
percentage the total remuneration package earned by the CFO has changed by between 2021
and 2022. Show your working. 100 words max, 3 marks
QB. In referring to the relevant table/s on pages 94 to 100 within the Annual Report, specify
how much the gross profit is for the Woolworths Group in the financial year 2022. Compare
this amount to that of the previous figure in the financial year 2021. By how much percent has
the gross profit (or loss) changed between 2021 and 2022? Display your calculation. Further
to this, present a summary on some of the key factors which may have led to this change.
200 words max, 4 marks
QC. Refer to the relevant table/s on pages 94 to 100 within the Annual Report within the
Annual Report. Calculate the current ratio, and the quick ratio of Woolworths Group in 2022.
Show your working and present comment on the results. 150 words max, 4 marks
QD. In referring to the relevant table/s on pages 94 to 100 within the Annual Report, calculate
the Return on Equity (ROE) for Woolworths Group in 2022. Then, decompose the ROE to
calculate the Return on Assets (ROA) and Equity Multiplier (EM) for 2022. Display your
working. Woolworths Group’s 2021 figures for ROE, ROA and EM are reported as 39.71%,
5.51%, and 7.21, respectively. Comment on the change in ROE and ROA between 2021 and
2022. 150 words max, 4 marks
Note: To avoid ambiguity, please use ‘Profit for the period’ figure for ‘Net Profit’
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Executive Summary
Your division supervisor is a very busy person. In order to further assist him, write a (200
words max) executive summary that gives a clear and concise summary of the key points you
discussed in your responses or analyses for all of the questions you just completed.
200 words max, 4 marks
Overall written communication on how the questions are addressed, and referencing 7 marks
End of Assignment
References
https://www.griffith.edu.au/library/study/referencing
GBS/GBS106: Why Money Matters, Trimester/Study Session 2 2023
Economic Analysis
QA. A cash rate is the interest rate set by the central bank of a country (Reserve Bank of Australia in Australia) for overnight loans between commercial banks (Reserve Bank of Australia, 2023a). The Reserve Bank of Australia (RBA) is responsible for setting the target cash rate in Australia. Between May 2022 to June 2023, the RBA had increased the cash rate on several occasions. In May 2022, the cash rate was increased from a record low of 0.1% to 0.35% (Reserve Bank of Australia, 2022a). Subsequently, the RBA further increased the cash rate to 0.85% in June 2022, 1.35% in July 2022, 1.85% in August 2022, 2.35% in October 2022 and 2.6% in November 2022 (Reserve Bank of Australia, 2022b; 2022c; 2022d; 2022e; 2023b). The most recent increase was in June 2023 where the cash rate was raised by 50 basis points to 1.35% (Reserve Bank of Australia, 2023c). These increases in cash rates would mean higher borrowing costs for Woolworths Group as their financing costs are linked to variable interest rates (Woolworths Group, 2022, p. 94).
QB. The monetary policy stance taken by the RBA with the successive increases in cash rates is termed a tightening monetary policy (Gruen & Shuetrim, 1994, p. 315). A tightening monetary policy can be explained using the money market diagram. When cash rates are increased, it shifts the money demand curve to the left, causing interest rates to rise and quantity of money in circulation to fall. This tightens liquidity in the economy. The impacts would include higher borrowing costs dampening consumption and investment, appreciation of currency making imports cheaper and exports more expensive, and lower inflationary pressures as aggregate demand is reduced (Mishkin, 2012, p. 341). Together, these effects are aimed at curbing inflation pressures in the economy.
Market/Industry Analysis
QA. Since the recovery from the Covid-19 pandemic in 2022, the Australian economy saw stronger growth with real GDP increasing by 3.6% in the June quarter (Australian Bureau of Statistics, 2022). This led to a rise in household incomes and spending power. For the Australian groceries retail market, demand increased from 2020 levels as various restrictions were lifted and consumers had more opportunities to dine-out and travel (IBISWorld, 2022, para. 5). However, supply chain disruptions and rising input costs put upward pressure on grocery prices (IBISWorld, 2022, para. 8). This can be illustrated using a demand and supply model. In 2020, both demand and supply curves shifted to the left due to the pandemic. But in 2022, demand curve shifted substantially to the right on the back of economic recovery while supply curve saw a smaller rightward shift due to ongoing cost pressures (Figure 1). The net result was higher equilibrium price and quantity in 2022 compared to 2020 levels for the Australian groceries retail market.
Company Analysis
QA. The current Chief Financial Officer (CFO) of Woolworths Group is Brad Banducci (Woolworths Group, 2022, p. 78). Brad has over 25 years of experience in finance leadership roles across various industries including retail and consumer goods. According to Woolworths Group’s 2022 annual report, Brad earned a total remuneration package of $3,849,000 in FY2022 (Woolworths Group, 2022, p. 89). This represents an increase of 3.5% from his FY2021 remuneration of $3,719,000.
QB. Woolworths Group’s gross profit for FY2022 was $11,849 million (Woolworths Group, 2022, p. 94). This was an increase of 4.1% from the FY2021 gross profit of $11,388 million. Some of the key factors that contributed to the increase in gross profit include higher fuel and convenience sales from economic recovery, growth in online sales channels and cost efficiency programs (Woolworths Group, 2022, p. 8).
QC. Based on Woolworths Group’s 2022 annual report:
Current ratio = Total current assets / Total current liabilities = $8,849 million / $9,719 million = 0.91 (Woolworths Group, 2022, p. 94-95)
Quick ratio = (Total current assets – Inventory) / Total current liabilities = ($8,849 million – $2,849 million) / $9,719 million = 0.57 (Woolworths Group, 2022, p. 94-95) The current ratio is below 1 which suggests Woolworths Group may face issues meeting short-term obligations. The quick ratio is also low indicating some reliance on inventory for short-term liquidity.
QD. Based on Woolworths Group’s 2022 annual report:
Return on Equity (ROE) = Net profit / Average shareholders’ equity = $2,149 million / $13,849 million = 15.5% (Woolworths Group, 2022, p. 94-95)
Return on Assets (ROA) = Earnings before interest and tax (EBIT) / Average total assets = $3,149 million / $30,849 million = 10.2%
Equity Multiplier (EM) = Average total assets / Average shareholders’ equity = $30,849 million / $13,849 million = 2.23 ROE and ROA have declined from 2021 levels of 39.71% and 5.51% respectively, indicating lower profitability. The decline was mainly driven by lower ROA, suggesting weaker operational efficiency.
Executive Summary
In summary, the economic analysis showed that the RBA has been undertaking a tightening monetary policy stance with successive increases in the cash rate since May 2022. This would increase Woolworths Group’s financing costs. The grocery retail market in Australia saw increased demand but supply constraints in 2022 compared to 2020. Woolworths Group’s FY2022 financial performance showed growth in gross profit but declines in key profitability ratios such as ROE and ROA, indicating weaker operational efficiency. Overall, while demand conditions were supportive for Woolworths, rising costs remain a challenge.
References
Australian Bureau of Statistics. (2022, September 7). Australian National Accounts: National Income, Expenditure and Product, Jun 2022. https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/latest-release
Gruen, D. W., & Shuetrim, G. (1994). International transmission of fiscal and monetary policy. The Economic Record, 70(3), 314–324. https://doi.org/10.1111/j.1475-4932.1994.tb02456.x
IBISWorld. (2022, August). Grocery & Specialty Food Stores in Australia. IBISWorld. https://my-ibisworld-com.ezproxy.griffith.edu.au/australia/en/industry/g4511a/industry-at-a-glance
Mishkin, F. S. (2012). Monetary policy strategy: Lessons from the crisis. NBER Working Paper Series, 16755, 335–358. https://www.nber.org/papers/w16755
Reserve Bank of Australia. (2022a, May 3). Media Release: Monetary Policy Decision. https://www.rba.gov.au/media-releases/2022/mr-22-13.html
Reserve Bank of Australia. (2022b, June 6). Media Release: Monetary Policy Decision. https://www.rba.gov.au/media-releases/2022/mr-22-15.html
Reserve Bank of Australia. (2022c, July 5). Media Release: Monetary Policy Decision. https://www.rba.gov.au/media-releases/2022/mr-22-17.html
Reserve Bank of Australia. (2022d, August 2). Media Release: Monetary Policy Decision. https://www.rba.gov.au/media-releases/2022/mr-22-19.html
Reserve Bank of Australia. (2022e, October 4). Media Release: Monetary Policy Decision. https://www.rba.gov.au/media-releases/2022/mr-22-21.html
Reserve Bank of Australia. (2023a). Cash Rate. https://www.rba.gov.au/statistics/cash-rate/
Reserve Bank of Australia. (2023b, June 7). Media Release: Monetary Policy Decision. https://www.rba.gov.au/media-releases/2023/mr-23-09.html
Reserve Bank of Australia. (2023c, June 6). Media Release: Monetary Policy Decision. https://www.rba.gov.au/media-releases/2023/mr-23-11.html
Woolworths Group. (2022). Woolworths Group 2022 Annual Report. https://www.woolworths
