Annual Reports with Calculations - Assignment Example

Various classes of financial ratios are analysed based on financial statements of the organisation provided in its annual reports of 2012 and 2013. These annual reports cover the financial performance of the organisation for 2011, 2012 and 2013. The classes of financial ratios analysed in this report include liquidity ratios, solvency ratios and profitability ratios. Liquidity ratios are used to measure the ability of the organisation to meet its short term debt obligations as they fall due. One of the liquidity ratios is the Quick ratio.

This ratio measures the ability of the firm to pay its current assets using its more liquid current assets (Ryan, 2004). From the financial ratios calculate, the quick ratios of Woolworths Ltd were 0.29, 0.31 and 0.32 in 2013, 2012 and 2011 respectively. This means that Woolworths could pay for its current liabilities 0.29 times, 0.31 times and 0.32 times in 2013, 2012 and 2011 respectively before its more liquid assets are exhausted. Therefore, the company was able to meet its current short term liabilities using its more liquid assets in 2011 and 2012 more than 2013.

The ability of the organisation to meet its short term debt obligations using more liquid assets reduced over the three years under analysis. The company needs to manage its more liquid assets more effectively to improve its liquidity so that it can meet its short term financial obligations as they fall due. The second type of liquidity ratio used in this analysis is the current ratio. This ratio measures the ability of the organisation to meet its short term financial obligations using current assets as they fall due.

It indicates the number of times current liabilities can be paid using current assets before the current assets are exhausted (Gibson, 2012). In 2013, the current ratio of Woolworths was 0.91 while in 2012 and 2011 the ratio was 0.86 and