Financial Position Of Apple And Samsung

Analysis of Financial Performance and Financial Position

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Table of Contents

Introduction. 3

Financial performance of Woolworths and Coles group of companies. 3

Financial position of Woolworths and Coles. 4

Valuation techniques in IASB framework. 5

Fair value valuation technique. 5

Conclusion. 6

Reference. 7

Introduction

In the present report, the financial performances, as well as the financial positions of Woolworth and Coles, will be analysed. These two companies are the Australia based super mart chain and operate in other countries as well. They are the main competitors to each other in the market. Moreover, the valuation techniques in accordance with the IASB framework as well as techniques of fair valuation would be discussed.

Financial performance of Woolworths and Coles group of companies

Woolworths or Woolies is the biggest chain of supermarket as well as groceries based in Australia. Coles is also a chain of supermarket, consumer service as well as retail and this company is also based in Australia having its headquarters in Melbourne. Woolworths and Coles are rival group of companies in the same industry. Some researchers have been performed to compare the financial performances of these two rival companies. According to a scholarly investigation, these two rival companies show a high level of diversities in similar products in some particular segments. This research has used the data from 2016 to 2019 and VAIC and DEA models were used for the analysis (Van Kampen & Kirkham, 2020). However, according to one report of the previous year, Woolworths dominates the market. Moreover, some articles show that, in the year 2020, in the period between July and August Woolies show 5% per cent growth whereas Coles show a 1 per cent growth. Market share of Woolworths in 2021 was 37.4 % whereas that of Coles in the same year was 28.4% in grocery.

Figure 1: Market shares of Supermarket and grocery chains in 2019

Source: (Statista, 2022)

Some research, however, tried to show the level of adaptability during the Pandemic, whether the employees could handle any emergency in the consumer staple industries. They collected samples from Australia based supermarkets and finds that they are well prepared to cope with the situation (Kent, McCormack & Zunker, 2021). Finally, it could have been said that Woolworths dominates the market whereas its close rival Coles comes second in the market.

Financial Position of Woolworths and Coles

Financial position of a company can be derived from the information provided in the financial statement of the company. More precisely, the financial position refers to the current economic condition of a company. In spite of the pressure of the pandemic Woolies earned the profit of 78% to produce a net profit of 2.1 billion dollars in the year 2020 to 2021. Woolworths had AU$ 2.63 bn debt in January 2021, which decreases from the previous year. In the year 2020 the debt was AU$ 3.02 bn. Current share price of the Woolworths group is 34.41 AUD. According to the financial statement of Cole’s group, it is revealed that, in 2021, AUD 38,562 million, gross profit was AUD 10,159 million. In 2021 its total current asset was AUD 3434 million whereas total current liability was AUD 5819 million and total equity was AUD 2813 million. The share price of Cole on 9 February 2022 is 16.62 AUD whereas that of Woolworths is 34.41 AUD.

Valuation techniques in IASB framework

IASB is an independent international body for setting accounting standard-setting of IFRS foundation and this body was established in 200. Its headquarters is located in London. They use mainly three techniques of setting value, namely, income approach, cost approach and market approach. They show consistency with the assumption of going-concern and is used widely for valuation of fair value. The measurement of fair value is a market-based measurement or measurement of exit price and not the measurement that is entry specific (Hayoun, 2019). This technique is known as IFRS 13 that issued in the year 2011. The first method of the IFRS 13 valuation technique is the income approach and this approach calculates the fair value of intangible assets and other liabilities as well as assets and that of an entity by the calculation of the current value of the cash flow of future that the entity, as well as its assets, are supposed to produce over a long period of time or rather a lifetime. Accounting of fair value has systematic risk in the industry of banking (Khan, 2019).The second method, which is the cost approach is based on the assumption that a participant in the market will not pay more amount for a particular asset than that for which the participant could get the capacity of service elsewhere.

Fair value valuation technique

Fair value is considered to be the most rational as well as the unbiased measurement of the price of commodities, services as well as assets (DeFond et al., 2020). In the case of assets, fair value is the measurement of the worth of the asset or more specifically the amount for which it could be exchanged in the share market. Fair value is not the same as the market value. It is different in many ways and could have been explained as follows. Firstly, the market value shows more fluctuation than the fair value of an asset. Secondly, the market value of an asset is based on the most recent price of the asset whereas the fair value considers the prices over a period of time. Thirdly, the market value is based on the demand for and the supply of the asset where it is sold. On the other hand, the fair value considers many other aspects for valuation. For estimating the fair value, an independent international body was established which has its headquarters in the city of London. The name of the organization is IASB and the methods adopted by this organization for the calculation of fair value is known as IFRS 13. This method adopts three techniques for the calculation of fair value, namely, income approach, cost approach and market approach of valuation.

Conclusion

It is evident from the above report that the supermarket chain Woolworths is dominating the Australian market of supermarket and groceries as well as retail. Its close competitor Coles is just behind Woolies in the market holding the second position. Moreover, in the above report, the techniques of calculation of fair values are also discussed.

References

DeFond, M., Hu, J., Hung, M., & Li, S. (2020). The effect of fair value accounting on the performance evaluation role of earnings. Journal of Accounting and Economics, 70(2-3), 101341. DOI: https://doi.org/10.1016/j.jacceco.2020.101341

Hayoun, S. (2019). How fair value is both market-based and entity-specific: The irreducibility of value constellations to market prices. Accounting, Organizations and Society, 73, 68-82. DOI: https://doi.org/10.1016/j.aos.2018.05.013

Kent, P., McCormack, R., & Zunker, T. (2021). Employee disclosures in the grocery industry before the COVID‐19 pandemic. Accounting & Finance, 61(3), 4833-4858. DOI: https://doi.org/10.1111/acfi.12755

Khan, U. (2019). Does fair value accounting contribute to systemic risk in the banking industry?.Contemporary Accounting Research, 36(4), 2588-2609. DOI: https://doi.org/10.1111/1911-3846.12501

Statista. (2022). Europe: online grocery market sizes 2018-2023 | Statista. Statista. Retrieved 9 February 2022, from https://www.statista.com/statistics/960484/online-grocery-market-sizes-europe/.

Van Kampen, T., & Kirkham, R. (2020). Assessment of the Supermarkets and Grocery Stores Sector in Australia: A Case Study of Woolworths and Coles using DEA and VAIC™. Journal of New Business Ideas & Trends, 18(1), 1-11. Retrieved from: https://research.usc.edu.au/esploro/outputs/journalArticle/Assessment-of-the-Supermarkets-and-Grocery-Stores-Sector-in-Australia-A-Case-Study-of-Woolworths-and-Coles-using-DEA-and-VAIC/99482293102621