Question 2 (14 marks)

The tables below provide the trend analysis for Dominos Pizza and Woolworths Ltd from 2015 to 2019.

Dominos Pizza

Woolworths Ltd

Required:

(a) Comment on ROE and ROCE for Dominos Pizza and Woolworths from 2015 to 2019 using DuPont analysis framework. (7 marks)

(b) Using the selected numbers from the tables, discuss how do Dominos Pizza and Woolworths generate profits differently based on the nature and strategy of the business. (3 marks)

(c) Using the selected numbers from the tables, discuss which company is risker. (4 marks)

Trend Analysis: Dominos Pizza 2019 2018 2017 2016 2015 ROE 0.35 0.3368 0.2614 0.2475 0.2424 ROCE 0.1512 0.1844 0.1758 0.1897 0.2121 Tax and Interest Ratio 0.6596 0.6587 0.682 0.6707 0.6822 Leverage 3.5084 2.7728 2.1794 1.9458 1.6758 Operating Profit Margin 0.1208 0.1601 0.1446 0.1388 0.1428 Capital Turnover 1.2518 1.1516 0.8964 1.0367 1.14 Gearing Ratio 0.7097 0.7207 0.5402 0.5422 0.3892 Inventory Turnover 17 19 19 18 21 Av Settlement period AP 138 140 145 154 179 Accounts payable 188,608 156,045 138,376 146,988 108,826 Purchases for year 454,607 383,848 358,550 358,550 302,870 302,870 213,634 Current Ratio 1.0764 1.142 0.8161 0.692 0.8888 Acid-test Ratio 0.9867 1.0462 0.7244 0.6293 0.7951 CF from Ops to CL 0.7157 0.9224 0.5773 0.4825 0.8086 Interest Cover Ratio 12 18 35 39 41 2016 Trend Analysis: Woolworths Ltd 2019 2018 2017 ROE 0.1566 0.1766 0.1797 ROCE 0.1696 0.1899 0.1762 Tax and Interest Ratio 0.6797 0.6773 0.6651 Leverage 1.3585 1.3729 1.533 Operating Profit Margin 0.0413 0.0475 0.0454 Capital Turnover 4.1039 4.0025 3.8791 Gearing Ratio 0.2826 0.2446 0.2992 Inventory Turnover 37 38 40 Av Settlement period A 58 61 60 Accounts payable 6,676 6,793 6,685 Purchases for year 42,589 40,387 39,262 Current Ratio 0.7306 0.7306 0.7944 Acid-test Ratio 0.3023 0.304 0.4358 CF from Ops to CL 0.4416 0.4407 0.467 Interest Cover Ratio 20 18 13 0.1013 0.1135 0.5796 1.5405 0.0326 3.4861 0.3948 45 59 6,266 38,226 0.8449 0.4577 0.3763 7 2015 0.1974 0.2025 0.6434 1.5152 0.0548 3.6982 0.3115 39 50 6,181 44,524 1.2394 0.4512 0.5412 13