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Woolworths is an Australian grocery store and supermarket chain that is possessed by Woolworths Limited. Woolworths Limited was founded in the year 1924 in Sydney. Woolworths started as a single store and became a chain after the opening of its second store in Brisbane (Woolworths Limited, 2016). Moreover, when Woolworths purchased Northern Territory business of Centralian Traders, it became the first retailer that operated nationwide. In addition to this, Woolworths acquired many businesses such as Dick Smith and also diversified its products to sustain in the market. In this essay, roles and responsibilities of chief financial officers will be analysed in detail along with duties financial officer performed in the Woolworth.
David Marr is the Chief Financial Officer of Woolworths and he was appointed as a CFO in the year 2014. Along with this, it is also explored that Marr joined Woolworths in 2011 as a General Manager of Finance and was promoted as a Deputy (Woolworths Limited, 2012). Marr has been on the position since 2012 and he is accountable for brining change in the finance function and provides support to the aspirations of the organisation in becoming the leading ecommerce business (Woolworths Limited, 2016). The responsibilities of the Chief Financial Officer include ensuring that the finance related records of the company are well maintained and are in order. The primary responsibility of Marr is to control the position of cash flow in the company and understand the uses of cash. Along with this the CFO is also considered accountable for maintaining the important documents which are finance related, integrity of the funds and security of the funds.
The three main responsibilities of a CFO include risk management, guarding financial condition of organisation and counselling senior management in making policies (Bragg, 2010). Moreover, the CFO is also liable for the present finance condition of the company and therefore, CFO must decide the ways in which the capital of the company should be invested before which the liquidity and risk needs to be considered (International Federation of Accountants, 2013). The Chief Finance Officer also administers the capital structure of the company and find out the best mix of internal financing, debt and equity. It is also considered that dealing with the issues related to capital structure is also an important responsibility of a chief finance officer.
The first advertisement of the company stated that every city requires Woolworths and Sydney is among the one now (Woolworths Limited, 2016). Moreover, every child and women required a place where they can buy the goods and products at cheap prices. This advertisement is considered as the principle for the company which is still being followed (Woolworths Limited, 2016). It is investigated that the company serves approximately 28 million customers every week and offer them the best possible product in terms of quality, convenience, price and value. Woolworths also possesses some brands including BIGW, Masters, Woolworths, Petrol, Countdown, Thomas Dux, and BWS (Woolworths Limited1, 2016).
Woolworths operates in many locations across Australia and New Zealand which is more than 3000 stores. These stores covers petrol, food, hotels, liquor and general merchandise home improvements. It is explored that more than 198,000 employees are working with the company and are also committed business partners. The company according to the survey of IBSI World is considered as the second largest after Wesfarmers in Australia and New Zealand in terms of its revenue (Hatch, 2016). The revenue of the company has grown by 4% from the last financial year to $62.7%. According to Hatch (2016), the company ranked number three in 2015 and have jumped to number two positions in 2016 beating BHP Billiton.
Along with dealing into groceries and being largest supermarket chain, Woolworths is also among the major takeaway liquor retailers in Australia. The company is a listed company on Australian Stock Exchange (ASX) and have announced that the year 2016 brought the biggest loss to the company which is estimated to be $1.235 billion. In the Australian market Woolworths holds good market share and influence the domestic food system within the nation (Wall, 2014). The major competitor of Woolworths includes Coles as both the supermarket industries deals in departmental stores, liquor cellar chains, petrol business along with convenience store business (Knox, 2014). Woolworths have 897 supermarkets and 613 petrol stations. Along with this, Woolworths also acquires 1355 liquor outlets and 323 hotels (News Limited, 2014). In addition to this, Woolworths also provides discount to its customers in order to remain competitive (Michael, 2015). Woolworths profit was recorded as $792 millions in the financial year 2004 and 2005 and the discount rebates provided by Woolworths was $601 million (Jones, 2011).
It is the responsibility of the chief financial officer to ensure that the management of the organisation has critical information that helps in making effective decisions. Moreover, CFO should make forecasts and use dependable benchmarking information to provide such decision making data to the management.
A professional CFO is one who is an effective leader of accounting and finance related functions and is capable of balancing the stewardship responsibilities with the business partnership (Hiebl, M.R.W., Neubauer and Duller, 2013). Moreover, CFO is a professional that acts as the navigator and integrator for the company and is the member of senior management that can help in decision making. Earlier the role of CFO’s was through as a guard that is responsible for the financial condition of the organisation and was also responsible for implementing appropriate infrastructure of financial control. However, in the current complex businesses, the responsibilities of a CFO have expanded from a guardian of finance to personnel that help in driving the organisation towards the accomplishment of its objectives (Karaian, 2014). CFO in present business environment is evolving as a value adding personnel.
Other than looking after or maintaining the finance and account related functions a CFO’s major roles and responsibilities include demonstration of business integrity and ethical leadership (Fuhr and McDonagh, 2012). Along with this, CFO in any organisation is also hold accountable for balancing the short-term concerns of the organisation such as management of profitability, cash and liquidity. Chief financial officer is also responsible for providing sustainable success to the organisation. CFO’s responsibilities also include managing and driving transformation and innovation in the business organisation. Ensuring that the finance and accounts related functions are supporting the business at both operational and strategic level is also one of the responsibilities of a CFO (Morgan, Robinson, Strachota and Hough, 2015). A Chief Finance Officer should also interact and involve with customers, regulators, colleagues, suppliers, investors and other internal as well as external stakeholders.
Essential duties of a CFO also include development, implementation and accomplishment of the annual work plan which is approved by Board of Directors. A Chief Financial Officer provides information to the Chairman along with advising and providing legal counselling to the Board Chairman, Board Committees and Board of Directors in making policies and programs (Bragg, 2010). It is investigated that it is the responsibility of a CFO to think about the ways in which he/she can provide his additional support in the business organisation that helps in its success and profitability. It is explored that over the period of time the expectations from CFO changes which are influenced by different internal or external drivers. The external drivers might involve investor’s demand, industry and competitor’s characteristics and business or economic challenges that are prevailing (Eeden, 2014).
The role of CFO changes in order to meet the current expectations and requirements. CFO as per current expectations of the senior management should be one who is capable of creating an environment where customers, employees, suppliers and other stakeholders are able to share and understand the vision and ambition of the business organisation (Sanders, 2013). In present complex business environment a CFO is expected as a partner that facilitates transparency and accountability in the organisation and providing strategic leadership at the same time.
In the views of Morgan, Robinson, Strachota and Hough (2015), a Chief Financial Officer is the senior most position in the organization where the CFO is responsible for handling the budgeting and financial issues. The CFO directly reports to the CEO of the company and his responsibilities might also include risk management, procurement, investments and contract services. As per the opinion of Bragg (2010), the topmost priority of a CFO must include pursuing a strategy that can increase the chances of return to shareholders. One of the major areas of concern for a CFO is to understand and mitigate the risk by lining up different alternative solutions for the issues along with spreading sales to a broad range of customers. A CFO should be aware of the possibilities of failure and should be ready with a recovery plan so that the organisation has a means of recovery (Lapovsky and McKeown-Moak, 2010). Moreover, A CFO should set up controls and coordinate employee training in order to minimise the risk of employee engagement in unethical activities that might lead to lawsuit against the company. In addition to this, A CFO should work with the managers of all the departments in order to explore new ways that can help in enhancing their operations (Moyer, McGuigan and Rao, 2014). This can be done by when operations of the organisation are benchmarked with those of other organisations, conducting financial analyses and using trade information about best strategies used.
“If the efficient-market hypothesis is true, the pension fund manager might as well select a portfolio with a pin”
Efficient-market hypothesis is a theory of investment which advocates that the stated price already involves all the inflation and it is worthless to spend extra cash to beat the index. If this hypothesis would have been correct it would have implied that investors do not have any specific advantage over other investors when it comes to stock investment (Kumar, 2012).
The statement above is not true because a pension fund manager has goals related to risk control and target return goals. This is because the stock page has diversified portfolio and by throwing dart on the stock page it is possible that the dart may not settle on the expected stock which may further result in risks (Brealey, Myers, Allen and Mohanty, 2012). Moreover, the resulting portfolio may also be associated with several systematic risks for the individual. In case, individual having huge amount of wealth so that they can invest in the assets which are riskless investment is not a problem, but in other case it can be much more risky. In addition to this, the above hypothesis so not depict that selection of the portfolio should be done with a pin because of the reasons stated below:
It should be ensured that the portfolio is well diversified. It is well known that a large quantity of stocks is not sufficient for ensuring diversification of portfolio.
Another reason is that a manager must also ensure that the client of the manager is capable of dealing with the risk of diversified portfolio (Brealey, Myers, Allen and Mohanty, 2012).
In pension fund case, the pension manager should use an investment that is safe for the client i.e., investment with lower beta.
From the overall discussion it has been analysed that there are several responsibilities of a chief financial officer. These responsibilities include controlling finance infrastructures, providing solution alternatives for mitigating risks, meeting the expectations of all stakeholders and the management. Thus, it is expected from the CFO of Woolworths that he should be responsible towards the organisation and contribute in the profitability and sustainability of the organisation.
Bragg, S.M. 2010. The New CFO Financial Leadership Manual. John Wiley & Sons.
Brealey, R.A., Myers, S.C., Allen, F. and Mohanty, P. 2012. Principles of Corporate Finance. McGraw-Hill Education.
Eeden, D.V. 2014. The Role of the Chief Human Resources Officer: Perspectives, Challenges, Realities and Experiences. Knowres Publishing.
Fuhr, E.A. and McDonagh, C.W. 2012. The Risk Manager. FTI Journal.
Hatch, P. 2016. Coles owner Wesfarmers moves up to Australia's top company by revenue, beating Woolworths, Rio Tinto and BHP. The Sydney Morning Herald.
Hiebl, M.R.W., Neubauer, H. and Duller, C. 2013. THE CHIEF FINANCIAL OFFICER’S ROLE IN MEDIUM-SIZED FIRMS: EXPLORATORY EVIDENCE FROM GERMANY. Journal of International Business & Economics 13(2), pp.83-92.
International Federation of Accountants. 2013. THE ROLE AND EXPECTATIONS OF A CFO A Global Debate on Preparing Accountants for Finance Leadership. [Online]. Available at: https://www.ifac.org/system/files/publications/files/Role%20of%20the%20CFO.pdf [Accessed on: 12 September 2016].
Jones, E. 2011. Coles and Woolworths duopoly hard to swallow. [Online]. Available at: https://theconversation.com/coles-and-woolworths-duopoly-hard-to-swallow-533 [Accessed on: 12 September 2016].
Karaian, J. 2014. The Economist: The Chief Financial Officer: What CFOs Do, the Influence they Have, and Why it Matters. Perseus Books Group.
Knox, M. 2014. SUPERMARKET MONSTERS. [Online]. Available at: https://www.themonthly.com.au/issue/2014/august/1406815200/malcolm-knox/supermarket-monsters [Accessed on: 12 September 2016].
Kumar, S. 2012. If Markets Were Efficient, Why are there Winners and Losers? [Online]. Available at: https://valuestockguide.com/all/wall-streets-achilles-heel-efficient-market-hypothesis-doesnt-always-work/ [Accessed on: 12 September 2016].
Lapovsky, L. and McKeown-Moak, M.P. 2010. Roles and Responsibilities of the Chief Financial Officer: New Directions for Higher Education, Number 107. John Wiley & Sons.
Michael, S. 2015. 'The fight has been taken to the bakery': Bread prices slashed by 34 per cent as Coles and Woolworths step up their supermarket wars (and it's not just the home brands). [Online]. Available at: https://www.dailymail.co.uk/news/article-2937338/The-fight-taken-bakery-Coles-Woolworths-step-supermarket-bread-wars-slashing-prices-selling-brands.html [Accessed on: 12 September 2016].
Morgan, D. Robinson, K.S., Strachota, D. and Hough, J.A. 2015. Budgeting for Local Governments and Communities. Routledge.
Moyer, R.C., McGuigan, J.R. and Rao, R.P. 2014. Contemporary Financial Management. Cengage Learning.
News Limited. 2014. Woolworths and Coles have taken over Australians’ lives. [Online]. Available at: https://www.news.com.au/finance/business/woolworths-and-coles-have-taken-over-australians-lives/story-fnkgdftz-1226990860686 [Accessed on: 12 September 2016].
Sanders, M.I. 2013. Joint Ventures Involving Tax-Exempt Organizations. John Wiley & Sons.
Wall, A. 2014. Supermarket wars – a tale of the Australian duopoly. [Online]. Available at: https://www.foodmag.com.au/features/supermarket-wars-a-tale-of-the-australian-duopoly [Accessed on: 12 September 2016].
Woolworths Limited. 2012. David Marr – Chief Financial Officer. [Online]. Available at: https://www.woolworthslimited.com.au/page/Who_We_Are/Directors_and_Management/Management_Board/David_Marr_-_Chief_Financial_Officer/ [Accessed on: 12 September 2016].
Woolworths Limited. 2016. How We Were Founded. [Online]. Available at: https://www.woolworthslimited.com.au/page/Who_We_Are/The_Woolworths_Story/How_We_Were_Founded/ [Accessed on: 12 September 2016].
Woolworths Limited(1). 2016. Our Brands. [Online]. Available at: https://www.woolworthslimited.com.au/page/Who_We_Are/Our_Brands/ [Accessed on: 12 September 2016].
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Operating revenue in financial year
Operating revenue in financial year
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= per annum
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Answer to Question A
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Profit margin= Net Income/Revenues
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Profit margin= 0.0841
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Asset turnover= 2.2016
Financial leverage= Asset/Equity
Financial leverage= 42966/4333
Financial leverage= 9.9159
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