Corporate Social Responsibility And Financial Performance: A Case Study Of Woolworth Company

Literature Review

This research report emphasizes upon the corporate social responsibilities and financial performance of company. The corporate social responsibilities are also defined as corporate sustainability, corporate governance, corporate citizenship and business self-regulatory program. It will not only assist in creating value on the investment but also strengthen the brand image of company in long run. In the starting of this report, corporate social responsibilities and financial performance of Woolworth Company has been analyzed in the literature review. It will reflect the scholars view points and complete financial and economic analysis of the company. After that, the research questions have been set which will set the parameters to make the research and justify the points. Afterward, discussion on the qualitative and quantitative data collected by using the secondary sources has been done. This includes use of scholar articles, annual report of company, CSR report and financial statements. These secondary sources have allowed in evaluating how well company has been managing its corporate social responsibilities and financial performance throughout the time. In the end of this report, data analysis part have been used to answer all the research questions such as how well company has been undertaking the CSR activities to align the interest of the stakeholders with the organization development, evaluation of the financial performance by analyzing profitability, efficiency, liquidity position and capital structure of company in long run. It assists in evaluating how well company has been deploying funds in its business to create value on the investment. In order to answer all the research questions, ratio analysis tool will be used to evaluate the financial performance of company. It will establish the linkage between two financial factors to determine whether company has been financially performing well in market or not. In the end, conclusion has been drawn to divulge the effectiveness of corporate social responsibilities and financial performance of company in long run. Woolworths Company has increased the value of its invested capital which will increase the end value of the shareholders at large.  Nonetheless, high debt funding in its capital structure reflects that company has been facing high financial leverage and in case of sluggish market condition and negative business outcomes, it might negatively impact the sustainable business output. The company has created value on the investment as the profitability and business efficiency have been reflecting the positive outcomes throughout the time.

• Who corporate social responsibilities help company to align the interest of the stakeholders with the organization development?
• How company integrates its financial and non-financial performance with the CSR program?
• What are the main indicators to determine the financial performance of company?
• How company could establish the equilibrium between the cost of capital and financial leverage?

As per the views of Devin, & Richards, (2018) it is divulged that with the changes in time, many organizations are using the CSR activities as method to align the interest of the stakeholders with the organization development. Corporate social responsibility (CSR) is a concept where consider the interest of the customers, employees, shareholders, stakeholders, communities, and ecological consideration in all aspects of their operation. Corporate social responsibility, a business has social obligations not to make profit. It is the responsibility of the companies to produce an overall positive impact on the society. The undertaken CSR activities have wide impact on the financial performance of Company. CSR is pursued because to make balance their economic environmental and social objectives. It is enhancing the shareholder’s values. It behaves ethically and contributes to economic development and improving the quality of life of the workforce. CSR is related with the principles of sustainable development .Their decision is not only based on financial factors but based on the immediate and long term social and environmental activities .CSR reduces the ecological damages and helps in achieving the long term objectives.

Research Questions

As stated by Ferrero-Ferrero, I., Fernández-Izquierdo, et al.  (2015) it is depicted that there are some activities which are related to CSR activities under corporation act and Listing rules and regulations which not only strengthen the CSR program towards the society but also strengthen the financial performance of company.

• Empowering women
• Promoting education
• Protecting art , culture
• Contribution to PM National relief fund /any specified fund
• Rural development project

Woolworths Company has increased the overall dividend payment to its shareholders which has impacted the share price of company in long run.  In addition to this, Woolworths Company has also increased the overall turnover which will positively impact the profitability and efficiency of the business in long run which has occurred due to increased turnover based on the CSR activities and sustainable busienss pracrice.  As stated by Bhardwaj, (2018) it is divulged that top down analysis is also used to evaluate the financial performance of company by estimating the how well CSR activity have positively impacted the overall turnover and profitability.  It will assist in evaluating how company will grow and what will be the changes in the financial performance of company in long run.  As per the views of Cull, Harten, Nishida, & Bull, (2014), it is reflected that there are several other financial parameters which could be assessed by organizations to evaluate the financial performance of company. Capital budgeting is also another tool which helps in analysing the identified project values and possible business outcomes which could arise if company invest its capital in well CSR activities. It helps in identifying the Net present value, internal rate of return and profitability of the projects in different segments. Woolworths Company could easily use these capitals budgeting tool to determine whether the well CSR activities undertaken would give higher project value and then accepting that particular project it could easily increase its overall return on capital employed. Woolworths Company has increased its overall revenue to AUD $ 67411 million which have increased by 12% since last four years. However, the CSR activity in Australia for the benefits of stakeholders has positively impacted the overall turnover and profitability. As stated by Uotila et al.  (2009) it reflects that company has increased its market share and total revenue which has resulted to positive business functioning throughout the time. However, by undertaking more strengthen CSR activities, company could also increase its financial leverage which may negatively impact the business functioning in long run. Woolworths has increased its capital investment in CSR activities and sustaible business practise which reflects that it might face high cost of capital issue in the initial time but in long run it will positively impact the business growth of the organization.

Methodology

As stated by Eccles, (2015), it is revealed that CSR expenditure to be incurred under the corporation act is not deductible under section 37(1) of the Income-tax Act, 1961. However; the expenses are adjust with the other provision of the Act. It is analyzed that when it is contribution based and the nature of CSR expenditure in respect of donation, charitable institution and contribution towards Relief Funds, Drought Relief Fund, NGO’s and other as specified then some of the deductions are given to corporation to reduce their tax liabilities. There are several cases when Woolworths has undertaken its CSR activities to lower down its high tax liabilities in long run. As per the views of Eriksson, & Svensson, (2016) it is divulged that the tax planning of company is highly based on the project based and the nature of CSR expenditure is promoting social and economic welfare or the public and contribution towards PSU or a local authority or to an association /institution approved by the national committee then the deduction will be 100% of the sum paid or expenditure incurred. There are some benefits which Woolworths Company has gained throughout the time after following the proper Code of conduct and CSR rules and regulation.

• It has resulted to enhance the reputation and brand image of company on international level which has assisted it to compete with the other rivals on international level.
• Woolworths has also strengthened its business transparency and increased business outcomes which has reduced the governmental control and increased the business efficiency in long run.
• Woolworths has also lower down the increased business cost and offered all of its products and services at least cost in market. The operating control system of company has also managed effectively. It will increase the profitability and financial performance.
• As stated by Thorlakson, Hainmueller, & Lambin, (2018) it is divulged that the CSR activities and implemented program has assisted organization to enhanced its business outcomes and strengthen the stakeholder’s value in the business process system.
• While implementing the CSR policies in a company there are some key strategies like mission, vision, education and training, strategic planning, reward to employees.

 As per the views of Devin, & Richards, (2018) it is depicted that Corporate social responsibility program is implemented by Woolworth’s employee’s credit union to integrate our social and environmental responsibilities. The Woolworth company has been operating its business in retail industry, the total turnover of this retail industry is AUD $ 1113 billion which is accompanied with the outcomes of the several competitors in the market such as Wesfarmers, Aldi, Tesco and Morrison. These are the biggest player of the Australian retail industry.  It is observed that liquidity ratio of company has shown how well company has managed its liquidity position or current assets to meet its current and future liabilities. In addition to this, profitability ratio reflects the profit earning capacity of company and how well it is earning profit on its overall turnover. It is analzlyed that when Company achieves sustainable development in economic dimension as well as social and environmental dimension then it could easily win ove the stakeholder’s trust which will strengthen the overall financial turnover and performance in long run. It is analyzed that Woolworths company has integrated its financial performance with non-financial performance so that it could enhance the  value for its members and all stakeholders .Stakeholders includes shareholders , analysts, employees, regulators  and labour unions,. However, below evaluating the financial performance of company there is needed to evaluate the industry first. As per the views of Andor,  Mohanty,  & Toth, (2015) it has reflected that by using the profitability ratio, company could easily determine the return on capital employed, return on equity and return on assets and benefits arise out of the invested capital in its CSR activities. Afterwards, efficiency ratio of company will be assessed which will evaluate whether the company has efficiently used its capital in the business or not. It is analyzed that company has faced high financial leverage in its business which have negatively impacted the business growth of organization. It is analyzed that company has high debt capital in its business which will eventually impact the business financial leverage and it might be hard for company to invest more capital in its CSR activities in this situation. Nonetheless, increased debt capital in business will also positively impact the cost of capital. The high debt capital in its business will lower down the cost of capital in the business. As per the views of Weygandt, Kimmel, & Kieso, (2015) it is analyzed that company needs to focus on keeping the cost of capital of organization low and increasing the overall return on capital employed. In order to run the business sustainable in long run, company needs to establish equilibrium in its cost of capital and financial leverage in long run. It has reflected that company needs to create value on the investment by deploying its funds and capital efficiently. However, company could raise more funds by issue of shares to employees. It will also provide capital to company and also result to aligning the interest of employees with the company. It is the one of the best CSR activity. The annual report of company has reflected that the net profit of company has been stable since last five years and at the same time it has increased its overall turnover. It divulges that with the increase in its overall turnover, company has increased its operating expenses throughout the time. As stated by Gitman, Juchau, & Flanagan, (2015) it is divulged that liquidity position is also another major concern which reflects that how well company has been investing its capital in the business functioning of organization. However, the financial performance and business condition of organization is highly dependent upon CSR activities, financial strategies and implemented strategic program. As per the views of Prentice, (2016) it is reflected that the creation of the capital from the invested capital is highly dependent upon the financial strategies undertaken by the organization. After analysing all the detail and case study of the Woolworths, it could be inferred that company has increased its profitability and efficiency in market due to its strengthen brand image based on the CSR activity programs. As stated by Grant, (2016) it is divulged that sensitivity analysis is the best method which could be used to analysis the changing business factors and its impact on the inflow and outflow of capital in the business due to the newly adopted CSR activities and program. It will assist organization to arrange the capital investment if in case it has to face high business changing factors.  The financial statements of Woolworths reflect all the possible information which could be used by stakeholder to take their financial decisions

Data Analysis

As stated by Flax, Bick, & Abratt, (2016) it is divulged that Woolworths launches corporate responsibility strategy 2020 to align the interest of the stakeholders with the organization development. It has not only increased the business outcomes but also lower down the business prosperity in long run. The newly designed CSR activities has shown the corporate support outcomes focusing on the people, planet, prosperity, and it is 2020 because there have been kept total 20 corporate responsibility and goals that are to be implemented by financial year 2017. In context with the people, all the employees, shareholders and other concerned individual will be given particular benefit. It reflects that at least 40% of executive and senior manager position to be held by women. There is an equivalent position between male and female employees in terms of salary wages which focuses on the increased business outcomes. It has lower down the business burden of the Woolworth Company which will increase the overall outcomes and business efficiency in determined approach.  Company have also put the more emphasis on not to waste going to landfill and prosperity to create value on the investment.  All the managers and directors are indulged in creating value and encouraging or influence to customers to consume all of Woolworths product in effective manner. Woolworths company has been investing some percentage in community, partnerships and programs to promote society and strengthening  the economic benefits at large.

As per the views of Nguyen, Romaniuk, Faulkner, & Cohen, (2018) it is revealed that there are some social responsibility programs are “surplus food and clothing”, “orphaned and vulnerable children”, “the Woolworth trust gives benefits to the communities. It also increase the financial leverage of company and resulted to high capital loss in short run.

There are several key corporate social responsibilities acts which are undertaken by the Company to mitigate its social and economic issues and aligning the interest of the stakeholders with the organization’s development. However, in order to keep the business more transparent towards its stakeholders Woolworths has aligned the use of TV programs to inform the consumers adopting the communication methods to keep the business more transparent like audits, audit report, Partnerships with the suppliers, NGO’s  report on the Company’s performance contribution. It also give several benefits such as saving costs by through packaging reduction, identify the opportunities for operational efficiency, Social and environmental benefits, implementing plans and procedure for plastics recycled each year. The newly adopted projects also provides the benefits related to the energy and carbon footprint is reduced by 30% by re-engineering of the undertaken making the change in its value chain.

• Woolworth employees credit union (we cu) will
• It actively manage its environmental impact
• It focuses on environmental issues
• Initiatives activities are concentrated in the Woolworth group of companies

Conclusion

Issues faced by Woolworths in CSR activities and its impact on the financial performance.

As per the views of Mwangi, & Murigu, (2015) it is depicted that with the ramified economic changes and complex business structure, Woolworths has faced the complex CSR issues and problems in its CSR activities and undertaken work program. There are some issues which are related to CSR activities like poverty reduction: free trade, property rights in underdeveloped countries; transparent government practices; capital inflows and private sector based technology transfers; the rule of law and protection of assets and in primary activities issues are related to forestry, transparent and open markets. Company has undertaken these activities to promote its environmental support program to strengthen its overall outcomes in effective manner.  It is analyzed that Woolworths has developed agriculture support program ain its CSR activities to promote the agriculture activities related to property rights of small farmers such as palm oil. The main impact of this CSR activity was seen in its increased services costing for its customers. It does not negatively impact the return on capital employed but also reduced the return on assets available to company.

There are several others issues which have been supported by Woolworths as its social and environmental support program.

Financial impacts due to the CSR activities

• High financial leverage.
• High cost of capital
• Low availability of funds to expand the business
• Forest –based on some core values are-
• For sustainable development
• For reducing poverty
• For climate change
• For equity
• Palm oil-
• Climate and the environment
• Opportunities
• Property rights
• Governance
• Risk taking
• Balance
• Regulation are limited

As per the views of Si, & Qiao, 2017), it is reflected that with the ramified changing business factors sensitivity analysis is the method which not only encounter the changing business factors but also evaluate the business outcomes which could be used to analysis the business outcomes throughout the time. As per the perception of Ashraf, Gershman, & Howitt, (2017) it could be divulged the financial performance and the impact of CSR activities on the financial performance of Woolworths could be measured by using the ratio analysis, top down analysis and bottom up analysis methods. The ratio analysis is the method to analysis the how well company has been performing in the market by setting relation between two financial factors of business. The financial ratio analysis is accompanied with the several parts named as liquidity ratio, solvency ratio, profitability ratio, efficiency ratio and market dividend payout ratio. It is analyzed that these all ratios are computed to determine the different financial aspects such as increased financial leverage due to CSR investment, cost of capital and increased turnover based on the CSR activity. It will help in determining how well company has been performing throughout the time. Financial statements play pivotal role in the measuring the financial performance of company.  It is analyzed that financial statement contains wealth of information that is properly read, analyzed and interpreted which could assist in providing the valuable insights into firm’s financial performance and position in long run. The objective and goal of Woolworths is simply to improve the sustainability, labour and human rights which reflect the position of business at “good corporate citizen and strengthen the corporate sustainability in long run.

As per the views of Devin, & Richards, (2018) it is revealed that The corporate social responsibilities are the idea that company should be socially involved with the environment around itself so that the proper nexus could be established between the stakeholder’s growth and organizational development at large. This has resulted to ranging from the engagement of the organizations in non-profit causes, to bettering the community and creating stronger connection between employees and other stakeholders. However, the main purpose of corporate social responsibilities program is to strengthen the overall outcomes and give back to society what company has taken from them while running business. As stated by Leonidou, Christodoulides, & Thwaites, (2016) it is reflected that many organizations follow the separate CSR activities to push themselves in the best interest of society. Now days, CSR activities have been also used by organizations to distinct itself from those of others in market. It will not only assist in creating the strong brand image on international level but also create core competency to beat the other rivals in market.  With the increasing focus and ramified growth of the organization in economy, CSR responsibilities has gained momentum and considered as corporate necessity which company needs to perform to sustain its business in long run. As per the annual report and corporate social responsibilities report of company, Wesfarmers has collaborated with its suppliers and initiated agriculture assurance program with an intention to minimize environmental impacts that have caused because of its supply networks. These recycling and Anti-littering programs has assisted in lower down the wastage in economy and developing the eco-support system for the benefits of the society at large.  This company has been making consistent efforts to enhancing its environmental and social performance by striving towards adopting the sustainable business policies and CSR program. It has invested more than its 5% of its average net profit in its CSR economic and social support program. As per the views of Saeidi, et al. (2015) it is reflected that the suppliers chain and undertaken business strategies program has shown how well company could mitigate the operational support system issues. It has also adopted the process of providing all of its services at least cost which will eventually provide all its retail services to clients at very low cost in their best interest.  The developed CSR activities of Woolworths also binds code of ethics and employees oriented policies to maintain vital corporation confidentiality, duly authorised work process and strengthen the environmental friendly work program for all of its employees. This system process CSR oriented work program has maintained high integrity, honesty and fairness for all of its customers and suppliers which could strengthen the overall outcomes and efficiency in long run.  In addition to this, Woolworths has also sponsored its several events to strengthen its business outcomes. It has not only increased the overall outcomes but also focused on disaster recovery plan to mitigate corporate social issues. Therefore, after analysing the corporate social responsibilities of company, it could be inferred that company has complied with the all the applicable rules and rendered the best possible outcomes in the best interest of organization.  There is another literature review which is done to reflects the details on the financial performance of Woolworths Company and how well company has performed throughout the time.

As stated by Ashraf, Gershman, & Howitt,  (2017) it is depicted that in order to measure the financial performance of company, investors needs to analysis balance sheet, profit and loss account and cash flow statement so that he could determine how well company has created value on its investment. There are other tools such as capital budgeting analysis, top down analysis, du pont analysis and economic value added analysis which could be used by managers and investors to evaluate the capital structure of company.

If investors could use these financial tools in effective manner then it will be the big helping tool for them to create value on the investment. As per the views of Brigham, Ehrhardt, Nason, & Gessaroli, (2016) it is revealed that the main purpose of the investors is to create value on the investment by investing their capital in the particular investment project.

It is analyzed that there are several quantitative and qualitative methods which could be used to collect required data. It will not only assists in assessing and evaluating all well Woolworths company has performed in long run but also assist in evaluating the best possible outcomes in determined approach.  It is analyzed tat research method highlights the technique used to gain the potential information on the research topic. It assists in collecting the imperative information to make the effective outcomes in determined approach. However, at the time of using the secondary research methods, proper authentication and research references must be taken into consideration in effective manner. In this research, secondary data will be used to collect the required amount of data. The main information about the company and its impact of corporate social responsibilities on the financial performance has been analyzed by undertaking and evaluating the journal books and annual report of company. The annual report of company is accompanied with the financial statements and books which could be used to analysis how well company has performed in terms of financial factors. In addition to this, CSR reporting frameworks and reports have also been analyzed to determine the future sustainability of company in long run. Now in the end, it could be inferred that if investors could properly use the financial information and tools in effective manner then it will be beneficial for them to take the imperative financial decisions. It is analyzed that financial analysis tool such as ratio analysis, capital budgeting and du pont analysis will be helpful to determine the main drawback of the financial structure and where company needs to make improvement in order to strengthen the financial performance in long run. Investors are the person who invest their capital in companies with a view to create value on the investment and if they use these financial tools in proper manner then they could easily determine whether company will be able to give them the expected benefits or return on their invested capital.

This research has been prepared to identify and evaluate the impact of corporate social responsibilities on financial performance of Woolworths. It is analyzed that there are several quantitative and qualitative methods which could be used to collect required data. It will not only assists in assessing and evaluating all well Woolworths company has performed in long run but also assist in evaluating corporate social responsibilities activities and its impact  on financial performance of Woolworths.  It is analyzed tat research method highlights the technique used to gain the potential information on the research topic. It assists in collecting the imperative information to make the effective outcomes in determined approach. The research methods will assist in making discussion on the qualitative and quantitative data collected by using the secondary sources. It is the process or framework of presenting the research philosophy, research design and methods which are used to gather required amount of data. The research methods assist in reaching the solutions to the problem through employing the extensive research practices.  The selection of research design and research methods has been studying the financial performance of company and how well corporate social responsibilities of company are undertaken.  The theory of financial analysis have reflected that if company wants to create value on its investment then it needs to establish harmonization in its cost of capital and financial leverage in itsbusiness(Denzin, 2017). The stakeholder theory, financial analysis theory, capital budgeting theory and corporate governance theory, corporate social responsibilities theory and sustainability theory have been used to identify the financial performance and business sustainability of company in long run. These secondary sources have allowed in evaluating how well company could manage its corporate social responsibilities to strengthen its financial performance. The research philosophy undertaken in this research reflects the nature of the enquiry which clearly states the financial measurement, parameters, and views point of the investors. It is further divided into two main parts which guides the researcher while Research philosophy is classified into two different parts named as Epistemological and Ontological. After that epistemological and ontological is further bifurcated into three main parts including positivist, interpretivist and realism (Schmidt, and Hunter, 2014). The positivist philosophy has direct nexus with the objectivism and hypothesis undertaken in the research. It includes subjectivism and undertaken work program.  The research methods include primary and secondary research methods which could be used to collect the required amount of data. The primary research method includes observation, data survey, and meeting and individual group discussion. The secondary research methods include use of journal articles, books, E-journals and web information. However, at the time of using the secondary research methods, proper authentication and research references must be taken into consideration in effective manner. In this research, secondary data will be used to collect the required amount of data. The main information about the company and its financial and corporate social responsibilities has been analyzed by undertaking and evaluating the journal books and annual report of company. The annual report of company is accompanied with the financial statements and books which could be used to analysis how well company has performed in terms of financial factors. In addition to this, CSR reporting frameworks and reports have also been analyzed to determine the future sustainability of company in long run. These research methods will assist in collecting the true data which will assist in determining financial performance and long term sustainability of company in long run (McLean, & Pontiff, 2016). It is further observed that there are several online websites which have been used in this research to collect the required amount of information such as Yahoo finance, E-books and Morningstar to evaluate the financial performance of company and how company has met with its corporate social responsibilities in long run. After collecting the required information, ratio analysis and other analysis tools have been used to analysis how well company has financially and ethically performed in long run (Creswell, & Creswell, 2017). The yahoo finance and Morningstar were the two best sources which have assisted in collecting the required amount of data (Nard, 2018). It has assisted in identifying the best possible options which could be used by investors to analysis the past and present financial performance of company in long run. Therefore, in this research, there will be secondary research methods which will assist researcher to collect and gather required amount of information. However, Journal articles, annual report, CSR report of company will be the main sources for gathering the imperative information to prepare this report (Bryman, & Bell, 2015).

The corporate social responsibilities are the process which helps organization to operate its business ethically and stakeholder’s oriented. It is analyzed that Woolworths has made contribution based and the nature of CSR expenditure in respect of donation, charitable institution and contribution towards Relief Funds, Drought Relief Fund, NGO’s and other specified institutions with a view to increase the overall outcomes and benefits to society.  However, the investment in its CSR activities have negatively impacted the financial cash outflow and resulted to higher cost of capital. There are several cases when Woolworths has undertaken its CSR activities to lower down its high tax liabilities (Nardi, 2018). The codes of conduct and CSR activities undertaken by Woolworths have been designed in such a way which could strengthen the overall benefits for its stakeholders.  The CSR activities includes changing code of conduct, business process system and adopting corporate sustainable business practices which have resulted to enhance the reputation and brand image of company on international level. In addition to this,

The ratio analysis tool is used by investor to evaluate the financial performance of company by setting relation between two factors. The liquidity ratio analysis is used to evaluate the liquidity of company (Eriksson, & Svensson, 2016).

Description	Formula	WOOLWORTHS HOLDINGS LTD  (WHL)
		2013-08	2014-08	2015-08	2016-08	2017-08	Average industry ratio
cash ratio	cash equivalents + cash / current liabilities	0.36	0.71	0.10	0.14	0.17	0.77
Current ratio	Current assets/current liabilities	1.24	1.05	0.91	0.94	0.97	1.25
Quick Ratio	Current assets-Inventory/current liabilities	0.57	0.79	0.26	0.29	0.31	0.89

The liquidity ratio of company is divided into two main parts such as current ratio and quick ratio. The current ratio of company has increased to .97 points in 2017 which is .06 points higher as compared to last three year data (Brigham, et al 2016). However, instead of investing in CSR activities, it should have kept higher liquidity to meet the demand of the clients.

 However, as compared to industry current ratio, it has kept .30 points lower current ratio. It reflects that company has kept less amount of cash blockage in its operating activities.  The quick ratio of company has decreased to .31 points in 2017 which is .20 points lower as compared to last three year data. These both ratios reflect that company needs to strengthen its liquidity position by increasing the overall investment in its current assets (Mahato, 2014). Woolworths has also strengthened its business transparency and increased business outcomes which has reduced the governmental control and increased the business efficiency in long run. However, it requires company to keep high liquidity for meeting the legal expenses.  

It is the main part which will assist researcher to analysis the collected imperative information. The financial tools such as budgeting analysis, ratio analysis and other tools are used to evaluate the financial performance of company.

It has also provided all the required information to stakeholders. Woolworths Company has also lower down the wastages and negative impact on environment by adopting the specified business code of conduct which will eventually lower down the costing of the business as well.  The profitability ratio assists in evaluating the financial profitability of company. The return on equity of Woolworths has decreased to 29% in 2017 which is 24% lower as compared to last three year data. In addition to this, return on assets has been stable in all the year. It reflects that company has kept its business output stable. The net profit ratio of company has been stable to 22% since last three years. It is analyzed that company has increased the overall earning and increased the overall turnover throughout the time. The return on capital employed of company has been stable due to the increased cost of capital and less amount of return on output (Grosse, Kean, & Scott, 2017).

Description	Formula	WOOLWORTHS HOLDINGS LTD  (WHL)
		2013-08	2014-08	2015-08	2016-08	2017-08	Average industry ratio
Return on equity	Net profit/Equity	46%	44%	22%	22%	29%	24%
Return on assets	Net profit/ Total sales	7%	7%	6%	7%	8%	8%
Earnings per share	Net profit/ Share outstanding	0.50	0.25	.1.5	0.65	0.45	0.85

It is analyzed that company needs to focus on investing more capital in the value chain activities instead of in its CSR activities. In addition to this, company has increased its profitability and maintained low amount of financial leverage.  The profitability of Woolworths has decreased to 29% in 2017 which is 24% lower as compared to last three year data which reflects that company needs to focuses on increasing its business turnover to cover its interest payment. Nonetheless, company need to efficiently use its resources if it wants to strengthen its business output. It will not only increase the overall output but also result to increase the profitability and business output in effective manner. CSR activities and implemented program has assisted organization to enhanced its business outcomes and strengthen the stakeholders value in the business process system. Woolworths has aligned the interest of its stakeholders with the organization development which will eventually result to strengthen financial performance of company (Bhardwaj, 2018).

The increased business profitability and low financial leverage will assist in lower down the overall costing and increase the overall if company lower down its investment in its CSR activities. It will assist in creating value on the investment and will also result to increased business value in long run. Nonetheless, Woolworths needs to increase the return on equity available to its equity shareholders if it wants to attract more clients in long run. This is the one of the method to align the interest of the shareholders with the company.  With the increase in the profitability, company could easily increase the amount of capital investment which will assist in strengthen the business functioning and increased business outcomes in long run (Brigham, et al. 2016).

This ratio divulges how the capital of busienss is deployed. While implementing the CSR policies in a company there are some key strategies like mission, vision, education and training, strategic planning, reward to employees. It may require some part of the capital blockage which may result to increased cost of capital.  It is analyzed that company has deployed its investment in its stocks and other assets which have increased the inventory turnover and resulted to high amount of cash blockage. In addition to this, receivable turnover of company has been kept zero which have reflected that company has managed its business effectively and increased the business outcomes at large (McIvor, et al. 2014).

Description	Formula	WOOLWORTHS HOLDINGS LTD  (WHL)
		2013-08	2014-08	2015-08	2016-08	2017-08	Average industry ratio
Receivable turnover	Receivables/ Total sales*365	–	–	–	–	–	55.55
Inventory turnover	Inventory / cost of goods sold *365	48.85	51.80	64.35	67.27	62.63	45.25
Accounts Payable ratio	Payables/ Total sales*365	39.76	42.51	49.73	27.77	24.17	32.55

The account payable ratio has been increased to 24.17 points which is 10 points higher as compared to last three year data. It reflects that company has strengthened its efforts to lower down its capital blockage to reduce the cost of capital. It reflects that company needs to increase the overall outcomes and profitability in long run.  The increased business efficiency and increased business output reflects that company needs to reduce the blockage of its funds from the inventories if it wants to create value on its investment.  

This ratio analysis how well company has managed its debt to capital structure in its busienss. It is analyzed that company has faced issues related to increased financial leverage. It is analyzed that company has increased the debt funding throughout the time. It is considered that if company wants to create value on its investment then it will have to establish sync in its cost of capital and financial leverage. However, Company should maintain low financial leverage and high sustainability by undertaking more CSR activities.

Description	Formula	WOOLWORTHS HOLDINGS LTD  (WHL)
		2013-08	2014-08	2015-08	2016-08	2017-08	Average industry ratio
Interest Coverage Ratio	EBIT / Interest expenses	0.0	0.0	0.0	5.6	4.9	5.0
Cash coverage ratio	EBIT + non-cash expenses / interest expenses	–	–	–	–	7.00	858
Debt to Equity Ratio	Debt/ Equity	1.17	2.36	1.91	1.49	1.36	3.7
Working capital	Current assets- Current Libiliteis	1034	678	-805	-638	-304	247

 Woolworths Company has increased its debt to equity ratio to 3.7 by raising more capital from debt capital. However, the increased debt capital will surely result to lower cost of capital to Organizaiton but eventually result to higher financial risk. It will not only impact the business functioning of organization but also negatively impact the business sustainability in long run. It is analyzed that company needs to establish equilibrium in its cost of capital and financial leverage if it wants to sustain its business in long run. As it is easy to observe that if in case company faces issues in sluggish market condition then low profitability may be negative point for covering the interest payment. Interest coverage ratio of Woolworths should be higher if it wants to sustain its business in long run.  In 2013, Woolworths was not having interest payment which have resulted to loss zero interest coverage ratios. Nonetheless, with the increase in its business outputs it increased its debt funding and interest coverage ratio.

After analysing all the details related to  impact of CSR activities on the financial performance of company, it could be inferred that Woolworths needs to establish the nexus between organization’s developments with the economic growth. It will not only assist in setting the code of conduct and business policies as per the needs and demand of the stakeholders but also deliver the best possible output to the organization. The CSR activities of company have shown increased business outcomes and corporate business practice of company.

Woolworths Company has increased its debt to equity ratio to 3.7 by raising more capital from debt capital which may be negative point at the time of sluggish market condition when company fails to earn adequate profit in its business. In addition to this, liquidity position of company is already too high which have been blocking high amount of capital and eventually increase the overall cost of capital.  These both ratios is highly impacted due to the high investment of company in its  CSR activities.

Conclusion

Corporate social responsibilities are very crucial for the business success and its long term sustainability. It is analyzed that in order to strengthen the CSR activities and its outcomes towards society, Woolworths needs to align the interest of its financial performance with the stakeholder’s growth. It will not only result to strong corporate governance, sustainability but also provide best possible business output in effective manner. In addition to this, as compared to its rivals such as Tesco, Wesfarmers and Morrison, Company has kept high liquidity ratio with a view to that in the future company will be having high demand for its products and services offered in market. The debt to capital structure of company has also been strong which reflects that company has low financial leverage and it could raise more funds by issues of debts in market. However, investing more funds in its CSR activities may also result to high financial leverage as it will lower down the available capital funding in business. It will not only lower down the overall costing of the business but also result to increased return to capital employed in long run.

The set codes of conduct and CSR activities of Woolworths have been designed and formulated in such a way which could strengthen the overall benefits for its stakeholders and society at large. It is analyzed that Woolworths has undertaken its CSR activities to lower down its high tax liabilities and other negative implications in long run.  The main CSR activities of Woolworths includes packaging reduction, identify the opportunities for operational efficiency, Social and environmental benefits, implementing plans and procedure for plastics recycled and aligning the interest of the stakeholder with the Organizaiton development. It has been assessed that Woolworth has donated capital with a view to promote its social and development program. The undertaken CSR program by company will surely reduce the ecological damages and helps in achieving the long term objectives. On the other hand, financial performance of Woolworths is also strong in market which would assist in give tough competition in long run. It is analyzed that company has strengthen its financial performance by managing its financial leverage and cost of capital. In addition to this, business expanding strategic plan will also be profitable for Woolworths as it will result to raising funds b using debt funding at least cost. Eventually it will result to higher return on capital employed to organization.  Now in the end, it could be inferred that Woolworths needs to increase its capital investment in its CSR activities if it wants to strengthen its business sustainability. It will have to analysis all the factors and positive sides of the CSR activities which will assist it to align stakeholder’s interest with the organization development. The financial structure could also be changed by company to increase the overall return on capital employed in long run.

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