If all the above liquidity analysis is summarized than it can be said that currently, the organization is in the position to pay its short term obligations efficiently. The liquidity ratios of Woodside have experienced fluctuation in the 5 year period which might not be a good thing for the organization. It is suggested that the organization should maintain enough cash from which it can quickly pay its loan back. In addition, the organization should not keep more money in the organization because excess cash will not generate any profit. The excess money should be invested somewhere to earn a significant amount of return.

Solvency Analysis of Wood side Petroleum

The solvency ratios show how efficiently the organization is managing its long term debt. The corporations financed their assets from debt & equity. It is always said that the corporations should maintain optimum capital structure because through optimum capital structure the cost of capital decreases.  The key solvency ratios which the corporations used for evaluating the solvency condition include debt to equity ratio, financial leverage ratio, total debt ratio and long term debt to equity ratio. It is highly essential for investors to evaluate the solvency of the organization before investment. Such corporations who have taken too much debt and experiencing profitability problems are not considered suitable for the investment. Therefore financing the assets from both debt 7 equity are preferred.

Source: http://financials.morningstar.com/ratios/r.html?t=WPL&region=aus&culture=en-US

Debt to Equity Ratio of Woodside Petroleum

The debt to equity ratio provides detail information about the organization’s financial leverage. Through the debt to equity ratio, it can be known how much debt the corporation has taken for financing its assets. Through the debt to equity ratio, the portion of the obligation of the corporation can be critically analyzed. The organizations that are highly leveraged are not considered suitable by investors because too much amount of debt could lead to financial problems in the future. Many organizations more focus on long term debt than short term debt because the risk of long term debt differs from the risk of short term debts. The formula of debt to equity ratio is explained below:

             The debt to equity ratio of Woodside organization was 0.12 in the year 2014 which increased in the 5 year period. However, the condition of debt remains stable in the 5 year period. The Woodside Corporation is more financed through equity than the debt which is a good sign. Through the debt, to equity ratio, it can be said that the corporation is not highly leveraged and the company have the ability to pay its long term loans quickly.  Currently, the capital structure of the organization is optimum because the organization debt is in stable condition. It is recommended that the corporation not to take much debt in the future because it will have a significant impact on financial performance.  For attracting the investors in the organization, the organization can keep lower debt because investors usually prefer such organizations where they can get maximum return. With a high level of debt, the company might not be able to provide more return (Fridson and Alvarez).

Financial leverage Ratio of Woodside Petroleum

             The financial leverage ratios show how much assets in the corporation are financed through debt. Through the financial leverage ratio, the degree of financial leverage is assessed. The formula of the financial leverage ratio is explained below:

The financial leverage ratio of Woodside Corporation indicates that the organization has not financed much of its assets with debt. Most of the assets are financed through equity.

 Debt ratio of Woodside Petroleum

             The debt ratio shows the amount of debt compared to total assets. The high amount of debt indicates that the organization is highly leveraged and the financial risk is higher. The high debt ratio also shows that the organization have more debt rather than assets. The formula of debt ratio is mentioned as follows:

The debt ratio of Woodside Corporation shows that the corporations’ debt is lower than their total assets. The corporation debt is in stable condition.

Summary of Solvency Analysis of Woodside Petroleum

            The solvency ratios of the Woodside Corporation indicates that the organization is not much financially leveraged. The corporation’s amount of debt is low, and the organization can quickly pay its long term obligations. It is suggested that the organization should maintain its capital structure in the upcoming years so that not only the cost of capital remains low but also the organization will able to attract more investors in the organization. Overall the solvency ratios are showing the positive sign for the organization (Needles and Powers).

Common Size Analysis of Woodside Petroleum

             In the above table the income statement of Woodside organization can be seen. All the figures are presented in percentage form and it can be seen that the profit of the organization is experiencing decline over the years.

        Through analyzing the common size balance sheet it can be seen that the current assets and long-term liabilities of the organization has experienced growth.

Conclusion on Woodside Petroleum

            If all the above discussion is summarized than it is evident that the organization is in the position to pay its short term obligations efficiently. The liquidity ratios of Woodside have experienced fluctuation in the 5 year period which might not be a good thing for the organization. It is suggested that the organization should maintain enough cash from which it can easily pay its loan back. However, the key profitability ratios such as ROE, ROA and Net profit margin are showing a declining trend over the 5 year period. The corporation has the opportunity to improve its profit by utilizing the assets more efficiently. Woodside can minimize its costs and can increase revenue for further increasing the earnings of the corporation. For sustaining in the long run, it is highly important that the organization should improve its profits.

 References of Woodside Petroleum

Atrill, Peter. Financial Management for Decision Makers . 7. Pearson Higher Ed, 2014.

Christoffersen, Peter. Elements of Financial Risk Management. Academic Press, 2011.

Erickson, K.H. Financial Risk Management: A Simple Introduction. K.H. Erickson, 2014.

Fridson, Martin S. and Fernando Alvarez. Financial Statement Analysis: A Practitioner's Guide. John Wiley & Sons, 2011.

Higgins. Analysis for Financial Management. Tata McGraw-Hill Education, 2007.

Melville, Alan. International Financial Reporting: A Practical Guide . 6. Pearson Higher Ed, 2017.

Needles, Belverd E. and Marian Powers. Financial Accounting . Cengage Learning, 2010.

Pandey, I.M. Financial Management. Vikas Publishing House, 2015.

Robinson, Thomas R., et al. International Financial Statement Analysis, Third Edition (CFA Institute Investment Series) . 3. John Wiley & Sons, 2015.

SINHA, GOKUL. FINANCIAL STATEMENT ANALYSIS . PHI Learning Pvt. Ltd, 2012.