Part II
Whole foods market has shown a gradual improvement in its performance in the market. From the analysis of the two previous years income statement, 2011 and 2010, there is an increase of total sales from $ 9.01 billion dollars in the year 2010 to 10.11 $ billion dollars in the year 2011. This is contributed by the increase in the number of stores opened at the end of these two fiscal years. This has lead to an increase in the firms' market share in dealing with food products. The diversification of its operations center has made the firm to enjoy the economies of scale in the production of its goods. This contributed the increase in sales revenue from the previous level. The trend is observed even from an analysis of the last five fiscal years from year 2007 to 2011. In a graphical term, there is an upward sloping curve of performance of the firm in the market. Another contributing factor to this increase in sales revenue may be due better customer services from the firm than in the competitors.
Whole foods market focuses on customer satisfaction that leads to an efficient and continuous relationship between the firm and its customers. The firm has shown a huge cost reduction evidenced by increment of net revenue from $ 726.04 million dollars in the year 2010 to $ 844.24 million dollars in the year 2011. This is an indication of the total expense reduction of about $ 118.2 million dollars. The revenue cost of revenue has also decreased from $5.87 billion dollars to $6.86 billion dollars. This can be contributed by adoption of efficient production techniques and low cost location of its raw materials.
Vertical analysis
In the analysis of the balance sheet of the firm for the last two years, there is an increase in the value of net assets from $ 1.16 billion dollars to $ 1.45 billion dollars. This is contributed by an increase in the number of stores from the year 2010 to the 2011. This is also contributed by an increase in the sales revenue since there should be enough inventory level to meet the market demand. The increase in percentage is 25 percent. Also, there is a tremendous decrease in the total liabilities from $1.61 billion dollars to $ 1.3 billion dollars in the years 2010 and 2011 respectively. The ratio of current assets to current liabilities has increased from 0.72 to 1.1 from year 2010 to the year 2011. This shows that, the firm liquidity position is strong thus able to meet its maturing obligations when they fall due for payment. The decrease in the value of current liability may be contributed by the huge change of deferred taxes in the two years. This can be as a result of changes of the timing differences in the determination of deferred taxes in the two years. From the statement of financial information given, there is an increase of owners' equity by $ 0.62 billion. This is an indication of issuing of new shares in the stock market or right issues. The increase in owners' equity helps the firm to have a strong capital structure thus minimal liquidation problems.
Form 10-k is a document that is used to describe the firms financial performance in the market. It basically describes the mode of operation that the firm adopt. The content of this form includes the company's level of risk and valuation of its assets, as well as its liabilities. It gives the company’s financial statements data that are used in most of its decision making. The form contains management discussions as well as analysis of the financial situation of the company and quantitative and qualitative attributes about the market. Whole food market uses a straight line depreciation method to charge depreciation of its equipments as well as building and plants. Also, the same method is used in amortization of the lease but for a short period where the contract is renewed. The method is used for the company's non current assets whose life ranges from 3 years to 15 years.
A proxy statement is a document that contains information regarding the shareholders meeting and their discussions are recorded in the same documents. It shows the date when the meeting was held, as well as the subject or areas that were discussed in their meeting. The recent proxy statement was on 9th March 2012 whose objectives were to elect nominees who were to be elected to serve for one year in the firm. Also, to ratify the appointment of auditors Ernst and Young and conduct advisory vote for compensation of new executive officers. Approval of Company’s Articles of Incorporation was to be done. The company has eleven board of directors with 9 of them being independent directors. It has audit and compensation committees chaired by the board of director. The compensation of chief executive officer was $ 720,000, a rise from $ 705,037 in the previous year.
PART III
Ratio analysis is used to explain the company performance in term profitability, liquidity, growth strength as well as the possible risks that may face the company. The ratio analysis provides a better way of analyzing the company performance with that of its competitors. From the company ratios analyzed in the previous year show that, on average, the company performance is stable. The company has a return of 7.98 percent of the assets employed. This is an indication that the company is utilizing its assets efficiently in realizing its revenues. This improves its competitive power since its financial position is stable. The investors or holders of equity realizes 11.45 percent return on the equity they employ in the company. The return is almost similar to the market interest rates on the shares traded thus the company is performing at the market place. This shows that, the company is able to maintain its market share and impress its investors or shareholders. The margin level of the sales made is 35.37. This shows that, the company is able to recover almost 36 percent of its sales as a profit. This is an indication that the cost of sales is almost 64 percent which is recommendable.
This makes the company's liquidity position to rise, thus being able to meet its maturing obligations. This has also led to a favorable earning per share of $ 1.93. This means that, the return each share, in terms of dollars is 1.93 dollars. This will motivate the investors to invest with the company since they're better returns although the rate is similar to that of its main competitor, the Kroger company Whole foods market has a price earning ratio of 28.97, meaning that the company earnings are high thus pays more to its shareholders. This is an indication of the improved financial position of the company.
In comparison with the competition, Kroger company, the competitor shows a low liquidity position by having a current ratio of 0.8 and the quick acid test ratio of 0.1. This shows that the competitor has a higher liquidity risk as compared with the firm. It takes more days to collect cash from the debtors and to convert inventory to sales by the competitors than the company. This can be contributed by having company performance better than that of the competitor. In general, the company's liquidity position is higher than the competitor and its activity level is also higher than the competitor.
The company thus shows a good asset management as the asset turnover is low. The ratio is 2.4. From the debt equity ratio of 0.5, the company finances half its operation through the use of debt capital. This shows that the gearing level of the company is low and can be able to meet its liabilities. The company is not subject to the risk of insolvency since half of its capital structure is financed by owners' equity. The long term solvency of the company will rarely occur since its capital structure is stable. The similar case is experienced by the competitor where the capital structure is almost similar to that of the company. This is an indication that, both companies have minimal chances of solvency risk since their capital structure is stable.
Works Cited
WHOLE FOODS MARKET, INC. Company Info. 2012. 25 October 2012
