Examine the financial performance of Whole Food Market Inc. in 2010

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Whole Food Markets Inc.

Whole Food Markets Inc. is an American food supermarket chain which specializes in natural and organic foods is working in USA, UK and Canada having its headquarters in Austin, Texas. John Mackey partnered with Mark Skiles and Craig Weller opened the Whole Foods Market on September 20, 1980. John Mackey, founder of Whole food Markets Inc. is currently serving as CEO of the publicly traded company. Recently in 2013, Whole Food opened up two brand new facilities in Minnesota. There are currently sic Whole Foods facilities within Minnesota which makes Minnesota the leading state in the Midwest for Whole Foods Stores.

Summary of financial performance of Whole Food Market Inc. 2010

Ratio Analysis of Whole Food Market Inc.

Fiscal year

2010

Liquidity Ratio

Current ratio

Current Assets / Current Liabilities

1.55

Current Assets

$1,161,519

Current Liabilities

$747,872

Quick ratio

(Current Assets - Inventory- Prepaid Expenses) / Current Liability

1.05

Current Assets

$1,161,519.00

Current Liabilities

$747,872.00

Inventory

$323,487.00

Prepaid Expenses

$54,686.00

Collection Period

(Accounts Receivable*365) / Revenue

5.41 days

Accounts Receivable

$133,346.00

Revenue

$ 9,005,794.00

Cash ratio

Cash + cash equivalent / Current Liabilities

0.18

Cash & Cash Equivalent

$131,996.00

Current Liabilities

$747,872.00

Financial leverage

Total debt to equity

Total Liabilities / Shareholder’s equity

80.64%

Total Liabilities

$1,613,282.00

Shareholders’ Equity

$2,000,567.00

Profitability Ratio

Return on Assets

Net Income / Total Assets

6.33%

Net Income

$ 245,833.00

Total Assets

$3,884,964.00

Return on Common equity

Net Income / Shareholder's equity

12.29%

Net Income

$245,833.00

Shareholders’ Equity

$2,000,567.00

Operating profit margin

EBIT / Revenue

4.86%

EBIT

$ 437,975.00

Revenue

$9,005,794.00

Pretax Profit margin

Income before income taxes / Revenue

4.57%

Income before income taxes

$411,781.00

Revenue

$9,005,794.00

Net profit margin

Net Income / Sales

2.73%

Net Income

$245,833.00

Revenue

$9,005,794.00

Asset Efficiency

Cash turnover

Revenue / Cash and cash equivalent

68.23

Revenue

$9,005,794.00

Cash and cash equivalent

$131,996.00

Accounts receivable turnover

Revenue / Accounts receivable

75.65

Revenue

$9,005,794.00

Accounts Receivable

$119,038.50

Total assets turnover

Sales / Total assets

2.32

Sales

$9,005,794.00

Total Assets

$3,884,964.00

Market Value

Price to earnings ratio

Market price per share / Earnings per share

35.98

Market price per share

$52.17

Earnings per share

$1.45

Earning yield

Earnings per share / Market price per share

2.78%

Earnings per share

$1.45

Market price per share

$52.17

( in thousands except EPS)

Sales

$ 9,005,794.00

Gross Profit

$ 3,135,401.00

Operating Income

$ 437,975.00

Net Income

$ 245,833.00

Basic Earnings per share

$ 1.45

Diluted Earnings per share

$ 1.43

A shareholder either wants growth in the value of the share or a regular income in the form of dividend along with the increase in the earning per share. Whole Food Market Inc. in 2008 paid dividend of $.60 per share and $ o per share in 2009 and 2010 to common stock holders, decrease in which dissatisfy the common stock holders. Whole Food Market Inc. in 2009 paid dividend of $28050 and $ 5478 in 2010 to preferred stock holders, decrease in which dissatisfies the preferred stock holders. There is an increase in Basic Earnings per share from $0.80 in 2008 to $0.85 in 2009 and to $1.45 in 2010 which still satisfies the shareholders. From 2008 -2014, there is both rise and fall in the market price of the stock of Whole food Market Inc. from September 2009 till 2 April 2014. The percentage of rise is more than the percentage of fall, which satisfy the existing shareholders and attracts new shareholders.

Business Risk is the uncertainty of future income i.e. Earnings before income and tax and risk depend upon various business factors such as operating leverage, competition etc. There are two main types of business risk and they are external risk and internal risk. The three types of business risk and threat which might threaten Whole Foods ability to accomplish their financial goals for the next 3 years are

  • Market Risk: Change in the preference of the consumer and increase in the competition is the risk which can affect the financial goals of Whole Food Inc. Since preference and taste of individual can easily be change which will reduce the market demand and hence can reduce the performance of the company.
  • Innovation Risk: To keep up with competitors or to step ahead them, innovation is necessary. Innovation can be done in the form of promotional and marketing initiatives by training the staff, embracing new technologies. Without innovation, business cannot grow because customers want new things and it is necessary to satisfy customers so as to exist in the market. Whole Food Market Inc. has the risk of innovation i.e. if they fail to bring new marketing and promotional initiative then their competitors can take their place
  • Strategic Risk: Strategic risk affects the ability of the business to reach the objectives and goals which is outlined in the business plan. This can be due to the effects of change in the demand of the customers or because of technological evolution and thus poses threat in regards how the business is perceived by customers.

Control activities are the tools which include policies, procedures and actions which help in ensuring that actions are taken so as to address risk. Control activities should be recognized as an integral part of each business process ad can reduce the risk of

  • Failure to meet the organizational objectives and goals.
  • Unexpected results and business breakdowns
  • Fraud, theft and embezzlement

The three examples of control activities that Whole Foods Market, Inc. could use so as to minimize these risks are:

  • Segregation of duties: Control activities reduce the risk of error and fraud in Whole Food Market Inc. by requiring more than one person in completing a particular process.
  • Education, training and coaching: Control activities reduces the risk or inefficiency and error in the operations of Whole Food Market Inc. by ensuring that the personnel have proper training and education to perform their official duties effectively.
  • Verification: A variety of manual and computer controls are to be designed for Whole Food Market Inc. so as to provide the reasonable assurance that all the accounting information has been correctly captured.

Annual report is the principal document which is used by the companies in order to disclose the information of corporate to the shareholders. It is usually a state of the company’s report which includes an opening letter from the Chief Executive Officer; it also includes results of continuing operations, financial data, market segment information, product plans, subsidiary activities, and research and development activities on future programs. Annual report is used by government, customers and supplier’s community, employees and investors. The annual report of Whole Food Market Inc. presents the positive image of the company. The annual report of Whole Foods Market Inc. contains each and every detail required to be disclosed to the stakeholders which can affect their interest, contains the annual performance of the Whole Food Market Inc and also contains information through which the performance can be easily measured.

Reference:

Annual Report of Whole Food Market Inc. 2010

(https://www.wholefoodsmarket.com/sites/default/files/media/Global/Company%20Info/PDFs/ar10.pdf)

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