1: According to the 2009 fiscal year report, private label sales contributed about 11% of the overall retail sales representing an increase of 1% from the previous financial and/ or fiscal year.
2: Cash required for investment in new stores is allocated based on factors such as geographical location of a given store, the store size, complexity of development issues in a given size and finally the level of work to be carried out by the landlord. Similarly, cash allocations also depend on the structure of the project which includes the cash-out flows and /or costs.
3: The auditor's opinion received by the Whole Food Company is unqualified. This means that the organizations financial statements portray a true and fair view of the results of operations, and the perceived state of affairs for the fiscal year under investigation. Additionally the opinion means that true books of accounts were kept by the firm. As a potential investor, this means that the company is a viable investment option.
4: Whole foods mission is to uphold the well being as well as the vitality of their clients. To achieve this, the firm endeavors to supply food substances which are of high quality as well are wholesome in the overall nutrients composition. In order to enhance quality and wholesome foods provision, the firm undertakes promotion activities of foods grown organically, food safety concerns and also on ecosystem sustainability issues.
5: Whole food's core values include: Promoting health through health education to the company's stakeholders, supplying the utmost quality organic and natural products available, delighting and satisfying the company clients and/or customers. Whole food Incl is also committed to wealth creation through growth and profit maximization. The firm also upholds support to the members of the team, caring for the environment and the communities as their core values.
6: Whole food Incl acquires Wild Oats on 28th august 2007. This is a key strategic policy in enhancing the firm's competitive edge.
7: As part of the 2010 forecast, the company expects a growth rate of about 3% in sales. The identical stores are expected to grow from 0% to 3% in sale while the comparable store sales are expected to rise from lows of 1% to highs of about 4%. Additionally, the firm anticipates opening 16 new stores, 10 of which are expected to be established by the second quarter. However, difficulty in long-term debts expenses are anticipated for 2010 due to cost incurred in fiscal 2009.Finally, Whole foods limited expects to generate cash flows that would exceed the requirements of capital expenditure on a yearly basis.
8: Dividend per share paid in cash for the 2009 fiscal year were lower for the company compared to the preceding years. For instance, dividend amount had fallen from the highs of about 27 million in 2007 to about 19 million in 2009 fiscal year. This rate is alarming for the company as it indicated decline in profitability. The company may not be able to continue paying dividend in the future if this trend persists/continues.
9: Co-founder gave up his title as chairman due to the demanding roles of the then rapidly growing company. This boosted the firm's branding strategies for competitive reasons.
10: Lease indebtedness of the company is very high. As evidenced from the annual report, the firm had engaged in lease arrangements for 53 stores poised to open by fiscal 2013. This high debt ratio is likely to affect the firm in the long-run in the sense that high debt ratio compromises any given firm's solvency in the long-run. Increased use of lease arrangements indicate the perceived use of debt-financing relative to equity in a company (gearing). Also, the trend increases the degree of leverage or use of debt financing by the firm across periods. Though use of debts to finance a business leads to higher returns to company owners, the degree of risk associated with the investment is very high. This is because high level of debts can cause a company to liquidate especially during recession when the interest rates are considerably high.
11: Key areas of the business that have changed is the shift in purchases of large stores to smaller stores. This is focused in having a right store size in each location. Also decreases in lease arrangements geared at improving overall leverage of the firm in the long-run.
12: To uphold the integrity of the foods supplied by Whole Foods ltd, the firm should comply with the requirements of the organic rules set by USDA (An agricultural regulatory body for organic foods in USA).
13: Whole Foods Company values its stock and/or inventories based on the lower of market price or the original cost. This is carried out using LIFO (last-in, first-out) method of stock valuation.
14 Whole Food's ltd recognizes revenue when the products are sold (Point of sale). Discounts are offered to customers at the time of purchase and are accounted for by deducting them from the total sales figure as the products are sold. Additionally, taxes levied on sales are not recognized and/or included in sales. That is, the expense is not deducted from the sales figure
15: Whole Food's industry uses straight line method to account for depreciation where cost of the assets is written-off over the number of useful life in equal installments. This is commonly done to allow for consistent as well as ease the perceived accounting procedures in a bid to enable the firm adhere to GAAP principles.
16: As evidenced from the ratio calculations above, current ratio and quick ratio for are decreasing. Current ratio and quick ratio are used to indicate the ability of a firm to meet its short-term debts and/or obligations as they fall due. Therefore, the witnessed decrease the ratios between the two periods under investigation depict a decrease in the firm's ability to cover debts which are short-term thereby making this trend negative. As such, the future profitability levels of the firm may jeopardize future growth strategies.
Efficiency employed in the use of economic resources at the company disposal is seen to be decreasing. For example, day's receivable ratio is increasing from a figure of 68.91 to a figure of 76.69 in 2009. Day's receivable indicates the average number of day's firm's takes to collect its debts, lower number of days is preferable as the capital tied up could be used in short-term investment thus increase revenue for the firm .Additionally, debts ratios are seen to be decreasing across the period. These ratios indicate the use of debt-financing relative to equity in a company (gearing). Also, these ratios are used to indicate the solvency of a given firm in the long-run. The trend depicted is positive as it indicates decrease of the degree of leverage or use of debt financing by the firm over the period. Moreover, profit margin are increasing from 2008 .profit-margin ratio depicts the amount of Net-income earned given a certain volume of sales. This ratio shows the amount of revenue earned from a company's operations. The trend in these ratios is positive as it indicates increase in earnings generated from sales.
17. The major cash flow from operating activities arises from additional sales derived from the noted expansion in stores. While the negative results from investing activities is due to increased investment in acquisition of stores and fixed assets and finally from financing activities is derived from payment preference shares dividend and lease interests.
18: Liquidity position for the selected company is alarming. First, for the three sample companies the ratios are decreasing across the period under investigation. This implies that the ability of the firms in the industry to cover its short-term obligations as they fall due is at stake. Thus firms in the industry should increase their investment in the current assets to ensure sustainable growth at the industry level. Debt total assets are seen to be decreasing across the two fiscal years under investigation. Also efficiency in the use of assets is decreasing over the period. Therefore according to trend analysis, the company is not in a position to undertake high profile investments.
Appendix I: Financial ratios
Type of ratio
2008
2009
Current ratio=current assets/current liabilities
1,055,380/666177=1.54
622606/684,024=0.91
Quick ratio=(Current assets-Stock)/current liabilities
{(1055380-327452)/666177}=1.09
{(622606-10602)/684024
=0.45
Net-profit ratio=(Net profit/sales*100)
(114524/7953912)*100=1.43%
(146804/8031620)*100=
1.82
Inventory-turnover=sales-cost/stock
5274207/327452=16.11
Times
(5277310/310602)
=16.99Times
Days Inventory=(Inventory*365)/sales cost
365/16.11
=22.65days
365/16.99
=21.48days
Receivable turnover= Sales/debtors
7953912/115424=68.91 Times
8031620/104731=76.69 Times
Average-period of collection=(debtors*365)/Credit sales
356/68.91
=5.30days
365/76.69=4.76days
=7.28days
Earnings-per share =net-income/total shares
114524/140286=0.81
118754/140542=0.84
Debt-Total assets=Total debt/total assets
1874712/3380736=0.55
1742460/3783388
=0.46
Debt to equity=debt/equity
1874712/1506024
=1.24
1742460/1627876
=1.07
Return-on-equity=(Net income/equity)*100
(114524/1506024)*100
=7.60%
(118754/1627876)*100.=7.29%
