Executive Summary

This project is related to analyze the financial position and the financial performance of

a company in previous years and then discussed the financial position in future. The

“Whole Food Market” selected as a base company. Last five years financial statements

were used to analyze the financial position of Whole Food Market. For comparison of

company with its competitors, another company “Walmart Food Market” used as the

competitor of Whole Food Market. In first Part, “The qualitative part” Company’s

background and some other information of both companies was discussed. Second part

is quantitative. In which the financial position and performance was measured. Different

profitability, liquidity, marketability, efficiency and debt ratios were used to measure the

past and current performance and position both companies. Third part of the report is

related to the conclusion and the recommendations about the performance and the

position of both companies.

ContentsExecutive Summary.....................................................................................................................................1

Whole Food Market Overview.....................................................................................................................3

Walmart Food Market Overview.................................................................................................................4

Financial Statement of Whole Food Market................................................................................................5

Balance Sheet..........................................................................................................................................5

Income Statement...................................................................................................................................6

Cash Flow Statement...............................................................................................................................7

Description of financial Statement..........................................................................................................9

Ratio Analysis of Whole Food Market.........................................................................................................9

Ratio Analysis of Walmart Food Market....................................................................................................10

Comparison of Whole food Market and Walmart food Market................................................................11

Liquidity Ratio........................................................................................................................................11

Current Ratio.....................................................................................................................................11

Quick Ratio........................................................................................................................................12

Cash Ratio..........................................................................................................................................13

Profitability Ratio...................................................................................................................................14

Net Profit Margin...............................................................................................................................14

Return on Equity................................................................................................................................15

Return on Assets....................................................................................................................................16

Efficiency Ratio......................................................................................................................................17

Inventory Turnover............................................................................................................................17

Receivables Turnover............................................................................................................................18

Total Assets Turnover........................................................................................................................19

Debt Ratio..............................................................................................................................................20

Long Term Debt to Assets Ratio.........................................................................................................20

Debt to Equity Ratio...........................................................................................................................21

Times Interest-Coverage Ratio..........................................................................................................22

Market Ratio..........................................................................................................................................23

Price to Earnings Ratio.......................................................................................................................23

Earnings per Share.............................................................................................................................24

Dividend Payout................................................................................................................................25

Key statistics..............................................................................................................................................26

Market Value.........................................................................................................................................26

Beta.......................................................................................................................................................26

Diluted EPS............................................................................................................................................26

Buying and Selling Decision...................................................................................................................27

Forecasting................................................................................................................................................28

Conclusion.................................................................................................................................................29

Recommendation......................................................................................................................................29

References.............................................................................................................................................30

Whole Food Market Overview

The leading relater of natural and organic food is known to be Whole Foods Market.it

was uniquely positioned as healthiest grocery store of America and got the first national

“Certified Organic” grocer. The company was built in 1978 and in 1980 opened the first

whole foods market store in Austin taxes. The initial public offering was made in 1992.

Their food line ranges from bear, bakery, Bulk, coffee and tea, meat and poultry, sea

food, wine. The head quarter of whole food is located in Austin, United States of

America and TX. Walter E Robb IV is the CEO of whole Food. In 2010 the number of

employees were 58,300. It’s operating in US, Canada, and the UK.

Walmart Food Market Overview

Wal-Mart is one of the largest grocery retail stores of the world dealing primarily in

almost all household goods. It was incorporated by Sam Walton in 1969 and the

company’s headquarter is situated in Bentonville, United States. Carl Douglas is Chief

Executive Officer of the company who has a quite modernistic approach regarding

international business. The company has its presence in 28 countries with almost 11500

stores. Wal-Mart has been globalized with the right speed in the emerging era. The

company has a significant place in the Fortune List along with 2.4 million employees.

Wal-Mart is quite a follower of diversity in human force and this can be seen through a

diverse network of chains. All grocery store items are included in the product line of

Wal-Mart along with shopping counseling services. The major countries of operations

are United States, China, Canada, South Korea and Germany where a lot of stores of

Wal-Mart are existed.

Financial Statement of Whole Food Market

Balance Sheet

Years 2010 2011 2012 2013 2014

AssetsCurrent assets:Cash and cash equivalents 132 212 89 290 190Short-term investments – available-for-sale securities 330 442 1,131 733 553Restricted cash 87 92 103 111 109Accounts receivable 133 175 197 188 198Merchandise inventories 323 337 374 414 441Prepaid expenses and other current assets 55 74 77 93 97Deferred income taxes 101 121 132 151 168Total current assets 1,162 1,453 2,103 1,980 1,756Property and equipment, net of accumulated depreciation and amortization 1,886 1,997 2,193 2,428 2,923Long-term investments – available-for-sale securities 96 53 221 302 120Goodwill 665 663 663 679 708Intangible assets, net of accumulated amortization 69 67 62 65 81Deferred income taxes 99 50 43 72 132Other assets 9 9 9 12 24Total assets 3,987 4,292 5,294 5,538 5,744

Liabilities and Shareholders’ EquityCurrent liabilities:Current installments of long-term debt and capital lease obligations 0 0 1 1 2Accounts payable 213 237 247 247 276Accrued payroll, bonus and other benefits due team members 244 282 307 367 379Dividends payable 0 18 26 37 43Other current liabilities 290 343 396 436 557Total current liabilities 748 879 977 1,088 1,257Long-term debt and capital lease obligations, less current 508 17 23 26 60

installmentsDeferred lease liabilities 294 354 441 500 548Other long-term liabilities 63 50 51 46 66Total liabilities 1,613 1,301 1,492 1,660 1,931Series A redeemable preferred stock, $0.01 par value, 425 shares authorized;zero and 425 shares issued and outstanding at 2010 and 2009, respectivelyShareholders’ equity:Common stock, no par value, 300,000 shares authorized;172,033 and 140,542 shares issued and outstandingat 2010 and 2009, respectively 1,774 2,121 2,592 2,765 2,863Common stock in treasury, at cost 3.3 and 0.7 shares at 2013 and 2012, respectively 0 0 (28) (153) (711)Accumulated other comprehensive income (loss) 1 (0) 5 1 (7)Retained earnings 599 870 1,233 1,265 1,668Total shareholders’ equity 2,373 2,991 3,802 3,878 3,813Commitments and contingenciesTotal liabilities and shareholders’ equity 3,987 4,292 5,294 5,538 5,744

Income Statement

Years 2010 2011 2012 2013 2014

Sales 9,006 10,108 11,699 12,917 14,194Cost of goods sold and occupancy costs 5,870 6,571 7,543 8,288 9,150

Gross profit 3,135 3,537 4,156 4,629 5,044

Direct store expenses 2,376 2,629 2,983 3,285 3,586General and administrative expenses 272 311 372 397 446Pre-opening expenses 38 41 47 52 67Relocation, store closure and lease termination costs 11 8 10 12 11Operating income 438 548 744 883 934

Interest expense (33) (4) 0 0 0Investment and other income 7 8 8 11 12

Income before income taxes 412 552 752 894 946Provision for income taxes 166 209 286 343 367Net income 246 343 466 551 579Preferred stock dividends 5 0 0 0 0

Income available to common shareholders 240 343 0 0 0Basic earnings per share 1.45 1.96 1.28 1.48 1.57Weighted average shares outstanding 166 175 364.80 371.20 367.80Diluted earnings per share 1.43 1.93 1.26 1.47 1.56Weighted average shares outstanding, diluted basis 172 177 369 375 371Dividends declared per common share 0.00 0.40 0.28 1.40 0.48

Cash Flow Statement

Years 2010 2011 2012 2013 2014

CASH FLOW FROM OPERATING ACTIVITIESNet income 246 343 466 551 579Adjustments to reconcile net income to net cash providedby operating activities:Depreciation and amortization 276 287 311 339 377Loss (gain) on disposition of fixed assets (0) 2 0 0 0Impairment of long-lived assets 2 1 0 0 0Share-based payment expense 23 27 42 57 68LIFO expense (benefit) (8) 10 0 2 16Deferred income tax expense (benefit) (34) 20 (8) (51) (78)Excess tax benefit related to exercise of team member stock options (3) (23) (50) (37) (9)Accretion of premium/discount on marketable securities 0 0 16 31 27Deferred lease liabilities 40 53 77 51 36Other (2) 6 1 9 12Net change in current assets and liabilities:Accounts receivable (28) (35) (30) 9 (14)Merchandise inventories (3) (23) (37) (42) (41)Prepaid expenses and other current assets (2) (19) (2) (17) (4)Accounts payable 23 24 10 0 30

Accrued payroll, bonus and other benefits due team members 36 37 25 60 12Other current liabilities 20 54 95 51 54Net change in other long-term liabilities (1) (9) 4 (4) 23

Net cash provided by operating activities 585 755 920 1,009 1,088

Cash flows from investing activitiesDevelopment costs of new locations (171) (203) (262) (339) (447)Other property and equipment expenditures (85) (162) (194) (198) (263)Purchase of intangible assets 0 0 0 0 (20)

Purchase of available-for-sale securities(1,072

) (1,229) (3,009) (1,252) (720)Sale of available-for-sale securities 647 1,156 2,138 1,534 1,054Decrease (increase) in restricted cash (16) (5) (11) (8) 2Acquisition of intangible assets (2) (5) 0 0 0Payment for purchase of acquired entities, net of cash acquired (14) (2) (22) 0 (73)Other investing activities (3) (0) (3) (4) (17)

Net cash used in investing activities (715) (451) (1,341) (289) (484)

Cash flows from financing activitiesCommon stock dividends paid 0 (53) (95) (508) (170)Preferred stock dividends paid (9) 0 0 0 0Issuance of common stock 47 297 370 81 42Excess tax benefit related to exercise of team member stock options 3 23 50 37 9Purchase of treasury stock 0 0 (28) (125) (578)Payments on long-term debt and capital lease obligations (210) (490) 0 (2) (1)Net cash provided by (used in) financing activities (169) (224) 297 (517) (698)

Effect of exchange rate changes on cash and cash equivalents 1 (1) 1 (2) (6)Net change in cash and cash equivalents (298) 80 (123) 201 (100)Cash and cash equivalents at beginning of year 430 132 212 89 290Cash and cash equivalents at end of year 132 212 89 290 190

Description of financial Statement

The whole food market has total revenue of 14,194 in 2014. Company earn net income

of 579. Company declared basic and diluted EPS that 1.57 and 1.56. Balance sheet

shows the current and noncurrent assets, current and noncurrent liabilities and the

owners’ equity. Total asset of company are 5,744 the current liabilities are 1,257. The

owners’ equity for the company is 3,813. Cash flow statement shows the cash and cash

equivalent at the end of the year is 190.

Ratio Analysis of Whole Food Market

Liquidity RatioYears 2010 2011 2012 2013 2014

Current Ratio 1.55 1.65 2.15 1.82 1.40

Quick Ratio 1.05 1.19 1.69 1.35 0.97

Cash Ratio 0.176 0.241 0.091 0.267 0.151

Debt Ratiosyears 2010 2011 2012 2013 2014

Long Term Debt to Asset Ratio 0.22 0.10 0.10 0.10 0.12

Debt to Equity Ratio 0.68 0.43 0.39 0.43 0.51

Times Interest - Coverage Ratio 12.46 142.12 0.00 0.00 0.00

Profitability RatioYears 2010 2011 2012 2013 2014

Net Profit Margin 2.73% 3.39% 3.98% 4.27% 4.08%

Return on Equity 10.36% 11.45% 12.26% 14.21% 15.18%

Return on Investment/ Assets 10.33% 12.85% 14.20% 16.14% 16.47%

Efficiency Ratioyears 2010 2011 2012 2013 2014

Inventory Turnover 18.15 19.51 20.17 20.02 20.75

Receivables Turnover 67.54 57.66 59.39 68.71 71.69

Total Assets Turnover 1.47 1.53 1.42 1.50 1.59

Investment/ Market RatioYears 2010 2011 2012 2013 2014

Price To Earning Ratio 0.0069 0.0051 0.0078 0.0068 0.0064

EPS 1.45 1.96 1.28 1.48 1.57Dividend Payout 0.00% 20.41% 21.88% 94.59% 30.57%

Ratio Analysis of Walmart Food Market

Profitability RatioYears 2010 2011 2012 2013 2014

Net Profit Margin3.54

%3.91

%3.69

%3.81

%3.53

%

Return on Equity20.26

%23.91

%22.98

%23.26

%21.89

%Return on Investment/ Assets

12.96%

13.03%

12.58%

12.63%

12.04%

Liquidity RatioYears 2010 2011 2012 2013 2014

Current Ratio 0.87 0.89 0.88 0.83 0.88Quick Ratio 0.27 0.27 0.23 0.22 0.24Cash Ratio 0.142 0.126 0.105 0.108 0.105

Efficiency Ratioyears 2010 2011 2012 2013 2014

Inventory Turnover 9.19 8.68 8.23 8.04 7.98

Receivables Turnover97.7

482.3

374.7

668.7

970.8

5Total Assets Turnover 1.78 1.75 1.73 1.73 1.75

Debt Ratios

years201

0201

1201

2201

3201

4

Long Term Debt to Asset Ratio 0.25 0.28 0.28 0.24 0.26Debt to Equity Ratio 0.00 0.01 0.01 0.01 0.02Times Interest - Coverage Ratio

11.74

11.75

11.26

12.44

11.13

Investment/ Market RatioYears 2010 2011 2012 2013 2014

Price To Earning Ratio

0.0027

0.0022

0.0022

0.0020

0.0020

EPS 1.45 1.96 1.28 1.48 1.57

Dividend Payout29.38

%27.01

%32.16

%31.55

%38.37

%

Comparison of Whole food Market and Walmart food Market

Liquidity Ratio

Current Ratio

Current Ratio shows how much current assets are financing through its current liabilities.

2010 2011 2012 2013 20140.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

Current Ratio

As current Ratio measures the ability to meet current debts with current assets. It

means that the higher the current ratio, the greater the ability of a company to pay its

current liability. Whole food market has mixed trend. In 2012 it has a maximum current

ratio that is 2.15. And after it also decreased till 2014. On the other hand the Walmart

food market has almost constant current ratio over the period.

Quick Ratio

Quick Ratio shows how much most liquid current assets are financing through its

current liabilities.

2010 2011 2012 2013 20140.00

0.50

1.00

1.50

2.00

2.50

Quick Ratio

This ratio serves as a supplement to the current ratio in analyzing liquidity. This ratio is

same as the current ratio, except that it excludes the inventory. Whole food market has

increasing trend till 2012 and in 2012 it was 1.69 but it decreasing after it and in 2014 it

was 0.97. Walmart food market almost has constant quick ratio but very small change in

quick ratio.

Cash Ratio

When a company wants to measure the short term liquidity then it use cash ratio.

2010 2011 2012 2013 20140.000

0.050

0.100

0.150

0.200

0.250

0.300

0.350

0.400

Cash Ratio

Cash ratio for whole food market has mixed trend over the time period. In 2011 and

2013 whole food market has increasing value that is 0.241 and 0.267. Walmart food

market has maximum value in 2009 and after it, Walmart food market has decreasing

trend.

Profitability Ratio

Net Profit Margin

Net profit is the profit after deduction of all direct cost and indirect cost.

2010 2011 2012 2013 20140.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

Net Profit Margin

Net profit is the margin at the end after deduction of all direct and indirect expenses.

Profit margin shows the how much profit company generating from its sales. Whole food

market has increasing trend. In 2009 it is 2.73% and in 2014 it is 4.08%. But Walmart

food market has same trend over the time period.

Return on Equity

Return on equity shows that the rate of return that every investor earn against his/ her

investment or measuring earning power on shareholders’ book-value investment

(Davidović et al., 2012).

2010 2011 2012 2013 20140.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

Return on Equity

Return on Equity which the company is paying its investors against their investment.

The result shows the investors have gain against their investment when they want to

earn profit. By comparing both companies the Walmart food market is paying more to

their investors against their investment than whole food market.

Return on Assets

It is the alternate of ROCE. It measures the overall effectiveness in generating profits

with available assets or earning power of invested capital (Chang et al., 2011).

2010 2011 2012 2013 20140.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

Return on Assets

Return on investment or asset shows the effectiveness of generating profits with

available assets. Overall performance of a company shows that company’s assets are

used effectively in generating more and more profit. In 2013 and 2014 company has its

return on asset or investment is 16.14% and 16.47% respectively. But the Walmart food

market has constant trend for ROE over the time period.

Efficiency Ratio

Inventory Turnover

Inventory turnover shows the replenishment order of the inventory.

2010 2011 2012 2013 20140.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

Inventory Turnover

The whole food market has increasing trend from 2009 to 2014. Which means that the

company is increasing its efficiency with the passage of time. On the other hand the

Walmart food market value decreasing which means that the company is not utilizing its

assets efficiently from 2009 to 2014.

Receivables Turnover

Receivables turnover shows the efficiently use of assets. It also shows the receivables

collection in one financial period.

2010 2011 2012 2013 20140.00

20.00

40.00

60.00

80.00

100.00

120.00

140.00

160.00

180.00

Receivables Turnover

As the company’s receivable turnover increasing it means that the company has good

liquidity. As the result shows that whole food market has increasing turnover it means

that the company’s liquidity increasing. But the Walmart food market has decreasing

receivable turnover.

Total Assets Turnover

Total Assets Turnover tell us how much company utilizes its total assets in its

operations.

2010 2011 2012 2013 20140.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

Total Assets Turnover

Total assets turnover tells that how efficiently company utilizing its assets to generating

profit. As we see that the whole food market has almost increasing trend and

decreasing trend. Due to increase in assets and increases in sales as well. But the

increase in sales is greater than the sales in assets therefore over all assets turnover

increases.

Debt Ratio

Long Term Debt to Assets Ratio

Long term debt to assets ratio shows that the ability of a company to meet its financial

requirement.

2010 2011 2012 2013 20140.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

0.45

0.50

Long Term debt to Assets ratio

High value of long term to assets ratio shows the company has more ability to pay its

financial requirement. By comparing both companies Walmart food market has higher

long term debt to assets ratio than whole food market.

Debt to Equity Ratio

The debt to equity ratio measures the ability of a company to pay its long term debt or

liabilities.

2010 2011 2012 2013 20140.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

Debt to Equity Ratio

This ratio shows the extent to which the firm is financed by debt. The lower the ratio, the

higher the level of the company’s financing that is being provided by shareholders.

Walmart Company has lesser value than whole food market. Whole food market has

mixed trend and the Walmart food market has same trend.

Times Interest-Coverage Ratio

Interest coverage ratio shows that paying ability of interest.

2010 2011 2012 2013 20140.00

20.00

40.00

60.00

80.00

100.00

120.00

140.00

160.00

180.00

Times interest-coverage ratio

As the result shows that whole food market has maximum interest coverage in 2011

and then after it, it decreases to 0. But the Walmart food market has increasing trend till

2013 and in 2014 it decreases.

Market Ratio

Price to Earnings Ratio

Price to earnings ratio shows the comparison of market value with the earnings per

share.

2010 2011 2012 2013 20140.00

0.05

0.10

0.15

0.20

0.25

Price to Earning Ratio

Whole food market has more price to earnings ratio than Walmart food market.

Earnings per Share

Earnings per share are the portion of profit/ earnings against each outstanding share of

equity/ common stock. It is the indictor use to check the profitability of the company

(Jorgensen et al., 2014).

Earnings per share is the part of the profit which a company distributed to their

investors. It is a return that an investor earn against one share. Basic EPS is given to

common stockholders while the diluted EPS for preferred stock which is converting in

common stock. To check the profitability company use earnings per share.

2010 2011 2012 2013 20140.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

EPS

Eps shows that how much company is earning against per share. By comparing both

markets we see that the Walmart food market is giving more earnings than whole food

market.

Dividend Payout

When the company compares its dividend per share with its earning per share then tis

ratio called dividend payout ratio.

2010 2011 2012 2013 20140.00%

20.00%

40.00%

60.00%

80.00%

100.00%

120.00%

140.00%

Dividend Payout

The result shows that whole food market has increasing trend till 2013 and then it

decreased. But the Walmart has increasing trend over the time.

Key statistics

Market Value

Source: http://finance.yahoo.com/

Beta

Beta measures the systematic risk. Whole food market has 1.45 beta.

Diluted EPS

Diluted earnings per share

1.43 1.93 1.26 1.47 1.56

Buying and Selling Decision

Source: NASDAQ

20

30

40

50

60

70

80

90

2009 2010 2011 2012 2013 2014 2015

CLOSE

Forecasting

Model Statistics

Model Number of

Predictors

Model Fit

statistics

Ljung-Box Q(18) Number of

Outliers

Stationary

R-squared

Statistic

s

DF Sig.

price-

Model_10 1.081E-015 14.252 18 .713 0

The above graph shows the historical price data and the forecasting on the basis of

historical prices. As the graph shows that in the future prices will increase continuously.

This price forecasting cannot be reasonable because it has a large increase in prices.

Conclusion

The overall performance of Whole Food Market is good. Because it has no liquidity

problem, its earnings are good and it is utilizing its asset efficiently to make profit. If we

see the industry analysis by comparing the performance of Whole Food Market with

Walmart Food market which is the competitor, Whole Food Market’s performance is

much lower.

Recommendation

The price forecasting on the basis of historical data. This may differ. In this case

company should follow the market or set the price according to the competitors.

References

CHANG, V., DE ROURE, D., WILLS, G., JOHN WALTERS, R. & BARRY, T. 2011. Organisational sustainability modelling for Return on Investment (ROI): Case studies presented by a National Health Service (NHS) Trust UK. CIT. Journal of Computing and Information Technology, 19, 177-192.

DAVIDOVIĆ, M., IVANČEVIĆ, J. & ANTONIJEVIĆ, T. 2012. The internal determinants of profitability in the Serbian banking sector. Strategic Management, 17, 23-31.

JORGENSEN, B. N., LEE, Y. G. & ROCK, S. 2014. The shapes of scaled earnings histograms are not due to scaling and sample selection: Evidence from distributions of reported earnings per share. Contemporary Accounting Research, 31, 498-521.