Whole Foods Financial Analysis

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Whole Foods Market, Inc. (WFMI) is a publicly traded company on the NASDAQ that seems to be doing very well in the grocery industry. The firm’s prospects for future success may be gleaned by computing several market value ratios to determine how investors feel about the company. Computing the ratios is a simple process that requires access to the company’s annual report and the value of the company’s stock. The computed ratios should be compared with the financial ratios of other companies in the same industry in order to gauge Whole Food’s performance in the grocery industry. We will calculate the price to earnings ratio, the price to cash flow ratio, and the market to book ratio per share to compare the success of Whole Foods with the…show more content…
income statement and balance sheets in the common size format many trends can be associated with and analyzed with their current situation. As a whole on their income statement operating expenses are increasing while net income available to stockholders is decreasing as a percentage of total sales. In 2006, 3.63% of their sales were available to stockholders, while in 2008 only 1.44% of net income was available to shareholders. Some of the major factors affecting Whole Foods, Inc. income statement include an increase in research and development by 1.31% over a two year period ending September 28, 2008. They also faced increased operational expenses of selling, general, and administrative costs by 0.49%. Perhaps the biggest impact on their profit margin is the cost of revenues that were associated with their sales, an increase of 0.92% which affected their EBITDA (Earnings before Interest Tax Depreciation and Amortization). Overall, these show operating expenses as a key issue for the company as the operating income shrank by 2.72% in just a two year period. When analyzing the whole foods balance sheet in common size it shows they have been reducing their short term debt. In 2007, they reduced their current installments of long-term debt by 0.76%, accounts payable by 1.61%, and other current liabilities by 1.35% in just a year as portion of their Liabilities and Shareholders’ Equity. They however faced an increase of accrued payroll…show more content…
In general, this indicates that investors are expecting higher earnings in the future. Compared to the industry WFM P/E ratio is above the industry average. Whole Food Market liquidity is higher than its competitors. Whole Foods Market’s quick ratio is 0.81, Kroger’s quick ratio is 0.23 and Safeway Inc. has a quick ratio is 0.23. A ratio of 1.5 or greater is considered adequate to cover short term debts, and a ratio of less than one is a clear warning signal that a company may not be able to pay its short-term debts. The industry quick ratio standard is 0.84 so therefore, not only does WFM lead their competitors they are close to meeting the industry standard. Whole Food Market reliability is higher than its

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