Kroger and Whole Foods are the two giants in the grocery industry; however, their capital structure and financial measures paint vastly different pictures. The liquidity ratios, which measure short term solvency of the company, were calculated for both companies. The current ratio for Kroger was calculated to be .76 compared to a current ratio for Whole Foods of 1.60. At a glance, Whole Foods is more able to pay their short term debt obligations compared to Kroger. In the same vein, Whole Foods has a much higher quick ratio at 1.20 compared to .25 for Kroger. The capital structure of the two companies is the main reason for the distinct differences in the liquidity ratios. Kroger has financed the company’s expansions with debt; whereas, Whole Foods has financed their expansions with equity. One of the reasons why Whole Foods’ quick ratio is higher than Kroger’s quick ratio is due to inventory management. Whole Foods is an industry leader at inventory management. Whole Foods inventory consists of two-thirds perishable foods, which requires management to have outstanding inventory management to be profitable. Due to the outstanding inventory management of Whole Foods, the quick ratio for the company is higher compared to the much larger Kroger.…
The strength of Mark X as a company is its fixed assets turnover ratio, which rose from 1990 to 1992. This tells us Mark X 's ability to generate net sales from each addition of a fixed asset. Sales generated from the fixed assets are greater than the costs of the fixed assets, which imply that the fixed assets that were purchased are good investments for the company. This is really the only positive ratio they have at the moment. Weaknesses we found in Mark X were its debt ratio, which increased from 40.47% in 1990 to 46.33% in 1991 and from 46.33% to 59.80% in 1992. This shows us Mark X 's amount of debt relative to its assets is increasing and that its debt is equal to more than half of its assets by 1992. The current ratio and quick ratio has also indicated negative change, both decreasing between 1990 and 1992. The current ratio is a liquidity ratio that measures a company 's ability to pay short term obligations, while the quick ratio shows a company 's ability to pay its short-term obligations with its most liquid assets. Both ratios are steadily decreasing, indicating to us the position of the company has become less and less favorable.…
The success of a business depends on its ability to remain profitable over the long term, while being able to pay all its financial obligations and earning above average returns for its shareholders. This is made possible if the business is able to maximize on available opportunities and very efficiently and effectively use the resources it has to create maximum value for all involved stakeholders. One way the performance of a company can be measured on critical areas such as profitability, its ability to stay solvent, the amount of debt exposure and the effectiveness in resource utilization, is performing financial analysis where a set of ratios provides a snapshot of company performance and future prospects. Financial analysis is also a very useful technique that forms a basis for making key decisions about company operations. In addition to internal company members, these ratios are used by potential investors and shareholders to make investment decisions about the company.…
Liquidity ratios show the relationship between the current assets and current liabilities. These ratios provide us with a view of the company’s ability to pay its current liabilities. KR has a current ratio of 0.72 and a quick ratio of 0.25. WFM has a current ratio of 2.15 and a quick ratio of 1.77. Both companies’ consists largely of inventory. If both KR and WFM sold their entire inventory, they would be in the same comparable position. These ratios show that WFM is more liquid than KR.…
Companies’ Solvency, Liquidity, And Profitability Based On Current Ratio, Return On Sales, Earnings Per Share (EPS), Debt Ratio, And Price Earnings Ratio, Compared With Industry Standards…
Ratio analysis is a tool brought by individuals used to evaluate analysis of information in the financial statements of a business. The ratio analysis forms an essential part of the financial analysis which is a vital part in the business planning. There are 3 different ways of assessing businesses performance and these are: solvency, profitability and performance. Ratio analysis assists managers to work out the production of the company by figuring the profitability ratios. Also, the management can evaluate their revenues to check if their productivity. Thus, probability ratios are helpful to the company in evaluating its performance based on current earning. By measuring the solvency ratio, the companies are able to keep an eye on the correlation between the assets and the liabilities. If, in any case, the liabilities exceed the assets, the company is able to know its financial position. This is helpful in case they wish to set up a plan for loan repayment. Ratio analysis is also helpful in analysing the performance of a company. Through financial analysis, companies can review their performance in the past years. This is also helpful in identifying their weaknesses and improving on them. Polish Fine Foods needs to use ratio analysis because it is a valuable tool for the business’s management to determine the performance of a business and to control the cost measures when necessary. Also, ratio analysis helps them monitor and identify issues that can be highlighted and resolved. However, ratio analysis doesn’t take into account external factors such as a worldwide recession.…
The liquidity ratio of a company shows the way the company is able to pay back short-term debt that is owed. Creditors would be interested in this type of ratio. The profitability ratios are the profit performance that makes up the financial success of the company. Profitability ratios would be beneficial to individuals outside of the company such as investors and creditors. Solvency ratios are the ability of the company to pay off the long-term debt. The company’s solvency ratios are of interest to long-term creditors and the company’s’ shareholders. Shareholders and long-term creditors would be most interested in solvency ratios of the company.…
To any company whether small or a large corporation, the financial analysis is very important in order for a successful business. This will determine if the company is healthy enough to invest or even to see where you are weak in the financial part of the business. It is the company’s responsibility to present accurate analysis of their financial reports. What I hope to present to you is information that you will help see the comparison of both companies within their financial standings. In this report I will present a vertical analysis and a horizontal analysis, and ratio analysis. I will also try to provide some strategies…
Liquidity ratio. The firm’s liquidity shows a downward trend through time. The current ratio is decreasing because the growth in current liabilities outpaces the growth of current assets. The quick ratio is also declining but not as fast as the current ratio. From 1991 to 1992, it only decreased 0.35 units while the current ratio decreased 0.93 units. Looking at the common size balance sheet, we also see that the percentage of inventory is growing from 33% to 48% indicating Mark X could not convert its inventory to cash.…
After reviewing the Financial Report from The Leslie Fay Companies from 1987 to 1991, I made ratios of Balance Sheet and Income Statement to start with audit planning, which could help us make comparison directly. Also, the calculation of ratios in liquidity, activity, profitability and solvency contains in my report. The purpose of analytical procedures is to detect “red flags” within the financial and non-financial information. For the financial part, firstly, I made year-to-year comparisons from 1987 to 1991; then, I did going concern analysis that to compare the data from The Laslie Fay Co. with the industry standard in 1991. What’s more, I consider the predicable relationships such as gross profit to sales. For the non-financial part, I analysis the economic environment during the period and big events took place in Leslie Fay Co. from 1987 to 1991. To end up with the analytical procedures, I make conclusions and provide my recommendations.…
Financial Analysis is very important to the inner workings of a business. Keep track of financial statements, taxes, audits, and various other areas of financials will show how well a company has done, is doing, and how well it will do in the future. Seeing how well a company is doing into the future is important so they can see any mistakes and try to fix them before they become an issue and hinder the growth of the company. In this essay I will compare financial statements in two companies, PepsiCo. and Coca Cola Company. I will describe what vertical and horizontal analysis is then I will go over the vertical analysis of both companies, comparing one to the other. I will go over the horizontal analysis of both companies, comparing them as well. I will describe ratio analysis and I will show the ratio analysis of both companies, including the testing of a liquidity ration, a solvency ratio, and a profitability ratio. I will explain in my own opinion which company is more financial stable and why, using comparisons of the data from the data stated. I will finally include three recommendations to improve each company’s financial health for the future.…
This report is written and created by our group on the performance and financial position of Virgin Media Inc. and BT Group PLC. The purpose of the report is to compare internal performance of Virgin Media Inc. in 2010 and external comparison with its main competitor in the industry BT Group PLC in 2011 and to give recommendations on how Virgin Media Inc. can improve its performance in the future.…
This is an analytical procedures’ report of Interserve plc. to evaluate the company’s performance using its last four financial statements. The report is used in planning to understand the client’s business and industry. It compares clients’ ratio to industry or competitors benchmarks to provide an indication of the companies performance. Also, it is used throughout the audit to identify possible misstatements, reduce detailed tests, and to assess going-concern issues (Michael, 2011).…
This paper provides calculated ratios of liquidity, activity, debt and profitability of Pepsi Co for the fiscal years 2007-2008. This information was obtained from the financial statements.…
Samsun and LG’s are among the leading companies in South Korea. Samsung is a multinational corporation with several subsidiaries and associated business, mainly under the brand name Samsung. LG is also an international electronics organization that operates through its four divisions: Home Appliances, Mobile Communications, Air Conditioning and Energy Solutions, and Home Entertainment. It is among the top producers of television sets and mobile phones. This paper focuses on Samsun and LG’s financial analysis. It compares the two companies using risk analysis and profitability analysis. In risk analysis, liquidity ratio and solvency ratio will be focused on. In profitability analysis, focus is on return on assets, profit margin, gross profit ratio, asset turnover, return on equity, and price earnings ratio.…