Exhibit 5.24 presents balance sheets for 2007 and 2008 for Whole Foods; Exhibit 5.25 presents income statements

Question:

Exhibit 5.24 presents balance sheets for 2007 and 2008 for Whole Foods; Exhibit 5.25 presents income statements for 2006–2008.

Required
a. Prepare the standard Dupont decomposition of ROCE. Use average balances for amounts.
b. Assume that all cash is operating cash (that is, no excess cash). Also assume that deferred lease liabilities are operating. Prepare the alternative decomposition of ROCE by computing NOPAT, Net Financing Expense (after tax), Operating Profit Margin, Net Operating Assets Turnover, Operating ROA, Leverage, and Spread for 2008. Use average balances for amounts.
c. Use the same assumptions as in Part b, except that all cash is a financing asset (that is, all cash is excess cash) and deferred lease liabilities are a financing obligation. Prepare the alternative decomposition of ROCE by computing NOPAT, Net Financing Expense (after tax), Operating Profit Margin, Net Operating Assets Turnover, Operating ROA, Leverage, and Spread for 2008. Use average balances for amounts.
d. Does the different treatment of financial assets and liabilities affect inferences you draw from the decomposition of ROCE? Explain.

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...