Analyzing the Kroger Company and Whole Foods Market The following information relates to The Kroger Company and Whole Foods Market, Inc. for their 2009 and 2008 fiscal years.

Required
a. Compute the following ratios for the companies€™ 2009 fiscal years:
(1) Current ratio.
(2) Average days to sell inventory. (Use average inventory.)
(3) Debt to assets ratio.
(4) Return on investment. (Use average assets and use €œearnings from continuing operations€ rather than €œnet earnings.€)
(5) Gross margin percentage.
(6) Asset turnover. (Use average assets.)
(7) Return on sales. (Use €œearnings from continuing operations€ rather than €œnet earnings.€)
(8) Plant assets to long-term debt ratio.
b. Which company appears to be more profitable? Explain your answer and identify which of the ratio(s) from Requirement a you used to reach your conclusion.
c. Which company appears to have the higher level of financial risk? Explain your answer and identify which of the ratio(s) from Requirement a you used to reach your conclusion.
d. Which company appears to be charging higher prices for its goods? Explain your answer and identify which of the ratio(s) from Requirement a you used to reach your conclusion.
e. Which company appears to be the more efficient at using its assets? Explain your answer and identify which of the ratio(s) from Requirement α you used to reach your conclusion.

Transcribed Image Text:

THE KROGER COMPANY Selected Financial Information (Amounts in millions, except per share amounts) January 31, 2009 February 2, 2008 $ 7,206 6,459 $ 7,114 Total current assets Merchandise inventories 6,063 Property and equipment, net of depreciation Total assets Total current liabilities 13,161 12,498 23,211 7,629 10,311 17,940 5,271 22,299 8,689 8,696 Total long-term liabilities Total liabilities 17,385 4,914 Total shareholders equity Revenue Cost of goods sold Gross profit Operating income Earnings from continuing operations before income tax expense 76,000 70,235 53,779 16,456 2,301 58,564 17,436 2,451 1,827 1,966 Income tax expense Net earnings Basic earnings per share 717 646 1.181 1,249 $ 1.92 $ 1.71 WHOLE FOODS MARKET, INC. Selected Financial Information (Amounts in millions except per share data) September 27, 2009 September 28, 2008 Total current assets S1,055 311 $ 623 327 Merchandise inventory Property and equipment, net of depreciation 1,900 3,381 1,898 3,783 Total assets Total current liabilities 684 666 Total long-term liabilities Total liabilities 1,058 1,742 2,041 1,209 1,875 1,506 continued Total stockholders' equity September 28, 2008 September 27, 2009 Revenues $8,032 5,277 2,754 $7,954 5,247 2,707 Cost of goods sold Gross profit Operating income Earnings from continuing operations before income taxes Income tax expense Net earnings Basic earnings per share 284 236 251 104 207 92 147 115 $ 0.85 $ 0.82