The Kroger Company is an American retailer founded by Bernard Kroger in 1883 in Cincinnati, Ohio. As of January 2016, it is the country's largest supermarket chain by revenue and the second-largest general retailer (behind Walmart). Kroger is also the third largest retailer in the world. Kroger operates, either directly or through its subsidiaries, 2,778 retail food stores. It maintains markets in 35 states, with store formats that include supermarkets, superstores, department stores, 784 convenience stores and 323 fine jewelry stores. Kroger-branded grocery stores are located throughout the Midwestern and Southern United States. Kroger operates 38 food processing or manufacturing facilities, 1,387 supermarket fuel centers and 2,122 pharmacies.

a. Compute net operating profit after tax (NOPAT) for 2015. Assume that the combined federal and state statutory tax rate is 35%. Assume that Net Earnings attributable to non-controlling interest is a non-operating item. b. Compute net operating assets (NOA) for 2015 and 2014. c. Compute the return on net operating assets (RNOA) for 2015, as well as the net operating profit margin and the net operating asset turnover. d. Walmart has a RNOA of 15.1% with a profit margin of 4.06% and an asset turnover ratio of 3.73. How does Kroger compare? What inferences can you draw from this comparison e. Kroger has an ROE of 33.5%. What inferences can you draw from the difference between their ROE and RNOA?

The Kroger Co. Income Statement (In Millions USD $) 2015 $109,830 85,496 24,334 2014 $108,465 85,512 22,953 Net Sales Cost of Sales Gross Profit Operating Expenses: Operating, General and Administrative Rent Depreciation and Amortization Total Operating Expenses 17,946 723 2,089 20,758 17,161 707 1,948 19,816 Operating Income Interest expense Earnings Before Provision for Income Taxes Provision for Income Taxes Net Earnings including controlling interest Net Earnings attributable to noncontrolling interest Net Income 3,576 482 3,094 1,045 2,049 10 $2,039 3,137 488 2,649 902 1,747 19 $1,728 Stockholders' Equity Common Stock Paid-In Capital Retained Earnings Accumulated Other Comprehensive (Loss) Income Treasury Stock Total Shareholder's Equity - The Kroger Co 1,918 2,980 14,011 (680) (11,409) 6820 1,918 2,748 12,367 (812) (10,809) 5412 Non-controlling interests Total Equity Total Liabilities and Stockholders' Equity (22) 6,798 33,897 30 5,442 30,497 The Kroger Co Balance Sheets (in Millions USD S) 2015 2014 Assets: Cash and Cash Equivalents Store Deposits in-transit (operating) Receivables Inventories Prepaid and other Current Assets Total Current Assets $277 923 1,734 6,168 790 9,892 268 988 1,266 5,688 701 8,911 Net Property and Equipment Intangibles Net Goodwill Other Assets Total Assets 19,619 1,053 2,724 609 33,897 17,912 757 2,304 613 30,497 Liabilities: Current Portion of Long-Term Debt Accounts Payable Accrued Salaries and Wages Deferred Income Taxes Other Current Liabilities Total Current Labilities 2,370 5,728 1,426 221 3,226 12,971 1,874 5,052 1,291 287 2,888 11,392 Long-Term Debt, excluding current installments Deferred Income Taxes Pensions and postretirement obligations Other Long-Term Liabilities Total Liabilities 9,709 1,752 1,380 1,287 27,099 9,723 1,209 1,463 1,268 25,055