This exercise is built around Whole Foods Market's financial statements from the chapter. Average common shareholders' equity for 2012 was $3.397 billion, and a 40% income tax rate should be used as needed. Refer to Exhibits 5.1 and 5.6 from the chapter. Required: 1. Whole Foods earned an ROA of 9.7% in 2012. What was ROCE that year? (Round your answer to 1 decimal place.) 2. ROA at the company fell to 9.4% in 2015. What was ROCE that year? (Round your answer to 1 decimal place.) 3. Did financial leverage help or hurt Whole Foods Market in 2015? 1. ROCE 2012 % 2. % ROCE 2015 Did financial leverage help or hurt Whole Foods Market in 2015? 3. EXHIBIT 5.1 Whole Foods Market Comparative Income Statements ($ in millions) Sales Cost of goods sold and occupancy costs Gross profit Selling, general and administrative expenses Pre-opening expenses Relocation, store closure and lease termination costs Operating income Investment and other income, net of interest expense Income before income taxes Provision for income taxes Net income 2015 2014 2013 2012 $15,389 $14,194 $12,917 $11,699 9,973 9,150 8,288 7,543 5,416 5,044 4,629 4,156 4,472 4,032 3,682 3,355 67 67 52 47 16 11 12 10 861 744 17 12 11 8 878 946 894 752 342 367 343 286 $ 536 $ 579 $ 551 $ 466 934 883 EXHIBIT 5.6 Whole Foods Market 2015 2014 2013 2012 $ 237 155 127 218 500 108 199 1,544 $ 190 553 109 198 441 97 $ 290 733 111 188 414 93 151 1,980 $ 89 1,131 103 197 374 77 168 132 1,756 2,103 3,163 63 710 79 144 38 $5,741 2,923 120 708 81 132 24 $5,744 2,428 302 679 65 72 12 $5,538 2,193 221 663 62 43 9 $5,294 Comparative Balance Sheets ($ in millions) Assets Current assets: Cash and cash equivalents Short-term investmentsavailable for sale securities Restricted cash Accounts receivable Merchandise inventories Prepaid expenses and other current assets Deferred income taxes Total current assets Property and equipment, net of accumulated depreciation and amortization Long-term investmentsavailable for sale securities Goodwill Intangible assets, net of accumulated amortization Deferred income taxes Other assets Total assets Liabilities and Shareholders' Equity Current liabilities: Current installments of capital lease obligations Accounts payable Accrued payroll, bonus and other benefits due team members Dividends payable Other current liabilities Total current liabilities Long-term capital lease obligations, less current installments Deferred lease liabilities Other long-term liabilities Total liabilities Shareholders' Equity: Common stock, no par value Common stock in treasury, at cost Accumulated other comprehensive income (loss) Retained earnings Total shareholders' equity Total liabilities and shareholders' equity $ 3 295 436 $ 2 276 379 43 45 $ 1 $ 247 367 37 436 1,088 1 247 307 26 396 977 557 473 1,252 1,257 62 26 587 71 1,972 60 548 66 1,931 500 46 1,660 23 441 51 1,492 2,765 (153) 2,904 (1,124) (28) 2,017 3,769 $5,741 2,863 (711) (7) 1,668 3,813 $5,744 1,265 3,878 $5,538 2,592 (28) 5 1,233 3,802 $5,294