Understanding real-world annual reports The following information relates to The Kroger Company for its 2015 and 2014 fiscal years, and Whole Foods Market, Inc. for its 2014 and 2013 fiscal years. February 1, 2014 THE KROGER COMPANY Selected Financial Information (amounts in millions, except per share amounts) January 31, 2015 Total current assets $ 8,911 Merchandise inventory 8,178 Property and equipment, net of depreciation 17,912 Total assets 30.556 Total current liabilities 11,403 Total long-term liabilities 13,711 Total liabilities 25, 114 Total shareholders' equity 5,442 Revenues 108,465 Cost of goods sold 85,512 Gross profit 22.953 Operating income 3,137 Earnings from continuing operations bofore income tax expense 2,649 Income tax expense 902 Net earnings 1,747 Basic earnings per share $ 1.75 $ 8,830 7,951 16,893 29,281 10,705 13,181 23,886 5,395 98,375 78,138 20,237 2,725 2.282 751 1.531 $ 1.47 WHOLE FOODS MARKET, INC. Selected Financial Information (amounts in millions except per share data) September 28, 2014 Total current assets $ 1,756 Merchandise inventory 441 Property and equipment, net of depreciation 2.923 Total assets 5,744 Total current liabilities 1,257 Total long-term liabilities 674 Total liabilities 1,931 Total stockholders' equity 3,813 Revenues 14,194 Cost of goods sold 9,150 Gross profit 5,044 Operating incomo 934 Earnings from continuing operations before income taxes 946 Income tax expense 367 Net earnings 579 Basic earnings per share $ 1.57 September 29, 2013 $ 1,980 414 2.428 5,538 1.088 572 1.560 3,878 12,917 8,288 4,629 883 894 343 551 $1.48 Required: Use an Excel file to answer the following questions. 1. Compute the following ratios for the companies 2014 fiscal years. (Use formulas): a. Current ratio b. Average days to sell inventory. (Use average inventory.) c. Debt to assets ratio. d. Return on investment. (Use average assets and use "earnings from continuing operations" rather than "net earnings.") e. Gross margin percentage. f. Asset turnover. (Use average assets.) 3. Net margin. (Use "earnings from continuing operations" rather than "net earnings.") h. Plant assets to long-term debt ratio. 2. Which company appears to be more profitable? Explain your answer and identify which ratio(s) from Requirement a you used to reach your conclusion. 3. Which company appears to have the higher level of financial risk? Explain your answer and identify which ratio(s) from Requirement a you used to reach your conclusion. 4. Which company appears to be charging higher prices for its goods? Explain your answer and identify which ratio(s) from Requirement a you used to reach your conclusion. 5. Which company appears to be the more efficient at using its assets? Explain your answer and identify which ratio(s) from Requirement a you used to reach your conclusion
