Whole Foods Financial Analysis Project

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Category: Business and Industry

Date Submitted: 03/15/2014 04:59 PM

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Whole Foods Market Inc. is the largest natural-foods grocer in the United States. The founder, John Mackey, took a huge risk experimenting in a different kind of capitalism. Mackey, who some call a visionary, believes that employees should be empowered to make decisions, be conscious of their higher purpose, and identify their own success with the business growth. Additionally, Whole Foods as an organization publically strives to be a good corporate citizen, remain ethical, obey the law, and be profitable for shareholders. All of this may sound too good to be true; here is a company that is caring and empathetic while in business to make money. Can this quality of an organization, a style that is almost an anti-corporation, deliver profits for the shareholder, be a good business partner financially, and worth a lending risk ?

Let’s take a deeper look into the financial side of Whole Foods and consider the key indicators of its 2013 performance compared with 2012. Contemplate the current ratio, which is a measurement of short term liquidity, it went down to 1.82 which is due to current assets decreasing 6% from 2012 and current liabilities increasing 11%. Additionally, the quick ratio decreased to 1.44 which is due to increased inventory and increased current liabilities probably in response to new store expansion. Overall the decrease in the current ratio and quick ratio are probably of little concern considering are favorable numbers. Furthermore, looking at the inventory turnover ratio is 20.02 with means the increased inventory should turn over in a short period of time.

Looking at days sales outstanding which has decreased to 5.31was fueled by lower accounts receivable. This number decreased showing Whole Foods improved their performance collecting outstanding receivables sooner than in the past. The added result allows Whole Foods to reinvest cash sooner in in additional sales growth.

The fixed asset turnover ratio decreased slightly, but within...