Whole Foods Market, Inc.

Introduction 

Whole Foods Market, Inc. is a multinational American based supermarket chain that deals in the organic products. Whole Foods Market, Inc. is almost four decades old and serves the United States of America, the United Kingdom, and Canada. Whole Foods Market, Inc. is headquartered in the downtown of the city of Austin, the state of Texas, the United States of America. It has four hundred and seventy-nine stores spread across the three countries. In 2017, Whole Foods Market, Inc. had 91000 employees in its stores across the three countries. The expansion of Whole Foods Market, Inc. has significantly been enabled by the rise in the level of technology where the customers can shop for their goods online. This paper looks at the financial performance of Whole Foods Market, Inc., comes up with the various financial ratios that indicate a company's performance, and lastly discuss the financial performance of Whole Foods Market, Inc. (Whole Foods Market Inc., 2018). 

Horizontal and Vertical Analysis 

A horizontal and vertical analysis can be made out of the data regarding the Whole Foods Market, Inc. financial statements in some years. The total assets of the company have had changes in the last three fiscal years. In 2015, Whole Foods Market, Inc. had total assets worth $ 5,741,000,000. There was an increase of the same to $ 6,341,000,000 in the financial year 2016. That was a 10.45% increase in the same. The total assets further shot up to $ 6,676,000,000 in the fiscal year 2017. That again was an increase and this time it was a 5.28% rise (Sec.gov, 2017). The following is the representation of the same on a table. 

Fiscal year	Amount of total assets	Percentage Increase from the previous year
2015	$ 5,741,000,000	-
2016	$ 6,341,000,000	+10.45%
2017	$ 6,676,000,000	+5.28%

The current assets at Whole Foods Market, Inc. started at $ 1,544,000,000 in the year 2015. The current assets increased with a 27.9% to $ 1,975,000,000 in the fiscal year 2016. The current assets also shot further to $ 2,145,000,000 in the fiscal year 2017, which represented an 8.6% increase in the same (Sec.gov, 2017). 

Fiscal year	Amount of current assets	Increase from the previous fiscal year
2015	$ 1,544,000,000	-
2016	$ 1,975,000,000	27.9%
2017	$ 2,145,000,000	8.6%

The following is the graphical representation of the changes in the total assets and the current assets at Whole Foods Market, Inc. the values are in million dollars. 

The current liabilities at Whole Foods Market, Inc. have also had various changes. The following us the representation of the same. 

Fiscal year	Amount of current assets	Increase from the previous year
2015	$ 1,252,000,000	-
2016	$ 1,341,000,000	7.1%
2017	$ 1,355,000,000	1.0%

The following is the graphical representation of the current liabilities at Whole Foods Market, Inc. the values are expressed in million dollars. 

The shareholder’s equity had a nosedive of 14.46% from $ 3,769,000,000 in the fiscal year 2015 to the financial year 2016, which stood at $ 3,224,000,000. It then increased by 6.39% towards the fiscal year 2017 to stand at $ 3,430,000,000. The net income of the company had the same behavior from 2015 to 2016 where it reduced from $ 536,000,000 in 2015 to $ 507,000,000 in 2016. It then decreased towards 2017 and stood at $ 245,000,000 (Sec.gov, 2017). 

Ratio Analysis 

The following is the ratio analysis for Whole Foods Market, Inc. the following is the current ratio analysis of the company in 2017. 

Liquidity Ratios 

Current ratio 

Current ratio= current assets/ current liabilities 

Current ratio= $ 2,145,000,000/ $ 1,355,000,000 

Current ratio= 1.58 

Quick ratio 

Quick ratio= (current assets – inventories) / current liabilities 

Quick ratio= ($ 2,145,000,000- $ 471,000,000) / $ 1,355,000,000 

Quick ratio= 1.24 

Activity ratio 

Accounts receivables turnover 

Accounts receivable turnover= net sales/ average net accounts receivable 

= $ 16,030,000,000/ $ 242,000,000 

= 66.24 

Asset turnover 

Asset turnover= net sales/ average assets 

= $ 16,030,000,000/ $ 6,676,000,000 

= 2.40 

Profitability ratios 

Return on assets 

Return on assets= net income/ average total assets 

= $ 245,000,000/ $ 6,676,000,000 

= 0.04 

Profit margin on sales 

Profit margin on sales= net income/ net sales 

= $ 245,000,000/ $ 16,030,000,000 

= 0.02 

Coverage ratios 

Debt to assets ratio 

Debt to assets ratio= total liabilities/ total assets 

= $ 3,246,000,000/ $ 6,676,000,000 

= 0.49 

Cash debt coverage 

Cash debt coverage = net cash provided by operating activities/ average total liabilities 

= $ 1,138,000,000/ $ 3,246,000,000 

= 0.35 

The greatest source of cash under the operations section of the statement of cash flow at Whole Foods Market, Inc. is depreciation and amortization. That means that the assets of Whole Foods Market, Inc. are depreciating at a higher rate as an expense of the company. The depreciation and amortization value in the fiscal year 2017 was $ 495,000,000. It occupied a 43.5% of the net cash provided by the operational activities at Whole Foods Market, Inc. the company needs to find out ways that can be used to mitigate the depreciation of the tangible assets and the amortization of the intangible assets to reduce the expenses they cause the company. 

The most significant source of cash under the investing section of the statement of cash flows is the purchase of the available-for-sale securities. The available for sale securities can either be in the form of debt or equity in the company. The investment of the company in the available-for-sale securities cost Whole Foods Market, Inc. $ 959,000,000 in the financial year 2017. That represented a significant part of the net cash that was used up by Whole Foods Market, Inc. in the investing activities in the various fields. The available-for-sale securities are also supposed to be sold by the company to generate income for it. That is after they mature in the company. 

The most significant source of cash from the financial section of the statement of cash flows of Whole Foods Market, Inc. in the fiscal year 2017 was the payment of the common stock dividends. The common stock dividends are the shares of the profits that the company has received in the financial year to the stakeholders. The common stock dividends paid by Whole Foods Market, Inc. in 2017 amounted to $ 190,000,000. The amount being the largest in the section meant that the company has been performing well and therefore the shareholders have been receiving a more significant share in the profits. That also means that the stakeholders of Whole Foods Market, Inc. have large stocks, which translate to more money being shared out to them as profits. 

The 10-K report of Whole Foods Market, Inc. also comes up with a set of the risk factors that affect the business and its operations. The first risk factor in the financial report of Whole Foods Market, Inc. is that the growth of the company is mainly dependent on the increase in the sales and the opening of the new stores in Canada, United Kingdom, and the United States of America. While this is its strategy for growth, Whole Foods Market, Inc. lacks other investing opportunities. The second risk factor in the 10-K report is the failure to maintain the security and the privacy of the customer related transactions. That could adversely damage the reputation of the business and reduce the sales and the profits that the company gets from the business operations. The third risk factor is the periodical disruptions of the information systems in the company. That causes a stall in the business activities and running of the conventional business operations. That also slows down the processes in the business and therefore losing customers (Sec.gov, 2017). 

The risk factors in the financial report of Whole Foods Market, Inc. are universal. In the first risk, which was dependent on one stream of income, has also affected many other business enterprises across the globe for a long time now. Most of the supermarket chains in the United Kingdom, Canada and the United States of America are reliant on the opening of new stores to grow their business operations. In the risk factor that involves poor customer service; other companies in the countries in North America and Europe are also faced with the issue of poor customer service, which may lead to the migration of the clients to the other supermarket chains. The problem of the disruption of the information systems is also universal. Modern day businesses are in pursuit to migrate to the technology business arena. That has led to the acquisition of the contemporary systems to ensure that the processes are digitized. That may not always work as desired (Sec.gov, 2017). 

Several critical accounting policies and estimates affect the financial statements of Whole Foods Market, Inc. one of the significant policies is the accounting of the future unpaid loans that are granted to the company. Just like many other American companies, Whole Foods Market, Inc. has been issued with various amount of money to invest in projects and pay them off with interest. The accounting of the future loans may detriment the company's financial performance since the estimates may be wrong. The incorrect projections may lead to confusion in the future preparation of the 10-K reports at Whole Foods Market, Inc. (Libby, 2017). 

The other critical accounting policies and estimates example at Whole Foods Market, Inc. is the accounting of the future returned organic products by the American, Canadian, or British customers. Whole Foods Market, Inc. may not be able to state the returned items as the correct values. Since the returned items are considered as liabilities in the organization, the company may quote incorrect values as far as the organic products are concerned. The false values will affect the estimated revenue and profits for Whole Foods Market, Inc. that will change the ratio analyses in the company since they mostly depend on the significant values of the financial reports for calculation (Libby, 2017). 

The other critical accounting policy and estimate issue at Whole Foods Market, Inc. is the estimation of the bad debts in future. Bad debt is the one that the company is unable to pay off in good time, or unable to pay off entirely. The company cannot estimate how much money it will have as a debt from the financial institutions in the United States of America in the subsequent years. The same case applies to the payment. The company cannot ascertain whether it will be able to pay the debt in good time or not. That affects the calculation of the ratios that will be instrumental in showing the financial position of the company (Libby, 2017). 

Whole Foods Market, Inc. is involved in significant legal proceedings that are likely to affect its accounting sector as follows. Whole Foods Market, Inc. is engaged in the insurance and self-insurance contingency. Many segments of the business have been insured, and the company pays the insurance premiums as evident in its annual financial report. The other aspects of the company are self-insured. Self-insurance, in this case, is the lack of third party insurance and the decision of the company to cater for the risks itself. An example at Whole Foods Market, Inc. is the health costs of the employees who fall sick at work. Both insurance and self-insurance are recorded as expenses on the accounting report. 

Various members of the company's management have retention agreements with Whole Foods Market, Inc. to provide payments for the different circumstances such as a change in the aspects of the company's performance. The company has to honor that. The impact on the accounting of the company is that the expenses are increased in the case of Whole Foods Market, Inc. The company has to take care of the shareholder claims as per the agreements it has with its stockholders. The company has to ensure that part of the profits it has garnered in each financial year goes to the shareholders in their respective percentages of contribution. That increases the accounting time at Whole Foods Market, Inc. 

The company has to take care of the personnel and the employment issues. In addition to the company's human resource management coming up with the requirements of the employees at the company, the department also comes up with the role of the company to the employees. According to the law such as in the United States of America, the company has to honor its functions to the employees and ensure that their issues are solved. Such matters may involve the financial matters, such as payment of their monthly salaries. That costs the accounting of the company some money in the addressing of the issues and the mitigation of their effects. 

Whole Foods Market, Inc. has had a stable financial journey, which has been instrumental to its performance in the market. The financial ratios in the company have also made it evident that the company has a stable economic performance in the market. The company's expansion into the United Kingdom's and the Canadian market, besides the United States of America's, has further ensured that the company has reached more consumers in the organic products market. The expansion has also made it possible for Whole Foods Market, Inc. to edge its competitors in the market. At the cutting edge of technology, Whole Foods Market, Inc. has also radically changed its operations and increased their reliability and customer friendliness. The financial report at Whole Foods Market, Inc. has also come up with the risk factors facing the business. One of them is the issue of the failing systems in the technological pursuit. That has to be fixed so that the company can achieve growth. 

References 

Libby, R. (2017). Accounting and human information processing. In The Routledge Companion 

To Behavioural Accounting Research (pp. 42-54). Routledge. 

Sec.gov. (2017). Form 10-K- Whole Foods Market Inc . Retrieved from https://www.sec.gov/Archives/edgar/data/865436/000086543617000238/wfm10k2017.htm#s9C1455E90858AC2B78DEBE1EB7B401E0 

Whole Foods Market Inc. (2018, June 27). Company information . Retrieved from https://www.wholefoodsmarket.com/company-info