Whole Foods Ratio Essay Example for Free

full Foods Ratio moveKroger and substantial Foods are the cardinal giants in the grocery industry however, their capital construction and financial measures pigment vastly different pictures. The liquidity dimensions, which measure short term solvency of the company, were calculated for both companies. The current ratio for Kroger was calculated to be .76 compared to a current ratio for altogether Foods of 1.60. At a glance, Whole Foods is more(prenominal) able to pay their short term debt obligations compared to Kroger. In the same vein, Whole Foods has a often time high(prenominal) quick ratio at 1. 20 compared to .25 for Kroger. The capital expression of the two companies is the main reason for the apparent differences in the liquidity ratios.Kroger has financed the companys expansions with debt whereas, Whole Foods has financed their expansions with equity. One of the reasons why Whole Foods quick ratio is higher than Krogers quick ratio is due to stocktaking m anagement. Whole Foods is an industry leader at inventory management. Whole Foods inventory consists of two-thirds spoilable foods, which requires management to have outstanding inventory management to be goodable. ascribable to the outstanding inventory management of Whole Foods, the quick ratio for the company is higher compared to the much larger Kroger. Activity ratios are a measure of a companys addition management. When comparing Kroger to Whole Foods, Kroger has a higher total asset disorder and fixed asset turnover compared to Whole Foods.In fact, Kroger is the industry leader in asset turnover consistently having the highest asset turnover ratios in the industry. The reason for Krogers high asset management ratios for total asset turnover and fixed asset turnover is due to gross gross sales. Sales are calculated into each ratio. By generating massive sales, Kroger is able to apprehend with slim profit margins due to exploiting economies of scale. Whole Foods dominat es Kroger with two of the activity ratios inventory turnover and days sales in inventory. Inventory turnover for Whole Foods is 19.84 times per year compared to 14.45 times per year for Kroger. Days sales in inventory for Whole Foods is 18.39 compared to 25.24 for Kroger.The catalyst for Whole Foods superior performance in inventory turnover and days sales in inventory is due to three reasons businesslike inventory management, high vocation in stores, and the nature of the organic market. Due to the nature of the organic market, Whole Foods has had to become extremely efficient as inventory management. The organic market is characterized by fresh fruits and vegetables, inventory mix that is more perishable than traditional grocery stores, and shorter shelf life of products. Because the organic market is dominated by fresh foods as opposed to pre-packaged foods, Whole Foods customers are more likely to visit the grocery store multiple times per week compared to Kroger customers.Due to this, Whole Foods is more able to control inventory and generate higher inventory turnover compared to Kroger. An analysis of the leverage ratios of Whole Foods and Kroger illustrates the impact of a companys capital structure on leverage ratios. Whole Foods had a lower Debt Ratio (.282), Long Term Debt Ratio (.0147) and long-term Debt to candor Ratio (.01) compared to Kroger, which had a Debt Ratio of .83, Long Term Debt Ratio of .41, and Long-term Deb to Equity Ratio of .01. The reason for Whole Foods having substantially lower leverage ratios is due to the capital structure of Whole Foods. Whole Foods capital structure consists of little to no debt. At the present time, Whole Foods capital structure is made up of 99.3% equity and .7% debt. In contrast, Krogers capital structure consists of 57.3% debt and 42.7% equity.By having little to no debt, Whole Foods is able to maintain lower leverage ratio numbers compared to Kroger, which is more dependent on debt to fund expansion . The corporate strategies of Whole Foods and Kroger make a tremendous impact on the positiveness ratios. Whole Foods strategy involves opening high-end grocery stores in upscale locations, offering organics foods and specialty items, providing a more gratifying shopping experience for shoppers, and selling more expensive grocery items than traditional grocery stores. By comparison, Krogers strategy is to offer hurt reduction on grocery items, compete based on price which reduces profit margins, and offer a high-end shopping experience with low prices on staples. Due to the strategies of both companies, the profitability ratios are affected.By competing on price, Kroger has lower net income and higher sales. Lower net income and higher sales shrinks profit margins and gross margins. On the other hand, Whole Foods specialty food items are priced at a premium therefore, net income is larger compared to sales. A larger net income results in a higher profit margin and higher gross mar gin. The corporate capital structure factors into two of the profitability ratios for Whole Foods and Kroger. Due to having a capital structure that is essentially all equity, Whole Foods has much lower final payment on equity than Kroger, which has a capital structure that is a mixture of debt and equity.The diversified capital structure of Kroger accounts for the higher Return on Equity compared to Whole Foods. The Return on Invested Capital is the same for Whole Foods and Kroger at 13% for each company. The Return on Invested Capital takes into consideration both debt and equity, which allows for a more high-fidelity comparison of the two companies. Many of the ratios for Whole Foods and Kroger have been affected by the capital structure of the two companies. By taking into consideration by side of the capital structure, debt and equity, the two companies have a return on invested capital that is essentially the same.