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FINANCE ASSIGNMENT 3 PAGES

FINANCE ASSIGNMENT 3 PAGES

Whole Foods Market (WFM) has experienced disappointing profits over the past few yearsdespite increasing its revenues during the same interval. While WFM’s total revenuesincreased by approximately 2% in 2016, and 8% in 2015, its net income (profit) declined byabout 5% and 7% in 2016 and 2015 respectively, indicating higher costs of operating theirbusinesses. The size of the WFM balance sheet has been growing larger; however, the WFMcommon stock experienced high volatility and posted a devastating loss to its value from ahigh of $65/share in October 2013 to about $31/share in December 2016. This performancewas more distressing to WFM investors as the S&P 500 stock index experienced gainsduring the same interval. The decision to open the lower-cost 365 supermarkets has beenmade against this financial background, in addition to other concerns relating to the long-termhealthiness and growth of its core upscale supermarket business.
Please answer the questions below. Use either the Bloomberg terminals located at theFeliciano School of Business or other reputable sources such as finance.yahoo.com,morningstar.com or Wall Street Journal etc. for the financial data you use in your answers.You need to cite the sources you use for the financial data at the end of the finance portion ofthe term paper.

Questions:
1. Opening a series of new supermarkets, such as 365, is a major capital budgetingproject for the company. A project of this scale requires coordinated planning acrossall functions of a business that you are studying in your Integrated Core classes.Choose and discuss three items each on the income statement and the balance sheetthat you think will be impacted by this new undertaking (a total of six items). Explainwhy you chose those particular items, and how those items might be impacted by the

 

marketing, management and operations decisions of the company.2. Explain how the financial decisions regarding opening the 365 supermarkets arerelated to management, marketing or operations decisions that the company mustmake (or has made) in light of the plans to open this new line of stores?3. Choose and calculate five ratios for this company for the last two years. Make sure toselect ratios that you think would be impacted by the opening of the new 365 stores,and explain your reasoning. Identify two competitors of WFM and contrast the ratios.Explain why you selected those competitors. Describe how the decisions made bymanagement, marketing and operations functions of the company can impact, andhopefully improve, these financial ratios.4. Calculate the annualized stock price return of WFM over the last 3, 5, and 10 years.How does it compare to the return of the competitors you selected in question 3 andthe S&P 500 index over the same time periods?  What kind of steps can the companytake regarding management strategy, operational efficiency and marketing policy toimprove the disappointing performance of this company going forward?

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