The Kroger Company Essay Example | Topics and Well Written Essays - 1500 words

The Kroger Company - Essay ExampleAlthough, most of its competitors have experienced negative sales growth in 2010, Kroger Co. has not failed to keep its shareholders satisfied by steady sales growth in the last 29 quarters. Kroger Co. takes pride in its loyal customer base as approximately half of US households have a Kroger loyalty card. This has been a result of Customer 1st strategy that Kroger Co. believes in. It has to a fault been popular among shareholders for its consistent dividend compensationments. In 2010, it distributed $250 million along with maintaining investment-grade credit rating and reducing long-term debt which lastly resulted in capital gains. Profit capability balances are an indicator of a fraternitys performance all over the stratum. Profitability dimensions include operating profit boundary line, net profit margin, return on asset, and return on fair-mindedness (Puxty, Dodds & Wilson 1988). Sales increased by 7.1% to $82.2 billion in 2010, which i s more than its competitors. Operating profit margin for the year 2010 was 2.65% with operating profits of $2.182 billion. transcend on sales, also known as net-profit margin, were impressive in 2010 with reported net earnings of $1.12 billion to get $1.74 earning per diluted share. Net profit margin for the year was 1.36%. Shareholders are also interested in return on assets and equity. Their decisions are influenced by these ratios therefore it is requirement that a company projects better return on the asset it employs and the equity it takes. For Kroger, return on equity is impressive with 21%. Moreover, Kroger has been reducing its long term debt in the past few years which makes the company less risky to benefit shareholders. Therefore, a return of 21% is notable in comparison to the industry. Return on asset has also been sufficient with 6.3%. Speaking of efficiency, Kroger Co. has performed well in this regard. Efficiency ratios judge the ability of a company to earn from its resources in an effective and efficient manner (Besley & Brigham 2008). These ratios include asset derangement ratio, receivable turnover ratio and store turnover ratio. Total Asset turnover is impressive for Kroger Co. as sales are about 3.5 times the total assets. This means that with every dollar of asset provided, Kroger generates $3.5 worthy of sales from it. Inventory Turnover ratio has also been inspiring with a multiple of 16.55 times. This means that in a matter of 21 days, inventory is converted into sale. A high turnover rate implies that Kroger Co. is approach high sales therefore there is minimal investment tied up in the inventory (Fabozzi, Peterson & Drake 2003). Still efforts need to be made to increase its turnover rate as investment in inventory yields zero return and a company would always refrain from having its capital tied up in such an investment. Receivable turnover is calculated by dividing credit sales from average receivables. This ratio measures t he efficiency of a company to collect its receivables. Kroger Co. is extremely efficient in this regard as it collects its receivables in less than four days which is remarkable. Kroger Co. generates sales of $82.2 billion and not more than 1 billion is unploughed as receivable means a job well done. Liquidity ratios illustrate the companys ability to pay off obligations in the short term (Shim & Siegel 2008). Current asset ratio and acid-test ratio are observed closely when liquifiedity is in question. Kroger Co. has not been impressive with its ability to keep liquid assets. Current ratio which is current asset divided by current liabilities is below 1. This means that to pay off each dollar of liability, Kroger does not have equal amount of liquid assets on hand. astringent test ratio is in a sorry state as well. Inventory constitutes major distribute of current