Exhibit 5.24 presents balance sheets for 2007 and 2008 for Whole Foods; Exhibit 5.25 presents income statements for 2006-2008.
Required
a. Prepare the standard Dupont decomposition of ROCE. Use average balances for balance sheet amounts.
b. Assume that all cash is operating cash (that is, no excess cash). Also assume that deferred lease liabilities are operating. Prepare the alternative decomposition of ROCE by computing NOPAT, Net Financing Expense (after tax), Operating Profit Margin, Net Operating Assets Turnover, Operating ROA, Leverage, and Spread for 2008. Use average balances for balance sheet amounts.
c. Use the same assumptions as in Part b, except that all cash is a financing asset (that is, all cash is excess cash) and deferred lease liabilities are a financing obligation. Prepare the alternative decomposition of ROCE by computing NOPAT, Net Financing Expense (after tax), Operating Profit Margin, Net Operating Assets Turnover, Operating ROA, Leverage, and Spread for 2008. Use average balances for balance sheet amounts.
d. Does the different treatment of financial assets and liabilities affect inferences you draw from the decomposition of ROCE? Explain.