Deciphering Financial Statements (Safeway, Albertson’s, and A&P)
Safeway operates 1,802 supermarkets in the United States and Canada. In the United States, Safeway is located principally in the Western, Southwestern, Rocky Mountain, Midwestern, and Mid Atlantic regions. Albertson’s operates 2,503 stores in 37 Northeastern, Western, Midwestern, and Southern states. The Great Atlantic & Pacific Tea Company (A&P) operates 649 stores in the Northeast and in Canada. Selected financial statement information for 2004 for these three companies follows (in millions of U.S. dollars).
|
|
Safeway |
Albertson’s |
A&P |
|
Inventory |
$ 2,741 |
$ 3,119 |
$ 654 |
|
Total current assets |
3,598 |
4,295 |
1,146 |
|
Property, plant, and equipment |
8,689 |
10,472 |
1,449 |
|
Total assets |
15,377 |
18,311 |
2,751 |
|
Total current liabilities |
3,792 |
4,085 |
1,074 |
|
Total liabilities |
11,071 |
12,890 |
2,365 |
|
Sales |
35,823 |
39,897 |
10,812 |
|
Cost of goods sold |
25,228 |
28,711 |
7,883 |
|
Net income |
560 |
444 |
(147) |
1. For each of the three companies, compute the following ratios:
(a) Current ratio
(b) Debt ratio
(c) Asset turnover
(d) Return on equity
2. Which company uses its inventory most efficiently? Which company uses its property, plant, and equipment most efficiently?
3. What dangers might there be in making ratio comparisons without viewing the financial statement notes for the individual companies?