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Kroger is a multinational company that has it head offices located in Cincinnati, Ohio. It is a retail grocery chain store. The Kroger company work in two main business set up, combo stores and multi departmental stores. The combo stores primary goal is a food store, though it also sells pharmaceutical and also general merchandise.
The multi departmental warehouse sells a wide range of products making them a one stop shop for the customers. In addition to selling groceries and pharmaceutical the comb store also does have gas selling stations. The company’s 334,000 associates serve it 2,461 supermarkets and multi departmental stores in the more than 31 states (p2).
By carrying out an analysis of the balance sheet one will be able to know the true and vivid picture of the company’s financial position. The company boosts of a good assets base. This is a key component in the balance sheet in that by the knowledge of the company’s net asset base an individual may be able to make a very informed decision on the purchase of the firm’s shares.
Kroger has a total asset of $ 23,505,000, 000 this gives a good picture of the string asset base that the company has. In addition the in the eyes of the investor gives the impression that once he or she invests in the company he or she will stand a very low chance of losing his or her investment.
If we further break down the assets we find out that the company holds more money in cash form than the other years this has been due to the recent sale of the company’s shares. This is not a very positive aspect, as the money could be invested and earn the shareholder more return on his investment (Mukherjee 21). It can be noted that the goodwill of the company has been on a downward curve this should raise a question to the investor tat should then enquire on the course in order to selvage there investment.
Generally over the year the asset base of the company has been on the increase. The total asset compared to the previous year has experienced a steady increase in the amount. It has experienced a close to 30% increase from the year 2007. This has positively influenced the cash flow of the business and in the long run building a investor confidence.
The company’s good will totaled to 1.2 billion in the beginning of the 2010. The goodwill was reviewed down due to some impairment in the third and four quarter of the year. By taking a snapshot look on the total amount of goodwill over the past two year one can note that the good will has been on the decreasing trend, it has reduced by 2.3% from 2008 and 3.6% for the year 2007. This shows that the perception of the company has been has had a negative progress.
The share sale by the company may be the main contributor to the decrease in the goodwill. With a clear look into the company’s good will impairment, the amount of impairment is not as significant in comparison to the total goodwill at the present. With the implementation of the companies plan and projection there is hope that the good will have a more than 10% increase in the next financial year (p16).
Long term debt as at the end of the finical year was $7,304,000,000 this is quite significant figure as compared to the capital base of the company. Though may entrepreneur prefers having a high percentage of debt in that they have little invest in the company but the money in use in the business is large hence yielding more profits than were the debt level is low (p.21).
Though this might be a very risky situation in that, the company at dissolution may leave with a little extra amount to share amongst its share though the company had a multimillion balance sheet ( Kieso, Weygandt & Warfield p. 132). The company has set up to a strategy to reduce the debt of the company a positive to the shareholder. This event will be expected to play a key and important role in the increase of the goodwill and the long run increasing the value of the company’s share in the stock exchange (Management Accounting.p6.)
In conclusion the company has a strong balance sheet. It also does have a fairly good cash flow. I would advice an prospective investor that the company is a good investment to buy into.
Kies, Weygandt & Warfield. Intermediate Accounting (12th ed.). Hoboken, NJ: John Wiley & Sons, 2007.
Mukherjee, Mukherjee. Financial Accounting. Boston: McGraw Hill Higher Education. 2003.
“Management Accounting.” 123HelpMe. Web.
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