Kroger Co.s financial position and the role of profitability and Assignment

Kroger Co.s financial position and the role of profitability and shareholder equitys ratios in it - Assignment eventThis essay analyzes The Kroger Co. that is rated among the top five players in thirty-eight erupt of the forty-two major markets. Most of its competitors remove experienced negative growth trend in the recent past however, Kroger Co. has successfully managed to keep a smile on its shareholders face by steady sales growth in last twenty-nine quarters. Kroger Co. has a substantial customer base and it and it takes great pride in its hard-core customer base as approximately one half of US households have a Kroger dedication card. This has been a result of Customer 1st strategy that Kroger Co. believes in. It has in like manner been popular among shareholders for its consistent dividend payments. In 2010, it gave out $250 million along with maintaining high investment-grade credit rating and reducing its leverage which eventually resulted in large(p) gain. Profitabil ity ratios are an indicator of a companys performance over the year. Profitability ratios let in run profit margin, net profit margin, return on asset, and return on equity. Sales change magnitude by 7.1% to $82.2 billion in 2010, which is more than its competitors. Operating profit margin is calculated by dividing the operate profit by the net sales. The operating profit for the year was $2182 M, as compared to net sales of $82189 M. The operating profit margin was 2.65% for the year. Net profit margin is calculated by dividing the net profit by and by tax by the net sales amount. Net profit for the year was $1116 M and it constituted 1.36% of the sales. ... Kroger has been toilsome to reduce its long term debt in the past few years which makes the company less savage to benefit shareholders. The company has kept its shareholders happy by giving a return of 21.07%. Shareholders Equity Ratio The most important ratio in determining the impact of equity on the company is to find the percentage of equity to total assets. This ratio will give us an idea of the role of shareholder in the companys operation. Also, companies take up debt to keep the larger bunch of the profit with them (HORNE, James C. Van and Wachowicz, John M., 2008). This is a regular practice of paying and established firms. Likewise, Kroger Co.s asset base is majorly financed by debt and only 22.5% of its assets are sourced by shareholder. This is one of the reasons of high return on equity. This ratio indicates that Kroger Co.s business model is profitable and becoming its shareholder will be profitable in future. Use and Application of Financial Reports Financial statements are an integral document for any company. It is use by stakeholders to assess the financial position and performance of the company. These stakeholders can be classified as midland and external (BRIGHAM, Eugene F. and Ehrhardt, Michael C., 2010). The internal users of these statements are management, board of dire ctors and sometimes the employees as well. The external users include investors, lenders, suppliers and customers, government department and agencies, competitors, media, labor unions, supporters and opponents. Following are the three financial statements that is of prime importance for an investor, Balance sheet It is also known as statement of financial position. It presents the picture of the companys