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    Kroger Company Analysis

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    Please do the following points. Attached is the 10K.

    1. Decompose ROE using the DuPont formula. Please include a trend analysis for the two most recent fiscal years. What does the DuPont say about changes in ROE over time?

    2. Calculate the following for the two most recent fiscal years.

    A. Net Operating Profit after Tax (NOPAT).
    B. Net Operating Working Capital (NOWC)
    C. Total Operating Capital
    D. Free Cash Flow (FCF)
    E. Return on Investment Capital (ROIC)
    F. Dividend Payout Rates.

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    Solution Preview

    Du Pont analysis is an extremely useful way of seeing how the various ratios determined a firm's profitability.

    The extended Du Pont equation is particularly useful:
    ROE = Profit Margin x Total Assets Turnover x Equity Multiplier

    = Net Income / Sales x Sales / Total Assets x Total Assets / Common Equity

    Hence this model can be used to gauge following about the company:

    1. Asset utilization : as its utilization of the assets with the help of Asset turnover ratio.
    2. Solvency position: as its nature of financial risk with the help of Equity multiplier.
    3. Profit margin : as its position with respect to efficiency of the ...

    Solution Summary

    This solution provides an in depth analysis of Kroger Company.