Good Essay About Accounting

Answer 1)

a) Business strategy analysis
This analysis tool allows the organization to have a deep insight into the industry and to ascertain the key profit drivers and associated business risk. Thus, following the business strategy analysis, the user is able to figure out profit potential of the company at the qualitative level.
b) Accounting analysis
The purpose of accounting analysis is to analyze if the current accounting policies of the company reflects its business economics. Thus, by ascertaining appropriateness of accounting policies, the users can assess the possible degree of distortion in the accounting numbers disclosed by the company.
c) Financial Analysis
This is the most widely used analysis tool and provides indication relating to the past performance of the company using multiple ratios.
d) Prospective Analysis
The main purpose of this analysis tool is to assist in forecasting the future performance of the company using projected financial figures and valuations. Important to note that this all the previously discussed analysis methods discussed are above are also integral part of this analysis tool.

Answer 2)

About the company
Whole Foods Market is US based and world’s leading retailer of certified organic grocery items. The company sells its products in three markets, USA, Canada and United Kingdom with 96.3% of the total sales generated from US market only. The company was founded in the year 1978 and at presents owns 399 stores grossing annual revenue figures of $14 Billion.

Porter’s Five Forces

-Rivalry
While the company aced the organic food retailing business since years, but with growing health awareness of the consumers and considering the high profitability margins in organic retailing, many companies like Kroger and Wal-Mart have also entered the business and are posing intense rivalry to the company.
-Bargaining power of suppliers
Although the company arranges its supply from local farm producers only, both at regional and national level, however, the company declared that United Natural Foods Inc., is their dominating supplier and 32% of their total supply is arranged from them.

Hence, significant concentration of supply from one party allows them to bargain at a substantial level. , pg 6

-Bargaining power of consumers
In terms of bargain power of consumers, the company enjoys a good amount of legitimate control of the prices because of the following factors in the favor of the company:

Increasing health awareness amongst the consumer

Growing need and understanding amongst the consumer for a healthy lifestyle has made the organic food their first preference
, pg 1
Thus, with the company deals with the consumer who are insensitive to the price levels and more concerned about the organic certification of the product they are purchasing. Thus, the bargaining power of the buyers is minimal.
-Threat of new entrants
As discussed before, because of the growing demand for organic food by the society and because of sustainable profit margins, many new companies are considering entering the organic retailing business. Moreover, allowance of Foreign Direct Investment in this industry make the company vulnerable to threat from new entrants.
-Threat of Substitutes
The company has a specialized segment of health-conscious consumers that will be least attracted to substitutes like non-organic food item and junk food. Thus, it is least likely that the company will lose on its revenue to substitute products.

Answer 3)

In order to combat the principal-agent problem the board of directors of many companies tried to motivate the managers by offering them incentive once the threshold profit level is achieved. For example, top managers receive bonus compensation once target profit levels are achieved.
However, although this incentive plan may be successful in motivating the managers to work in the interest of the company but the chances are there that financial statements gets manipulated or the accounting numbers are distorted by them so as to maximize the profit figures and also their associated bonus compensation.

Works Cited

"SEC 10K Filing- Whole Foods Market." n.d. Whole Food Market. 31 January 2015 <http://www.sec.gov/Archives/edgar/data/865436/000086543614000161/wfm10k2014.htm#s56db89faadd441089a400d7114f983e5>.
Tahiri, Adem. "Why Whole Foods Market Stock Has Crashed 34% in 2014." n.d. 31 January 2014 <http://www.fool.com/investing/general/2014/10/03/why-whole-foods-market-stock-has-crashed-34-in-201.aspx>.