Financial Analysis of Sobeys Inc.
Financial Analysis of Sobeys Inc. This report is based on the consolidated financial statements of Sobeys Inc. for the years 2011 and 2012 with some reference and calculations from 2010 as well. The audit was performed by Grant Thorton chartered accountants. Office location is Suite 1100, 2000 Barrington Street, Halifax, NS. Calculations are based on GAPP numbers provided in these statements. IFRS standards have been adjusted at the end of the financial statements if reference is needed for those standards.
Short term Liquidity Sobeys Inc. current ratio drops from an acceptable 1.59 in 2011 to .963 in 2012. Being in the grocery industry this is not uncommon as inventories are higher because of the high inventory turnover rate which is higher than the accounts payable becoming due. With the exception of high inventories in this calculation the firm appears to be efficient in paying its obligations. The main contributor to the decrease in the ratio value is 2012 long term debt due within one year increase by approximately 200 mill. Note 13 states “ at end of year the $200 mill non revolving term credit was drawn down to due within one year”, this caused a substantial increase in current liabilities which in turn effects this ratio value. Working capital decreased in 2012 from 2011’s healthy positive value of $266.6 mill to a negative value of -$72.6 which is also a cause of long term debt due within one year increasing prominently. Again using the quick ratio it is lower than the desirable 1:1 value, however the company owns many assets and should not have a problem covering liabilities current or immediate future. Operating cash flow shows increases from 2010 to 2011 and increased again from 2011 to 2012 including the change in non-working capital. However, looking at the net cash flow trend from 2011 to 2012 with working capital changes removed, the value of 2012 is slightly lower than 2011. The changes in non-cash working capital have been adjusted at an
Short term Liquidity Sobeys Inc. current ratio drops from an acceptable 1.59 in 2011 to .963 in 2012. Being in the grocery industry this is not uncommon as inventories are higher because of the high inventory turnover rate which is higher than the accounts payable becoming due. With the exception of high inventories in this calculation the firm appears to be efficient in paying its obligations. The main contributor to the decrease in the ratio value is 2012 long term debt due within one year increase by approximately 200 mill. Note 13 states “ at end of year the $200 mill non revolving term credit was drawn down to due within one year”, this caused a substantial increase in current liabilities which in turn effects this ratio value. Working capital decreased in 2012 from 2011’s healthy positive value of $266.6 mill to a negative value of -$72.6 which is also a cause of long term debt due within one year increasing prominently. Again using the quick ratio it is lower than the desirable 1:1 value, however the company owns many assets and should not have a problem covering liabilities current or immediate future. Operating cash flow shows increases from 2010 to 2011 and increased again from 2011 to 2012 including the change in non-working capital. However, looking at the net cash flow trend from 2011 to 2012 with working capital changes removed, the value of 2012 is slightly lower than 2011. The changes in non-cash working capital have been adjusted at an