Question

Analyzing, Forecast, and Interpret Income Statement and Balance Sheet
Following are the income statement and balance sheet of Whole Foods Market Inc.

WHOLE FOODS MARKET INC.
Consolidated Statement of Operations
Fiscal Years Ended (in millions)		Sept 25, 2016	Sept 27, 2015
Sales		$15,724	$15,389
Cost of goods sold and occupancy costs		10,313	9,973
Gross profit		5,411	5,416
Selling, general and administrative expenses		4,477	4,472
Pre-opening expenses		64	67
Relocation, store closures and lease termination costs		13	16
Operating income		857	861
Interest expense		(41)	-
Investment and other income		11	17
Income before income taxes		827	878
Provision for income taxes		320	342
Net Income		$507	$536

WHOLE FOODS MARKET INC.
Consolidated Balance Sheet
(In millions)		Sept 25, 2016	Sept 27, 2015
Assets
Current assets
Cash and cash equivalents		$351	$237
Short-term investments-available-for-sale securities		379	155
Restricted cash		122	127
Accounts receivable		242	218
Merchandise inventories		517	500
Prepaid expenses and other current assets		167	108
Deferred income taxes		197	199
Total current assets		1,975	1,544
Property and equipment, net		3,442	3,163
Long-term investments--available-for-sale securities		-	63
Goodwill		710	710
Intangible assets, net		74	79
Deferred income taxes		100	144
Other assets		40	38
Total assets		$6,341	$5,741
Liabilities and shareholders' equity
Current liabilities
Current installments of long-term debt& capital lease obligations		$3	$3
Accounts payable		307	295
Accrued payroll, bonus and other benefits due team members		407	436
Dividends payable		43	45
Other current liabilities		581	473
Total current liabilities		1,341	1,252
Long-term debt& capital lease obligations, less current installments		1,048	62
Deferred lease liabilities		640	587
Other long-term liabilities		88	71
Total liabilities		3,117	1,972
Shareholders' equity
Common stock, no par value, 1,200 shares authorized;377.0 and 377.1 shares issued; 318.3 and 348.9 share outstanding at 2016 and 2015, respectively		2,933	2,904
Common stock in treasury, at cost, 58.7 and 28.2 shares at 2016 and 2015, respectively		(2,026)	(1,124)
Accumulated other comprehensive income loss		(32)	(28)
Retained earnings		2,349	2,017
Total shareholders' equity		3,224	3,769
Total liabilities and shareholders' equity		$6,341	$5,741

(a.) Forecast the 2017 income statement for Whole Foods using the following forecast assumptions, which are expressed as a percentage of sales unless otherwise noted (assume "no change" for accounts not listed). ($ millions)

Sales growth	1%
Cost of good sold and occupancy costs	65.6%
Selling, general and administrative expenses	28.5%
Pre-opening expenses	0.4%
Relocation, store closures and lease termination costs	$0
Interest expense	No change
Investment and other income	No change
Provision for income taxes/Pretax income	37%

• Round all answers to the nearest whole number.

• Do not use negative signs with your answers.

Whole Foods Market, Inc. Forecasted Statement of Operations ($ millions)	2017 Estimated
Sales	Answer
Cost of goods sold and occupancy costs	Answer
Selling, general and administrative expenses	Answer
Pre-opening expenses	Answer
Relocation, store closures and lease termination costs	Answer
Operating income	Answer
Interest expense	Answer
Investment and other income	Answer
Income before income taxes	Answer
Provision for income taxes	Answer
Net income	Answer

(b.) Forecast the 2017 balance sheet for Whole Foods using the following forecast assumptions ($ in millions).

Accounts receivable/Sales	1.8%
Merchandise inventories/Sales	3.3%
Prepaid expenses and other current assets/Sales	1.1%
Deferred income taxes (current assets)/Sales	1.3%
Deferred income taxes (noncurrent assets)/Sales	0.6%
Accounts payable/Sales	2.0%
Accrued payroll, bonus and other benefits due team members/Sales	2.6%
Other current liabilities/Sales	3.7%
Depreciation expense as a percentage of PPE, net, at start of the year	15.0%
CAPEX and development of new properties (all PPE) as a percentage of Sales	5.0%
Amortization of intangible assets	$6
Dividends payable as a percentage of dividends	25.0%
Long-term debt repayment due in 2017	$3
Long-term debt repayment due in 2018	$65
Increase in treasury stock in 2017	$200
Dividends as percentage of net income	30.0%

Assume no change for goodwill, other assets, deferred lease liabilities, other long-term liabilities, common stock, and AOCL.

• Round answers to the nearest whole number.

• Do not use negative signs with your answers.

Whole Foods Market, Inc. Forecasted Balance Sheet, ($ millions)	2017 Estimated
Current assets
Cash and cash equivalents	Answer
Short-term investments	Answer
Restricted cash	Answer
Accounts receivable	Answer
Merchandise inventories	Answer
Prepaid expenses	Answer
Deferred income taxes	Answer
Total current assets	Answer
Property and equipment, net	Answer
Long-term investments	Answer
Goodwill	Answer
Intangible assets, net	Answer
Deferred income taxes	Answer
Other assets	Answer
Total assets	Answer
Current liabilities
Current installments of long-term debt	Answer
Accounts payable	Answer
Accrued payroll, bonus and benefits	Answer
Dividends payable	Answer
Other current liabilities	Answer
Total current liabilities	Answer
Long-term debt and capital leases	Answer
Deferred lease liabilities	Answer
Other long-term liabilities	Answer
Total liabilities	Answer
Shareholders' equity:
Common stock, no par value	Answer
Common stock in treasury	Answer
Accumulated other comprehensive loss	Answer
Retained earnings	Answer
Total shareholders' equity	Answer
Total liabilities and equity	Answer

Answer 1

Whole Foods Market, Inc.	2017 Estimated
Forecasted Statement of Operations ($ millions)
Sales	$15,881			=15724*1.01
Cost of goods sold and occupancy costs	10,418			=J3*65.6%
Selling, general and administrative expenses	4,526			=J3*28.5%
Pre-opening expenses	64			=J3*0.4%
Relocation, store closures and lease termination costs	-			0
Operating income	874			=J3-J4-J5-J6-J7
Interest expense	(41)			(41)
Investment and other income	11			11
Income before income taxes	844			=J8+J9+J10
Provision for income taxes	312			=J11*37%
Net income	$532			=J11-J12