This course continues to develop the language of business, focusing on the tools and concepts required to make value-added financial decisions. Emphasis on interpretation and analysis of financial reports and data. Topics include financial statement analysis, budgeting, cash flow, time value of money, and capital investment decisions. It also introduces financial spreadsheet tools.
MEMORANDUM
To: Albertsons Shareholders and Interested Investors
From: Cole Sherman
Subject: Investments in Albertsons
Date: December 12th, 2021
Introduction:
Grocery stores in our day and age have developed to become far more superior to grocery stores when they were first originating. Whole Foods for example may have a restaurant above the grocery store where you can get food, drinks, and watch live music/sports. Another one of these developing grocery stores is Albertsons. Albertsons has over 2500 retail locations and over 400 fuel stations, not to mention over 40 combined distribution and manufacturing centers, within the United States. The plan for Albertson’s is to keep expanding business, especially on the retail side. A company as big as Albertsons utilizes and enjoys the common shareholder, not only to drive business forward, but also make a community for those who will invest in their company. Today, I am going to share with you my financial analysis and recommendations on why investing in Albertsons will be a fantastic business decision for yourself.
Recommendations:
As a growing company in today’s day and age, you need to have a controlled balance of assets, liabilities, and profits. The goal of this project is to share with you reasons as to why investing in Albertsons will be a good business decision for yourself. I have learned that some of the best ways of calculating a company’s liquidity are through some of these ratios: Current Ratio, Debt Ratio, Total Gross Profit, and Book Value Per Share Ratio. The Current Ratio takes a company’s current assets and simply divides their assets by its current liabilities. Not only does the current ratio calculate profitability, but it also measures a company’s ability to pay short-term and long-term obligations. This can be from maintaining distribution centers to paying off smaller loans from the bank. Current Ratio’s for Fortune 500 companies can be anywhere from 1.00-2.00, this is the range you typically want to be in as a company. Albertson’s current ratio was at a 0.97 at the end of the fiscal year in 2020. Being nearly 2 years later, I believe even through the pandemic Albertson’s has been becoming more liquid and more profitable as time continues. Not only is a company’s asset to liability ratio important for key investors such as yourself, but the debt ratio calculates a company’s total debts and divides that by a company’s total assets. The Debt Ratio measures the amount of assets paid for with debt. Albertsons has a debt ratio of 0.67, meaning that 0.67 of the company’s assets were paid in Albertson’s debt accounts. It is a bit more difficult for Albertsons to borrow money or lend money from the bank, but this doesn’t affect you as an investor since investing and owning shares is on the liquid side of a business. Albertsons was founded in 1939 and has been a top-ranking outlet within the grocery business for years. One of the ways to calculate the profitability of a major corporation is to calculate the total gross profit for that quarter or year. To calculate the profitability of a company you need to have a total gross revenue, then subtract the cost of sales from the total revenue. That answer would be the total gross profit. Albertsons in 2020 had a total gross profit of 17 billion dollars. The total revenue at the time was at around 62 billion dollars cost of sales was at around 44. 8 billion dollars. Albertsons is extremely profitable and has been showing their profitability for years now. One of the last ways I want to show Albertsons profitability while investing is to calculate a stock market ratio. The one that seemed to give me the most information after calculations is the book value per share ratio. Book value per share ratio is the value of the company the stockholders will own if all the company’s assets were sold. This ratio takes the total stockholder’s equity and subtracts this by the total number of outstanding shares, this is different than already issued shares. Outstanding shares would be the uncollected shares the company is still trying to get people to invest in. Book value per share ratio is different in every industry and is different for every single company. Albertsons has some leeway on the competition, Safeway’s book value is around 2.9. Albertsons top competitor for years has been Safeway, and to outsell them in investments and have more profitability than them is another fantastic reason as to why you should invest into Albertsons.
Conclusion:
In this memo, I gave reasons as to why investing in Albertsons would be a good decision for you. I included financial evidence from Albertsons 2020 SEC 10-K filings, and included 4 calculated ratios that should be evident as to why Albertsons is a profitable company and will remain at the top of the Grocery Outlet industry for years to come.
Reflection Essay
Cole Sherman
BUSBTC-302
December 11th, 2021
I first want to start off by saying that I truly learned valuable information in this course and every single lesson we went over was worth taking the course. The chosen items I have decided to include in my portfolio are as follows: Final project memo, and the final reflection essay. These two artifacts represent my progress towards gaining more insight on the 5 program outcomes. The final memo represents an organization of information relating to solving business problems. Our goal in the memo was convince investors that putting shares into the chose company was worth their time, in this memo we had to include evidence from our financial analysis in excel. The excel part of the project is not included in my portfolio, but it is surely included within helping me understand the program outcomes.
Learning how to organize and write a professional memo is an extremely important thing within the business world: memos can be seen my CEO’s, shareholders, employees. Memos introduce the problem or situation at hand, after this you move into the recommendations part of the memo. In this section, you are showing evidence and backing your case up with financial and logical analysis. Before this course, I wouldn’t be able to organize or create a memo as well as I can after taking the course. Not only are professional memos important, learning the ways of Excel is extremely important to harness. Accounting, marketing, economics, these related fields work very closely with excel and spreadsheets. If I were to be hired into a marketing career after college, I would need to become more versatile and comfortable with Excel.
One major skill I learned during this course was back within the first couple of units. We had gone over debit and credits tables. I remember them from my accounting course when I was a freshman: I always felt like I understood how to do these types of tables the most, the way the questions were formulated made it easy to spot which variables belong in the debits or credits spot. I would always be extremely satisfied after seeing the “1/1” on the side when I would pick the right answer!
If I were to take this course again, I would make sure to get all the assignments done in the beginning of the week, not waiting until the middle or end of the week to complete them. I would always have questions about the excel homework: emailing a professor earlier in the week about homework issues is a whole lot better than emailing on a Friday or Saturday.