Week 5 Questions: Company – Sprouts Farmers Market Inc.

Posted: August 27th, 2021

Week 5 Questions: Company – Sprouts Farmers Market Inc.

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Week 5 Questions: Company – Sprouts Farmers Market Inc.

Question 1: Questions to Ask CEO About Valuation

            When one is planning for investing money in a certain business, another crucial thing to ask besides the form 10-k is the company’s business plan. It must be given with sufficient details for the investor to ascertain the efficiency of the business and its likelihood to succeed. Thus, the business plan must indicate how a company expects to make money and provide a return on investment for investors (Damodaran, n.d.). Therefore, according to the company’s business plan, the investors can ask the following questions:

1. What is the expected trend in sales for the next year?
2. Who are emerging competitors in the industry in which the business is operating? What are the strategies to deal with the competitors?
3. Which factors may affect the business stock going forward? Will this effect be positive or negative? (Damodaran, n.d.).

Question 2: Non-Operating Assets

            Some assets can be categorized as intangible. These are:

1. Non-cash flow generating assets owned by firms. These assets have value, for instance, under-developed land (Damodaran, n.d.).
2. Investment in the bonds and equities of other companies, particularly low-risk investments that provide stable profits
3. Cash and near-cash equivalents, which include investments in risk-free or low-risk investments. These investments guarantee non-risky and stable profit for a business over years.
4. Holdings in other firms.

Businesses are required to report non-operating assets on their balance sheets such that they are reflected as a complete financial performance. However, the non-operating assets are often excluded when analyzing revenue and growth projections. This is because they are not related to the main production capabilities of a company (Damodaran, n.d.).Regardless, therefore, investing non-assets is necessary for the Sprouts Farmers Market Inc. stability.

Question 3: Increasing Value of Firm

In response to the company CEO, the company should strive to first boost its profits. This involves surpassing the break-even points to ensured that there are sufficient retained earnings and stability of the business. The customers should have made to know that the business is healthy and profitable. Equally, the company should reduce expenses and increase sales performance. Likewise, the company has to continue investing in new and profitable ventures while improving its services (Damodaran, n.d.). Thus, this way, it will report a substantial increase in its value.

References

Damodaran, Aswath. Support website for “The Little Book of Valuation.” Available online at: http://pages.stern.nyu.edu/~adamodar/New_Home_Page/littlebook.htm