Safeway is a large supermarket company that encompasses many smaller companies. Some of the companies Safeway operates are Kroger Food Stores and Vons. In looking at the financial strength of Safeway it is important to have a clear understanding of the solvency, efficiency, and profitability ratios because each of these ratios provide information on the future of the company. Whether it is the company one works for or a company one plans on investing in, this information is beneficial when making financial decisions about the company (Mayo, 2102).
Standard Industrial Classification (SIC)
Safeway falls under the G Division with the Occupational Health and Safety Administration. The subcategory for Safeway is 54 that indicates it is a food store and the subsection for Safeway is 5411 that indicates it is a grocery store. This classification indicates that Safeway is a supermarket that engages in the sale of food and drinks to include canned food, dry food, dairy, meats, fruits, and vegetables (OSHA, 2014).
In reviewing the last two statements for Safeway the solvency ratio is 50.79% for total debt to equity, and 56.66% for total liabilities to total assets (Yahoo.com, 2014). The solvency ratio examines the financial strength of the company and shows how well it can meet long and short-term responsibilities. The industry average for the solvency ratio with grocery stores is 42.3% for total liabilities to total assets (Dun & Bradstreet, 2014). Safeway solvency ratio indicates the company can successfully meet long and short-term obligations.
In reviewing the last two statements for Safeway the efficiency ratios is 37% (Yahoo.com, 2014). The efficiency ratio shows the quality of the receivables and how effective the company is at controlling assets, measures how effective Safeway is at paying suppliers, and evaluates under or over-trading on their equity. The industry average for the efficiency ratio with grocery stores is 17% (Dun & Bradstreet, 2014). Safeway's efficiency ratio shows the quality of the company's receivables is satisfactory and the company is effective at controlling assets, paying suppliers, and under and over-trading on equity.
In reviewing the last two statements for Safeway the profitability ratio is 2.66% return on assets, 4.21% return on sales, and 1.74% return on net worth (Yahoo.com). The profitability ratio shows how much profit is earned in relation to sales as well as net worth and total assets. The industry average for the profitability ratio with grocery stores is 4.70% on assets, 1.00% return on sales, and10.3% return on net worth (Dun & Bradstreet, 2014). The profitability ratio indicates Safeway is below the industry average on profitability ratios.
Just-In-Time Inventory System