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This case follows the financial-statement forecasting decisions of a Deutsche Bank research analyst for the natural and organic retailer Whole Foods Market in May 2014. Students evaluate the associated financial ratios with the forecast to ascertain whether the industry dynamics and company strategy are consistent with the forecast. The case expressly focuses on the asset side of the balance sheet as a preview for other cases using free cash flow forecasting. The forecast exercise exposes students to the mechanics of financial statement modeling and sensitivity analysis. Using a supplementary exhibit, the case can also be used to explore techniques in firm valuation with students debating whether the analyst should recommend a “buy” or a “sell."
Explore financial-statement and financial-ratio analysis; review basics of financial forecasting as a platform for cash flow forecasting. Build consideration of internal consistency of forecasting with respect to industry, peer, and own-firm comparisons; investigate forecast-sensitivity analysis and value drivers; prepare students for thoughtful cash flow forecasting in the context of capital budgeting and firm valuation; build techniques in firm valuation.