Question

1. A factor that would reduce EBIT margins at Whole Foods relative to peers is:

a. None of these

b. Premium pricing for organic products

c. Overcharging customers in California

d. Paying staff above market wages relative to peer group

2. Online retailer Amazon has higher Free Cash Flow (Operating Cash Flow – Capital Expenditures) as a percentage of sales than brick and mortar retailer Whole Foods due to:

a. Both

b. Lower capital expenditures as a percent of sales due to no physical stores at online retailers

c. Higher inventory amounts held to stock brick and mortar retailers which are a use of cash

d. Neither

3. Whole Foods became the largest supermarket-style natural foods chain by first acquiring natural food stores and then growing organically by opening its own stores.

a. True

b. False

Answer 1

1. Option d is correct option because higher wages increases operating expenses and hence EBIT increases.
Premium pricing, overcharging customers ,etc increases it increases EBIT margin

2. OPtion b is correct option FCF =Operating Cash flow-Increase in capital expenditure -Increase in NWC
Lower capital expenditure increases cash flow
Option c is incorrect because higher inventory decreases free cash flow

3. True. It opened its own store quite later