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Starbucks Financial Statement Analysis Essay

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Starbucks 2014 Annual Report

Income Statement

Net Revenues

Cost of sales

Gross margin

Store operating expenses

other operating expenses

D & A Exp

G&A Exp

Litigation Charge

#DIV/0!

Total Operating Expenses

Income from Equity Investees

Operating Income

Interest income

Interest Expense

Earnings before taxes

Income tax expenses

Net Earnings

The vertical analysis shows some interesting things. First that the bottom line reveals basically nothing -- the net income in 2013 is entirely a reflection of the litigation charge for a lawsuit the company lost. So to understand the actual trend in the business one needs to look at the other line items.

Top line revenue is increasing at a fairly rapid rate, up 10% in 2014 and almost 12% in 2013. This reveals that Starbucks in this period was in a period of steady, rapid growth. The growth was spread across different business units as well, indicating a healthy broad-based growth for the company.

Most expense categories grew at a slower rate than revenues, which highlights greater operational efficiency throughout the company. In particular, store operating expenses grew at 9.4% and 8.4% in 2013 and 2014 respectively....
This indicates that the company was able to increase revenues at its stores faster than costs, and those increased margins can be expected to have a positive impact on the company's overall financial health. Depreciation expenses grew more quickly than the overall expense base, but are a smaller category. The figures below the litigation charge are not all that useful because of the distortion provided by the litigation charge. Normally, unusual expenses are held separate from ongoing expenses, so Starbucks' rendering of its statements in this way seems like deliberate obfuscation.
Starbucks 2014 Annual Report

Income Statement

2012

2013

2014

Net Revenues

10534

11793

12977.9

Cost of sales

Gross margin

Store operating expenses

other operating expenses

D & A Exp

G&A Exp

Litigation Charge

0

#DIV/0!

-20.2

#DIV/0!

Total Operating Expenses

11490.1

15443.6

13635

Income from Equity Investees

Operating Income

1997.4

-325.4

-16.29%

Interest income

94.4

Interest Expense

-32.7

-28.1

85.93%

-64.1

Earnings before taxes

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