Starbucks Ratio Analysis
The relevance of ratio analysis cannot be overstated in seeking to assess the financial viability of an enterprise. As Porter and Norton (2012) point out, ratio analysis is one of the most important “techniques used by investors, creditors, and analysts in making informed decisions” (p. 698). Starbucks Corporation remains one of America’s foremost coffee marketers and retailers. In addition to sourcing, roasting, as well as selling coffee, the company also offers for sale a variety of other beverages and snacks – effectively making it one of the world’s largest fast-food entities. In seeking to assess as well as evaluate the company’s financial situation as well as performance, it would be prudent to conduct a financial statement ratio analysis using its full year fiscal results for the years 2017 and 2016 (Starbucks, 2018). Towards this end, three kinds of ratios will be taken into consideration, i.e. liquidity ratios, financial leverage ratios, and profitability ratios. The assessment in this case covered a total of 2 years so as to get a clearer view of the financial viability of the enterprise.
Liquidity Ratios
In essence, liquidity ratios come in handy in the assessment of the ability of an entity to settle its financial obligations in the short-run (Noreen, Brewer, and Garrison, 2017). In that regard, therefore, they are of great relevance to persons who would be interested in finding out about the company’s ability to settle its debts in the near-term. For instance, coffee suppliers seeking to determine whether to extend short-term credit to Starbucks would be interested in the company’s liquidity ratios as they seek to determine whether the company will honor its payments for goods supplied. Appendix 1 presents the computations for the current ratio and quick ratio. To begin...
Starbucks Ratio Analysis Ratio analysis is a tool that is beneficial in undertaking quantitative analysis on figures found on financial statements. Ratios provide a common approach for comparing financial strength and performance of two or more companies. Imperatively, ratios can divulge a company’s financial strength or weakness in addition to divulge trends regarding business conditions and profitability (Noreen, Brewer, and Garrison, 2017). The main purpose of this assignment is to perform
This strategy was combined with the company's focus on CAFE-based compliance and support for Fair Trade-based trading practices with coffee suppliers. This renewed focus on managing their supply chains to tighter levels of profitability and performance metrics including increasing quality standards has led to a significant reduction in operating expenses and control of variable costs (Starbucks Investor Relations, 2011). Starbucks was also able to manage costs of closing locations
However, the company has in general enjoyed success overseas and as a result international sales now account for 27% of operating income (2010 Starbucks Annual Report). The international division remains a key source for growth at Starbucks, in particular the Chinese market, where Starbucks has enjoyed considerable success and now sits at over 500 stores. The company struggled in the mid-2000s due to two main factors. The first was the
Starbucks and Peet's have similar gross margins. Dunkin' Brands has a much better gross margin at 78.9%, while McDonalds has a lower gross margin at 39.6%. Starbucks' gross margin might put it in the middle of the pack for quick service, but it is still a healthy margin. The company is profitable, something most of the firms in the industry are. Interesting, Dunkin is the least profitable of these
.....K, which is for the year ended October 2, 2016. This was used because many ratios are compared on an annual basis -- a quarterly report would yield different numbers. The first section is the liquidity ratios. These reveal the short-term health of Starbucks. The basic liquidity measure is the current ratio, which is the current assets over current liabilities. Starbucks, at 1.05, is at the industry average, and 1.05 is
Financial Research Report Rationale for choosing the company for which to invest Great Leadership Brand Name Growth and Expansion Market Dominance Starbucks Corporation Delivery Service Diversification of Menu Items Significant Growth Profile of the Investor for which Starbucks Corporation May Be a Fit Ratio analysis Current Ratio Quick Ratio Earnings per Share Stock price analysis Stock Valuation Estimated Beta of Starbucks Estimated Expected Return of Starbucks using Capital Asset Pricing Method Current Stock Price of Starbucks FINANCIAL RESEARCH REPORT FINANCIAL RESEARCH REPORT Financial Research Report The company selected and considered as an
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