1. Financial Analysis of Starbucks

2. Overview Industry and Market Commodity Starbucks is only global chain
Dominated by single or small chain retailers
Global demand
Market Elasticity

3. Overview
Coffee Industry

4. Overview Starbucks Strategy High Margin Specialty Products Franchising
Global Expansion

5. 3 Years Summary Ratios

6. Balance Sheet Proportions
Historical
Balance Sheet Proportions

7. 5 Year Projection

8. Ratios by categories

9. Liquidity Ratios Short-term solvency Current Ratio
Quick (Acid Test) Ratio
Cash Flow Liquidity Ratio

10. Liquidity Ratios Starbucks 2007 2006 2005 Current Ratio 0.76 0.79 0.99
Quick (Acid Test) Ratio
0.47
0.46
0.54
Cash Flow Liquidity Ratio
0.81
0.82
1.00

11. Liquidity Ratios

12. Liquidity Ratios (continued)
Efficiency in managing cash
Net Trade Cycle
Average Collection Period
Days Inventory Held
Days Payable Outstanding

13. Liquidity Ratios (continued)
Starbucks
2007
2006
2005
Net Trade Cycle (days)
48.54
50.73
65.19
Average Collection Period (days)
10.64
10.51
10.93
Day Inventory Held
84.46
86.65
91.12
Days Payable Outstanding
45.12
46.43
36.86

14. Liquidity Ratios (continued)

15. Asset Utilization Ratios
Address efficiency of business operations
Accounts Receivable Turnover
Inventory Turnover
Accounts Payable Turnover
Fixed Asset Turnover
Total Asset Turnover

16. Asset Utilization Ratios
Starbucks
2007
2006
2005
Accounts Receivable Turnover
10.11
5.37
5.12
Inventory Turnover
13.29
4.21
4.01
Accounts Payable Turnover
7.12
7.86
9.90
Fixed Asset Turnover
3.27
3.40
3.46
Total Asset Turnover
1.98
1.76
1.81

17. Asset Utilization Ratios

18. Leverage Ratios Address extent of firm’s financing with debt.
Debt Ratio
Long-term Debt to Total Capitalization
Debt to Equity

19. Leverage Ratios Starbucks 2007 2006 2005 Debt Ratio 51.31% 49.7% 40.5%
LT Debt to Total Capitalization
0.10%
0.09%
0.14%
Debt to Equity
1.21
0.99
0.68

20. Leverage Ratios

21. Leverage Ratios (continued)
Address ability to service debt and other long term cash needs
Times Interest Earned
Cash Interest Coverage
Fixed Charge Coverage
Cash Flow Adequacy

22. Leverage Ratios (continued)
Starbucks
2007
2006
2005
Times Interest Earned 97
106
600
Cash Interest Coverage
108
134
1,087
Fixed Charge Coverage
2.56
2.75
2.86
Cash Flow Adequacy
1.24
1.25
1.37

23. Leverage Ratios (continued)

24. Profitability Ratios Address overall efficiency and performance
Gross Profit Margin
Operating Profit Margin
Net Profit Margin
Cash Flow Margin
Return on Total Assets (ROA) / Return on Investment (ROI)
Return on Equity (ROE)
Cash Return on Assets

25. Profitability Ratios Starbucks 2007 2006 2005 Gross Profit Margin
52.3%
59.2%
59.1%
Operating Profit Margin
9.95%
11.5%
12.3%
Net Profit Margin
6.28%
7.2%
7.8%
Cash Flow Margin
14.3%
14.5%
ROA or ROI
12.46%
12.7%
14.1%
Return on Equity
27.24%
25.3%
23.7%
Cash Return on Assets
24.9%
25.6%
26.3%

26. Profitability Ratios

27. Trend Analysis Starbucks 2007 2006 2005 Ending share price $29.90
$34.05
$31.93
Earnings per share
$0.84
$0.71
$0.61
Price to earnings ratio 39 48 52

28. Trend Analysis

29. Starbucks Summary
Based on entrance of strong competitors, such as Java the Hut
More pessimistic
Sensitivity Analysis:
Revision with lower growth, margin, and profit than original forecast

30. Starbucks Summary
The effect of competition on strategy and profitability
Impact of high/low leverage
The value of the ratio analysis