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Financial Health of Starbucks Coffee Presented By: Author Coffee House opened in 1971 in a small town in Seattle, Washington In 1987 Starbucks expanded.

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Presentation on theme: "Financial Health of Starbucks Coffee Presented By: Author Coffee House opened in 1971 in a small town in Seattle, Washington In 1987 Starbucks expanded."— Presentation transcript:

1 Financial Health of Starbucks Coffee Presented By: Author Coffee House opened in 1971 in a small town in Seattle, Washington In 1987 Starbucks expanded beyond Seattle In 1996 Starbucks went international starting in Japan

2 Starbucks Liquid Ratios Current Ratio: 1748.0 ÷ 2189.7 =.798 times Quick Ratio: (1748 – 692.8) ÷ 2189.7 =.482 times Average Collection Period: 329.5 ÷ (10383 ÷ 365) = 11.583 days Days Inventory Held: 692.8 ÷ (4645.3 ÷ 365) = 54.435 days Days Payable Outstanding: 324.9 ÷ (4645.3 ÷ 365) = 25.528 Cash Conversion Cycle: 11.583 + 54.435 – 25.528 = 40.49 days

3 Starbucks Activity Ratios Accounts Receivable Turnover: 10,383 ÷ 329.5 = 31.511 times Inventory Turnover: 4,645.3 ÷ 692.8 = 6.705 times Accounts Payable Turnover: 4,645.3 ÷ 324.9 = 14.297 times Fixed Asset Turnover: 10,383 ÷ 2956.4 = 3.512 times Total Asset Turnover: 10,383 ÷ 5672.6 = 1.830 times

4 Starbucks Leverage Ratios Debt Ratio: 3,181.7 ÷ 5,672.6 = 56% Long-Term Debt to Total Capitalization: 549.6 ÷ (549.6 + 2,490.9)= 18% Debt to Equity: 3,181.7 ÷ 2,490.9 = 1.277 times Times Interest Earned: 503.9 ÷ 53.4 = 9.436 times

5 Starbucks Profitability Ratios Gross Profit Margin: 5,737.7 ÷ 10,383 = 55% Operating Profit Margin: 1,258.7 ÷ 10,383 = 12% Net Profit Margin: 315.5 ÷ 10,383 = 3% Return on Total Assets (ROA): 315.5 ÷ 5,672.6 = 5.5% Return on Equity (ROE): 315.5 ÷ 2,490.9 = 12.6% Cash Return on Assets: 1,258.7 ÷ 5,672.6 = 22%

6 Industry Comparison Starbucks Debt/Equity Ratio 0.33 Current Ratio 0.9 Quick Ratio 0.6 Interest Coverage NA Leverage Ratio 2.1 Book Value/Share 3.50 Industry Debt/Equity Ratio 0.32 Current Ratio 0.9 Quick Ratio 0.7 Interest Coverage 0.0 Leverage Ratio 1.7 Book Value/Share 3.65

7 References Fraser, L. M., & Ormiston, A. (2007). Understanding financial statements (8th ed.). Upper Saddle River, NJ: Pearson/Prentice Hall. MSN Money Central (2009). Starbucks Corp: Company Report. Retrieved July 14, 2010 from http://moneycentral.msn.com/company report?Symbol=US%3aSBUX http://moneycentral.msn.com/company report?Symbol=US%3aSBUX Starbucks Corporation (2009). Financial Statements. Retrieved July 14, 2010 from http://www.starbucks.comhttp://www.starbucks.com

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