ACC 660 - Milestone One

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Southern New Hampshire University *

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ACC 660

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Accounting

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Feb 20, 2024

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docx

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Milestone One: Starbucks Case Study Southern New Hampshire University ACC 660: Controllership Gina Smith December 24, 2023
Financial Indicators and Trend Analysis Financial Ratios: Ratio 2010 2011 2012 Current Ratio 1.5493 1.8282 1.9004 Gross Profit Margin 58.3596 57.6997 56.2893 Operating Margin 13.2563 14.773 15.044 Net Profit Margin 8.8313 10.6466 10.4227 ROE - Return on Equity 25.7529 28.4457 27.074 ROA - Return on Assets 14.8499 16.9556 16.8471 Debt/Equity Ratio 0.1492 0.1252 0.1075 Asset Turnover 1.6767 1.5896 1.6153 Operating Cash Flow per Share 0.1844 -0.0681 0.0847 (Macrotrends, 2023) (Starbucks Corporation, 2011) (Starbucks Corporation, 2012) (Starbucks Corporation, 2013) Starbucks Corporation has maintained predominantly consistent performance ratios. Their Gross Profit Ratio did, however, see a slight dip in 2012. (Macrotrends, 2023) Their revenue increased, and as such, so did the cost of sales. It is possible that it also could be accounted to the several acquisitions that occurred that year. (Starbucks Corporation, 2013) The operating margin increased each of the three years, and was attributed to store sales increases, and sales leverage increases due to higher supply costs. If management is looking to increase gross profits by 4%, the best way would be to reduce the cost of sales by 4%. From 2010 to 2012, the revenue increased by over $2 billion, and the cost of sales increased by over $1 billion.
Revenues have consistently increased year over year, so finding a way to cut costs would be the most logical option. (Starbucks Corporation, 2013) Starbucks saw a return on assets that increased from 2010 to 2011, but then stayed nearly the same in 2012. (Starbucks Corporation, 2011) There was an over 20% increase in net income between 2010 and 2011 and an increase in assets over 10%. These numbers in 2012 did not show much change from 2011. The notes on their financials discuss some changes in how assets and income were being documented which likely played a role in the nearly straight line between 2011 and 2012 as to not overstate the final balances. (Starbucks Corporation, 2013) Horizontal Trend Analysis See below for a horizontal trend analysis for Starbucks Corporation between 2010 and 2012 and pro-forma 2013 with a 20% increase in coffee inventory. Starbucks Corporation (in millions) (Starbucks Corporation, 2012) Interpret Financial Information
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