Week 2 _ Integrative Case Study 4
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Week 2: Integrative Case Study
1
Week 2: Integrative Case Study
4.1 Starbucks Profitability Ratios
Jesse Smithwick
ACCT 535 -1
Point University
Week 2: Integrative Case Study
2
Integrative Case Study
Part A - Question 1
Analyzing the financial metrics for Starbucks, laid out in the text, one can discern several
key insights (Wahlen, 2014). The profit margin for ROA, representing profitability relative to
total assets, is 8.9%. Assets turnover, illustrating the efficiency of asset utilization, is 1.74. ROA,
indicating the return on assets, stands at 16.83%. Meanwhile, the profit margin for ROCE, a
measure of profitability concerning equity, is an impressive 31.55%. Capital structure leverage,
denoting the proportion of debt to equity, is 18.46%. ROCE, an indicator of return on equity, is
17.8%. In terms of expenses, the cost of sales as a percentage of operating revenues is 31.53%,
store operating expenses account for 28.51%, other operating expenses represent 0.8%,
depreciation and amortization expenses are 2.79%, general and administrative expenses are
20.68% and restructuring charges stand at 2.13%. Moreover, income from equity investees
contributes 0.31%, interest revenue is 0.79%, and income tax expense is 0.43% of operating
revenues. Additionally, the efficiency ratios show that accounts receivable turnover is 31.12,
inventory turnover is 4.15, and fixed asset turnover is 4.22. These metrics provide a
comprehensive view of the company's financial health, profitability, and efficiency in managing
its assets and expenses. See the chart below:
Ratio
2012
Profit margin for ROA
8.9%
Asset turnover
1.74%
ROA
16.83%
Week 2: Integrative Case Study
3
Ratio
2012
Profit margin for ROCE
31.55%
Capital structure leverage
18.46%
ROCE
17.80%
Cost of sales/Operating revenues
31.53%
Store operating
expenses/Operating revenues
28.51%
Other operating
expenses/Operating revenues
.80%
Depreciation and amortization
expense/Operating revenues
2.79%
General and administrative
expense/Operating revenues
20.68%
Restructuring charge/Operating
revenues
2.13%
Income from equity
investees/Operating revenues
.31%
Interest revenue/Operating
revenues
.79%
Income tax expense (excluding tax
effects of interest
expense)/Operating revenues
.43%
Accounts receivable turnover
31.12%
Inventory turnover
4.15%
Fixed asset turnover
4.22%
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Related Questions
An assessment of leverage effect on MRF’s profitability shows?
A. Positive Effect in 2015 and negative effect in 2016
B. Positive Effect in 2016 and negative effect in 2015
C. Positive Effect in both 2015 and 2016
D. Negative Effect in both 2015 and 2016
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i need the answer quickly
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Performing vertical analysis
The Randall Department Stores, Inc. chief executive officer (CEO) has asked you to compare the company’s profit performance and financial position with the averages for the industry. The CEO has given you the company’s income statement and sheet as well as the industry average data for retailers.
Requirements
Prepare a vertical analysis for Randall for both its income statement and balance sheet.
2 Compare the company’s profit performance and financial position with the average for the industry.
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I need help with questions 1-6
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1. Compute for the profitability ratios of both Elen and Melanie. Which of the two companies do you believe is more profitable?
2. Compute for the operational efficiency ratios of both Elen and Melanie. Which of the two companies do you believe is more efficient?
3. Compute for the financial health ratios of both Elen and Melanie. Which of the two companies do you believe is more financially healthy?
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7,8,9,10
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Compare the two companies in the areas of liquidity, working capital management, profitability, financial leverage, and efficiency. What can you learn about these two companies?
Ratio
Company A
Company B
Current Ratio
0.91
0.83
Quick Ratio
0.29
0.24
Days’ Sales Outstanding
35
43
Inventory Turnover
6.54
12.23
Gross Margin Percentage
25.38
24.38
Return on Assets
7.61
6.26
Return on Equity
33.55
19.32
Return on Sales
4.9
8.5
Debt/Equity Ratio
158.17
73.12
Interest Coverage
11.04
10.07
Revenue per Employee
258,824
308,631
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Title: Financial Metrics Self-Assessment
Objective: To evaluate your understanding of financial metrics used to evaluate business performance.
Instructions:
Review the following financial metrics: Return on Investment (ROI)
Residual Income
Profit Margin
Asset Turnover
Minimum Required Income
For each financial metric, answer the following questions: ● Whatisthedefinitionofthefinancialmetric?
● Howisitcalculated?
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Your Task…
Using your assigned financial statements calculate the required ratios below
Indicate if the change from year to year is favorable or unfavorable.
All values should be accurate to at least two decimal places.
The expectation is to submit a professional report free of grammar and spelling errors and easy to read. Think of this as a menu you would be handing to a customer.
All calculations are to be represented.
Analysis of Profitability
Gross Profit Ratio
Operating Profit Ratio
Net Profit Ratio
Sales to Total Assets Ratio
Return on Total Assets
Return on Equity
Earnings Per Share
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Performing vertical analysis
The Klein Department Stores, Inc. chief executive officer (CEO) has asked you to compare the company’s profit performance and financial position with the averages for the industry. The CEO has given you the company’s income statement and balance sheet as well as the industry average data for retailers.
Requirements
Prepare a vertical analysis for Klein for both its income statement and balance sheet.
Compare the company’s profit performance and financial position with the average for the industry.
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TRUE OR FALSE: Read each sentence carefully and determine whether the statement True or False. Write your
answers in the space provided before the number.
1. Financial statement analysis uses computational and analytical techniques to evaluate the company's
risks, performance, financial health, and future prospects with the objective of making economic decisions.
2. Return on asset is an operational efficiency ratio.
3. Profitability ratios measure the ability of the company's assets to generate sales.
4. Gross profit margin provides an indication of the company's average pricing policy
5. Given equal gross profit margin, the company with the lower operating income margin has higher
operating expenses as a percentage of sales and has leaner operations.
Written Works
Below are the comparative Statement of Comprehensive Income & Statement of Financial Position of
Ellane Company & Lanie Company:
Statement of Comprehensive Income
Ellane Company
2013
Melanie Company
2014
2013
2014
Net Sales…
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Problem 1: Compute for the profitability ratios of both Ellane and meLanie. Which of the two companies do you believe is more profitable? Problem 2: Compute for operational efficiency ratios of both Ellane and meLanie. Which of the two companies is more efficient? Problem 3: Compute for the financial health ratios of both ellane and meLanie. Which of the two companies is more financially healthy?
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Chapter 14, Question 5
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Canis Major Veterinary Supplies Inc. DuPont Analysis
Ratios
Calculation
Value
Profitability ratios
Numerator
Denominator
Gross profit margin (%)
/
=
Operating profit margin (%)
/
=
Net profit margin (%)
/
=
Return on equity (%)
/
=
Asset management ratio
Total assets turnover
/
=
Financial ratios
Equity multiplier
/
=
MADISON: I see what I did wrong in my computations. Thanks for reviewing these calculations with me. You saved me from a lot of embarrassment! Xavier would have been very disappointed in me if I had showed him my original work.
So, now let’s switch topics and identify general strategies that could be used to positively affect Canis Major’s ROE.
YOU: OK, so given your knowledge of the component ratios used in the DuPont equation, which of the following strategies should improve the company’s ROE?
Check all that…
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See Image for Information
Compute the following performance indices for both companies:
Profit margin
Asset turnover
Return on Capital Employed (ROCE)
Current ratio
Debt equity ratio
Compare and analyse the performance of the two companies computed in (1) above and explain what the board of Box Limited needs to do to achieve their objective .
c. Which other non-financial measures can influence the decision of the board of Box Limited?
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Subject - account
Please help me.
Thankyou.
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Hello I would like help with this question.
Thank you
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I need help with this question, thanks in advance.
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What does the DuPont financial system present?
Question 18 options:
financial statements to calculate the liquidity position of a business
financial ratios in a logical way to measure return on total assets
horizontal analysis of the financial statements
financial ratios that are meaningful to suppliers
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Question 2
Please read the following scenario and answer the questions that follow:
You are an analyst in the food and beverage industry. In this industry, there are
various sizes of businesses - from small to significant global companies. In order
to conduct an effective comparison of the different businesses, you have chosen
to use a 'common size' analysis. Common size analysis converts all financial
statement variables to percentages, thereby allowing the effectiveness and
efficiency of the individual businesses to be compared.
What follows is the Statement of Profit or Loss and Other Comprehensive Income
of two of the businesses, Fruity Rush Limited and Sparkling Thirst (Pty) Limited,
respectively.
Statement of profit or loss and other comprehensive income for the period ending
30 June 2021
R'000
Fruity Rush
Sparkling Thirst
Sales
86,000
28,000
Cost of sales
40,000
14,000
Gross profit
46,000
14,000
Operating expenses
30,000
6,000
Selling expenses
4,000
3,000
Depreciation
7,000…
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Related Questions
- An assessment of leverage effect on MRF’s profitability shows? A. Positive Effect in 2015 and negative effect in 2016 B. Positive Effect in 2016 and negative effect in 2015 C. Positive Effect in both 2015 and 2016 D. Negative Effect in both 2015 and 2016arrow_forwardi need the answer quicklyarrow_forwardPerforming vertical analysis The Randall Department Stores, Inc. chief executive officer (CEO) has asked you to compare the company’s profit performance and financial position with the averages for the industry. The CEO has given you the company’s income statement and sheet as well as the industry average data for retailers. Requirements Prepare a vertical analysis for Randall for both its income statement and balance sheet. 2 Compare the company’s profit performance and financial position with the average for the industry.arrow_forward
- I need help with questions 1-6arrow_forward1. Compute for the profitability ratios of both Elen and Melanie. Which of the two companies do you believe is more profitable? 2. Compute for the operational efficiency ratios of both Elen and Melanie. Which of the two companies do you believe is more efficient? 3. Compute for the financial health ratios of both Elen and Melanie. Which of the two companies do you believe is more financially healthy?arrow_forward7,8,9,10arrow_forward
- Compare the two companies in the areas of liquidity, working capital management, profitability, financial leverage, and efficiency. What can you learn about these two companies? Ratio Company A Company B Current Ratio 0.91 0.83 Quick Ratio 0.29 0.24 Days’ Sales Outstanding 35 43 Inventory Turnover 6.54 12.23 Gross Margin Percentage 25.38 24.38 Return on Assets 7.61 6.26 Return on Equity 33.55 19.32 Return on Sales 4.9 8.5 Debt/Equity Ratio 158.17 73.12 Interest Coverage 11.04 10.07 Revenue per Employee 258,824 308,631arrow_forwardTitle: Financial Metrics Self-Assessment Objective: To evaluate your understanding of financial metrics used to evaluate business performance. Instructions: Review the following financial metrics: Return on Investment (ROI) Residual Income Profit Margin Asset Turnover Minimum Required Income For each financial metric, answer the following questions: ● Whatisthedefinitionofthefinancialmetric? ● Howisitcalculated?arrow_forwardYour Task… Using your assigned financial statements calculate the required ratios below Indicate if the change from year to year is favorable or unfavorable. All values should be accurate to at least two decimal places. The expectation is to submit a professional report free of grammar and spelling errors and easy to read. Think of this as a menu you would be handing to a customer. All calculations are to be represented. Analysis of Profitability Gross Profit Ratio Operating Profit Ratio Net Profit Ratio Sales to Total Assets Ratio Return on Total Assets Return on Equity Earnings Per Sharearrow_forward
- Performing vertical analysis The Klein Department Stores, Inc. chief executive officer (CEO) has asked you to compare the company’s profit performance and financial position with the averages for the industry. The CEO has given you the company’s income statement and balance sheet as well as the industry average data for retailers. Requirements Prepare a vertical analysis for Klein for both its income statement and balance sheet. Compare the company’s profit performance and financial position with the average for the industry.arrow_forwardTRUE OR FALSE: Read each sentence carefully and determine whether the statement True or False. Write your answers in the space provided before the number. 1. Financial statement analysis uses computational and analytical techniques to evaluate the company's risks, performance, financial health, and future prospects with the objective of making economic decisions. 2. Return on asset is an operational efficiency ratio. 3. Profitability ratios measure the ability of the company's assets to generate sales. 4. Gross profit margin provides an indication of the company's average pricing policy 5. Given equal gross profit margin, the company with the lower operating income margin has higher operating expenses as a percentage of sales and has leaner operations. Written Works Below are the comparative Statement of Comprehensive Income & Statement of Financial Position of Ellane Company & Lanie Company: Statement of Comprehensive Income Ellane Company 2013 Melanie Company 2014 2013 2014 Net Sales…arrow_forwardProblem 1: Compute for the profitability ratios of both Ellane and meLanie. Which of the two companies do you believe is more profitable? Problem 2: Compute for operational efficiency ratios of both Ellane and meLanie. Which of the two companies is more efficient? Problem 3: Compute for the financial health ratios of both ellane and meLanie. Which of the two companies is more financially healthy?arrow_forward
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SEE MORE QUESTIONS
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Recommended textbooks for you
- Financial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage Learning
- Century 21 Accounting Multicolumn JournalAccountingISBN:9781337679503Author:GilbertsonPublisher:CengagePrinciples of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
Financial Accounting: The Impact on Decision Make...
Accounting
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Cengage Learning
Century 21 Accounting Multicolumn Journal
Accounting
ISBN:9781337679503
Author:Gilbertson
Publisher:Cengage
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College