Case Study : Return On Equity ( Roe )

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Dupont Alternative: Return on Equity (ROE) is the most useful metric to measure the overall ability of a business to generate returns for its shareholders. Starbuck’s generated an ROE of 49.71% in 2015 as compared to 42.39% in 2014. A NOPAT Margin of 12.85% and 14.66% in 2014 and 2015 indicates Starbucks’ successful operating strategy in generating sales during the period under review. In 2015, the company opened 1,677 new stores, added a variety of ready to drink beverages which further boosted its sales revenue. Operating asset turnover measures the ability of the company to efficiently use its operating assets to generate sales. We do see a decline in operating asset turnover from 4.1% in 2014 to 3.18% in 2015 primarily due to a huge…show more content…
Analysis of Sales Growth: In 2015, Starbucks’s consolidated net revenue stood at $19.2 billion, registering an increase of 17% over 2014 primarily due to increased revenues from company operated stores, and a seven percent increase in comparable store sales.Global expansion, especially in the CAP region coupled with an increase in customer traffic (a 4% increase in average ticket and 3% increase in the number of transactions) were the key sales growth drivers for Starbucks n 2015. Globally, China is the fastest growing market and future investment will strengthen the company’s leadership position in that region. We also see a rapid growth occurring in the Channel development segment, which obtains its revenue from global sales of packaged products. Americas operating segment contributed 69% to net revenues in fiscal 2015, making a significantly higher contribution when compared with other segments. The sustainable growth rate of 66% and 58% in 2015 and 2014 indicates Strabuck’s strong financial situation and its superior ability to finance its future growth with the internally generated funds while maintaining its existing operating, investment, financing policies. As indicated from the company’s annual report 2015, Starbucks had sufficient amount of cash and retained earnings to invest in its business operations, for capital expenditures, new product innovations and funding its global expansion plans. Operating Management: Gross Profit margin measures the

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