Ratio Analysis of Starbucks vs Mcdonald's

Profit Margin: -This ratio relates the operating profit to the sales value (Walker, 2009). It tells us the amount of net profit per pound of turnover a business has earned.

Gross profit is defined as the difference between Sales and Cost of Sales. The gross margin (or gross profit ratio) expresses the gross profit as a proportion of net sales. The gross profit margin ratio measures how efficiently a company uses its resources, materials, and labour in the production process by showing the percentage of net sales remaining after subtracting the cost of making and selling a product or service. It indicates the profitability of a business before overhead costs. The higher the percentage, the more the business retains of each dollar of sales. So: the higher the gross profit margin ratio, the better.

I. Gross profit margin ratio is 25% means that the company is much more efficient in the production and distribution of its product.

The Gross Margin ratio represents the percent of total sales revenue that TCI retains after incurring the direct costs associated with producing the goods and services sold by them. It helps us distinguish, as much as possible, between fixed and variable costs. With a 20%, 15%, or 10% projected increase in sales, for 1996, we calculated TCI’s GM ratio to be 41.85% , and in 1997 to be 41.84%. This means that around 42% of TCI’s sales dollar is available to pay for fixed costs, like its potential long-term debt to MidBank, and to add to profits.

The Gross Profit Margin (GPM) is used to display the percentage difference between sales and the cost of sales before any other costs are factored in. A higher GPM is better as the company is making a higher profit off its sales

Gross profit margin ratio will define an organizations financial health by revealing the proportion of money left over from revenues after accounting for the cost of goods sold (Investopedia). The gross profit margin literally measures how much of every dollar of sales a company is able to actually keep (Answers, 2009).

Net profit margin ratios is sales into net income, a reflection of how well sales have done once you take expenses out of the equation.

The net margin indicates how high the percentage of the profit of a company to its sales is. …..

Increasing gross margin is a positive parameter and shows the firm’s developing healthy. Gross margin is calculated by subtracting the cost of goods with the total sales revenue and then dividing it by the total

The Net Profit Margin ratio measures how profitable a company’s sales are after all expenses, including taxes and interests, have been deducted (Van Deusen, Williamson, and Babson, 2007). It is calculated by dividing annual net income by revenues (sales). Target is in the increasing stage with the net margin ratio. Target has placed a focus on their team to make sure that they are taken care of, which in turn has allowed the team to push out great passion and initiative for the customers to buy into for life. This is also reflected amount the race between Target’s competitors. Target is ranked first in this ratio.

Many companies analyze gross profit margin to assess the health of the business and ascertain the company’s performance creating a product or service compared to the competition (Investipedia.com 2016). This first level of profitability calculates by taking sales minus the cost of goods sold (COGS and gross profit margin are generated by dividing gross profit by sales. The changes in the company’s pricing strategy or industry regulations can impact gross margin. A company needs adequate gross margin to pay for its operating expenses (Investipedia.com 2016).

Starbucks is one of the most recognizable coffee retail chains in the world. Their brand focuses on high quality coffee using specialized roasting of beans from many countries around the world.

You did a great job on your paper. Your analysis on the financial ratios of Starbucks Corp (SBUX) was very informative ratios are relationships determined and easy to understand. “Financial ratios are relationships determined from a company’s financial information and used for comparison purposes”(Inc.com, N.D., P. 1). They are basically used to measure the strength of a company. I’ve noticed that Starbucks operating margin has decreased in the past year, from 25.2% to 17.18%, which is a drop of 8.02%. “Operating margin gives analysts an idea on how much a company makes (before interest and taxes) on each dollar of sales” (Investopedia.com, 2003). So for every dollar of sales, Starbucks make $.17. It’s no secret that the higher the margin,

McDonald's is the world’s leading food service retailer with more than 30,000 local restaurants in 121 countries serving 45 million customers each day.

Company B (88.9%) has a higher gross profit margin most likely because the firm not only manufactures and mass markets a broad line of prescription pharmaceuticals, over-the-counter remedies, consumer health and beauty products but also manufactures medical diagnostics and devices. Company A is lower (76.1%) due to its limited product range (only manufactures drugs).