Starbucks : A Debt Ratio Of 22.51

2. Starbucks enjoyed strong financial performance in 2011. The company did not explicitly attribute this, but with an 8% rise in same store sales it seems that either the consumer market bounced back, or Starbucks made changes that attracted more consumers. The company feels that it offered better products and a better experience at its stores. The company also credited operating efficiencies and tight control of spending for improved profits. In addition, the company continued its global expansion, which improved the top line, and used the economies of scale it generated as part of its cost control program.

Financial statements provide users with information for evaluating an entity’s performance and financial status and thus help them to make informed decisions in their dealings with the entity. To assess these aspects, the users have various tools that they can employ. For instance, ratio analysis helps the users to detect any significant changes in an entity’s operating performance within a given period and thus indicate the risks and opportunities of the entity being reviewed (Helfert, 2001). Further, calculating ratios of companies in the same industry can help to highlight the companies that are performing below the industry average and thus help investors to choose the best company to choose from among alternatives. Apart from investors, ratio analysis can also help creditors evaluate a company’s liquidity and thus assess its ability to pay its debts on time (Helfert, 2001). Other ratios such as efficiency ratios can help managers to determine optimal uses of the entity’s assets and thus work towards enhancing efficiency. Apart from ratio analysis, horizontal analysis can also be used to reveal the trends of individual items in an entity’s income statement and balance sheet and thus help to unearth the items that may have affected the entity’s performance during a specific period. The horizontal analysis and ratio analysis of the financial statements of Starbucks Corporation that is the subject of this paper indicate that

Did you know that Costco has over 500 warehouses that operate in 40 different states! Two men, James Sinegal and Jeffrey Brotman, founded Costco in 1983 (Company Overview, 2014). Costco’s warehouse has one of the largest product category selections when being to compared to other warehouses. Costco is known for carrying the best quality brands at low prices. According to Jim Sinegal, the Company 's Co-Founder and Director, "Costco is able to offer lower prices and better values by eliminating virtually all the frills and costs historically associated with conventional wholesalers and retailers, including salespeople, fancy buildings, delivery, billing and accounts receivable. We run a tight operation with extremely low overhead which enables us to pass on dramatic savings to our members (Company Overview, 2014)”.

The total debt to total capital ratio is total debt divided by total debt plus equity. The total debt to total capital ratio measures the percentage of the firm’s capital provided by debtholders. Overall, between 2006 and 2016 Costco has the lowest average total debt to total capital ratio in comparison to its competitors. According to an article called “Wholesale and Distribution Industry Key Performance Indicators (KPIs)” written by Paul Melville, the wholesale retail industry average for the total debt to total capital ratio is 20.6%. In 2015 Costco had a total debt to total capital ratio of 40.3% which was well above the industry average. However, Target had a ratio of 51.2% which is 10.9% higher than Costco. Creditors prefer low total

The determinants of Starbucks profitability over time are variable costs and fixed costs. “A variable cost is a cost that change in direct proportion to a change in the level of activity (dict). Variable costs for Starbucks would include labor, coffee beans, dairy, and plastic products. A fixed cost is indirect costs of business expenses that remain unchanged (dict). Fixed costs for Starbucks include rent, taxes, and insurance as well as advertising. In the figure below (fig 1) we have Starbucks financial data in millions for the year of 2015. This includes their operating expenses, net revenues, such as company-operated stores, licensed stores, CPG, food service. It also includes their total net revenues and their balance sheet. As we can see “Operating costs dropped in the fiscal year

Starbucks financial statements were analyzed for the fiscal year ended September 27, 2015. Like all public companies, annual and quarterly financial statements are required to allow regulators and other interested parties to analyze the financial status and management decision making of the company. This analysis focuses on the results of Starbucks most recent published annual report containing their balance sheets, statement of earnings and cash flows. These statements will be analyzed against the results of one of its competitors, Dunkin Donuts, to investigate how the two companies compare to each other. It was noted that Starbucks and Dunkin Donuts do not have corresponding fiscal year ends. The data therefore is not directly comparable since the reports do not reflect the same time period of data but should provide additional insight. The paper will attempt to provide a brief analysis of Starbucks operations in terms of its liquidity, leverage, activity, profitability and growth ratios used by analysts in the industry.

The return on assets for Starbucks is 17.7%, while the ROA for McDonalds is 17.0%.

There are a number of ways an investor can assess the performance of a firm. When looking at a firm such as Starbucks an investor may choose to use measures such as the operating leverage, the return on investment and EVA as well as others. These can give an investor insight into the performance of the firm, but the measures may also be seen as limited.

Starbucks bond information on Morningstar displays a quoting market price of $107.73 with a fixed coupon rate of 3.850%, a maturity date of October 1, 2023, and a current yield to maturity of 2.80%. Starbucks bonds mature in 2022 and 2045 with early indications of yields close to 2.80% and 4.17% respectively. Starbucks coupon rate of 3.850% is more than the yield to maturity rate of 2.80% indicating the bond is selling at a premium. Starbucks bond is disbursed semiannually with the bond maturing in 16 years with a payment of $19.25 and a yield to maturity rate of 1.40% resulting in a present value of $1074.79. The present value of $1074.79 is slightly less than the purchasing price of $1077.30 indicating the bond is overvalued, therefore an individual should not purchase Starbucks’ bond at this time. Starbucks capital structure as of June 2015 reveals a comparatively low percentage of debt of 33.1% ($2.9 billion) and a noticeably high equity of 66.9%. These percentages indicate that 67% of Starbucks assets are financed with equity and the remaining 33% is financed with debt. In other words, Starbucks has a healthy proportion of equity capital as opposed to debt capital, which is a very positive indication of effective investment quality.

The fifth strength of Starbucks is its Debt-to-assets ratio which was the lowest when compared to its two main competitors McDonalds and Dunkin Donuts. This strength received a weight of 0.07. The Debt-to-Total-Assets ratio measures the percentage of total funds that are provided by creditors (David & David, 2015, p. 108). Starbucks has the lowest percentage at 18%. McDonalds and Dunkin Donuts both registered that more than 60% of their assets were supported by debt. This is a major strength which received a rating of 4. The less of a company is financed by debt the more stable

Starbucks’ Total fixed assets increased from $3,200.5 billion in 2013 to $3,519 billion in 2014. This was a 9.95% increase. As a percentage of total assets on the balance sheet, fixed assets increased from 27.79% to 32.73% (Starbucks,

Starbucks generates strong cash flows has solid liquidity. The company executes rigorous cost cutting initiatives to improve its bottom-line. However, throughout fiscal 2008, Starbucks continued to experience declining revenue, particularly in US operation. The decline is largely attributed to lower customer traffic.

Next we will take a look at the company everyone knows and can be found almost anywhere. That company is Starbucks, who is one of the leading coffee shops in the world and out of the companies in which we are looking at they had the highest cash flow/cash dividend. Starbucks did not have any operating cash flow/current maturities of long-term debt and current notes payable. Starbucks is also comparable to Panera Bread as their operating cash/flow debt ratio increased too. Out of the three different companies Starbucks did have the lowest cash flow per share. In 2010 Starbucks paid dividends of 9.97, however in 2009 they did not issue any dividends.

Starbucks does not have a lot of long-term debt. There was a point in the mid-2000s where Starbucks was struggling, closing stores and seeing reduced profitability. In August of 2007 the company made its first (and to this point only) debt issue. The issue was for $550 million at 6.25% on a 10-year issue (Trent, 2007). This debt remains on the company's books today, as $549.5 million on the balance sheet in long-term debt.

The horizontal analysis in the balance sheet reports that the amount and percentages from 2015 to 2016 increased in all but two assets. The cash and cash equivalents increased by 39%, total currents assets increased by $789.50 or 20%, and property, plant and equipment, net increased from $4,088.30 to $4,533.80, an increment of 11%. This indicates that Starbucks improved its ability to collect from its customers, while also expanding across the