Starbucks : Financial Ratios Analysis

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Starbucks: Financial Ratios Analysis Part 3
Anna Gallagher
American Public University
This financial paper part three will discuss different financial ratios of Starbucks, McDonalds, and Dunkin’ Donuts. These ratios are return on assets, profit margin, asset utilization rate, current ratio, acid test ratio, operating cash flow ratio, accounts receivable turnover, days’ sales outstanding, inventory turnover, and days’ sales in inventory. This paper will also present and discuss the free cash flow and working capital of Starbucks and its two major competitors – McDonalds and Dunkin’ Donuts.
Financial ratios are great tools to measure the financial performance of an entity. Investors, stakeholders and other financial statement users apply
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Below is a table of comparison of the ratios for Starbucks, McDonalds and Dunkin’ Donuts as aforementioned above.
Table 1. Return on Assets and Profit Margin
FY 2013 Starbucks McDonalds Dunkin ' Donuts
Total Assets $10,752,900 $36,626,300 $3,234,690
Revenue $16,447,800 $28,105,700 $713,840
Net income $2,068,100 $5,585,900 $146,903
Return on assets (ROA) 19% 15% 5%
Profit margin ratio 13% 20% 21%
Retrieved from Nasdaq website (all rights received @ 2015) Using the table above for comparison, it is evident that Starbucks, with a 19% ROA, is more efficient at managing its assets to generate income. Between the three companies, Starbucks is better at utilizing its resources to ensure that every dollar spent goes to the right bucket of expense to promote their brand and, thus, generating higher amount of income at the end of the period. However, due to multiple foreign expansions that Starbucks is investing into, its 20013 profit margin ratio of 13% is not as high as McDonald’s and Dunkin’ Donuts. Starbucks, being the youngest among the three companies, is focusing to meet the demands of its customers in foreign countries. According to Nasdaq (2015) and Starbucks (2015), the green mermaid logo brand is expected to grow 15% higher in the next 5 years. Free Cash Flow
Table 2. Comparable data for Free cash flow
FY 2014 Starbucks McDonalds Dunkin ' Donuts
Net cash provided by operating activities $607,800
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