Starbucks : Financial Ratios Analysis

Asset turnover depicts investment efficiency, because it shows how many sales dollars are generated for every dollar invested in the company’s assets. Lowe’s had relatively lower asset turnover ratios than Home Depot because their recent investment in PP&E.

Total asset turnover : This ratio measures the efficiency of a company’s use of its assets

Asset turnover (T/O) demonstrates how effective the asset base is in generating top line revenue. High T/O values have implications in terms of plant structure, level of backward integration, and aggressiveness of pricing policy. CUMULATIVE PROFITS Formula Cumulative Profits is the total Description of all year 's Net Profit. :

Asset (or capital) turnover ratio measures how many times the capital employed was turned over during the year to achieve the revenue which fact indicates the efficiency of the company’s deployment of its assets. The above tables show that even though the two companies surpass the rank of one hundred percent which means that their capital employed was

The notes to the financial statements can reveal a lot about the details of the line item in question. It is often said that to fully understand financial statements, one must read the notes. The company that I have selected is Starbucks, and to that end their financial statements are available online at MSN Moneycentral. To read the notes, however, I will need the annual report.

Abbott’s fixed asset and total asset turnover ratios can tell us how well the firm uses its assets to generate revenue. The fixed asset ratio provides the proportion of sales to fixed assets and tells us how much revenue is

Another ratio we will look at is total asset turnover rate. Total asset turnover rate measures how efficiently a company uses its assets to generate sales. In 2001 the total asset turnover rate was 1.079 and in 2000 it was 1.193. The fixed asset turnover ratio is similar to the total asset turnover ratio but includes only fixed assets. The fixed asset turnover rate measures the capacity utilization and the quality of fixed assets and was 3.771 for 2001 and 3.854 for 2000.

In this assignment, a savvy financial analyst researching companies in which to invest a U.S. publically-traded company that would be a good investment was chosen. After a lengthy search, a company that my family is unduly familiar with, Starbucks, was chosen and in the following pages a financial analysis will be described.

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,

The ratio expresses the relationship of gross profit on sales to net sales in terms of percentage (Van Horne, Wachowicz & Bhaduri, 2005). Goss profit is the result of the relationship between prices, sales volume and costs. Gross profit margin of Starbucks Corporation is 23% whereas the ratio for McDonald’s is 35%. McDonald’s ratio is high as compared to Starbucks which is a sign of good management. It implies that the cost of production of the firm is relatively low. The McDonald’s has reasonable gross margin which ensures adequate coverage for operating expenses of the firm and sufficient return to the owners of the business, which is reflected in the net profit margin.

Critical accounting policies are those that are believed to be most important to the presentation of Starbucks financial position and results. They require the most difficult, subjective and complex judgments. They are often used to make estimates about the effect of matters that are inherently uncertain. Starbucks considers financial reporting and disclosure practices and accounting policies quarterly to ensure that the documents provide accurate and transparent information relative to the current economic and business environment. Within the past three years, no material changes to the accounting methodologies have been used to assess the areas discussed. Starbucks fiscal year ends on the Sunday closest to September 30. Fiscal years 2015, 2014 and 2013 include 52 weeks (sec.gov).

Asset turnover ratio is also increasing in 1994. It shows that total assets are being efficiently used in producing revenues.

Evaluating management effectiveness, the asset utilization ratios assess daily operating performance. Indicating a quicker collection turnover on outstanding debt, Google has a higher receivables turnover than Apple. Although, Google takes longer to collect accounts receivable, or average collection period, than Apple. Similarly, analysis reveals Google has double the higher inventory turnover than Apple. Comparing the fixed asset turnover reveals that Google gains 2.64 dollars for each dollar in fixed assets, whereas Apple generates 7.98 dollars. The total asset turnover tells that Apple outperformed Google by generating 67 cents for every dollar of assets.

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

Businesses purchase and use a variety of fixed assets, such as equipment, furniture, tools, machinery, buildings, and land. These fixed assets are long-term or relatively permanent assets. Also, they are tangible assets because they exist physically. They are owned and used by the business and are not offered for sale as part of normal operations. Perhaps the most descriptive titles these assets are known under are plant assets or property, plant and equipment. Depending on the industry, the plant assets of a business can be a significant part of its total assets. That is why the accounting for these long-term assets has important