Starbucks Financial Ratios

* In general, a high P/E suggests that investors are expecting higher earnings growth in the future compared to companies with a lower P/E.

2. List the four basic types of financial ratios used to measure a company’s performance, give an example of each type of ratio and explain its significance.

Rate of return on common stockholders’ equity: This ratio determines how much profit the company makes from the money invested by the shareholders. Investors will use this ratio to determine if the company is profitable over

There is a essential use and limitations of financial ratio analysis, One must keep in mind the following issues when using financial ratios: One of the most important reasons for using financial ratio analysis is comparability and for this, a reference point is required. Usually, financial ratios are compared to historical ratios of the business itself, competitor’s financial ratios or the overall ratios of the industry in question. Performance may be adjudged as against organizational goals or forecasts. A number of ratios must be analyzed together to get a true and reliable picture of the financial performance of the business. Relying on each ratio

This paper examines financial ratio analysis by defining, the three groups of stakeholders that use financial ratios, the five different kinds of ratios used and their applications, the analytical tools used in analysis, and finally financial ratio analysis limitations and benefits.

The ratio measures the company’s ability to meet its debt obligations. It allows investors to see to what extent company’s earning can decline without the firm being unable to pay its annual interest costs. Nevertheless, a high ratio can indicate that a company has an undesirable lack of debt or it is paying too much debt with earning that could be invested in other projects.

Financial ratios are great indicators to find a firm’s performance and financial situation. Most of the ratios are able to be calculated through the use of financial statements provided by the firm itself. They show the relationship between two or more financial variables that can be used to analyze trends and to compare the firm’s financials with other companies to further come up with market values or discount rates, etc.

Investor ratios assess earning and stock performance of a company. Investors are interested in these ratios, because it helps them decide what stocks to buy and which one to sell. They are interested in the money they earn from selling stocks and the money the get from dividends. To rate Hilton Worldwide from an investors stand point we looked at two very key ratios. We looked at earnings per share and price/earnings ratio.

How can financial ratios extend your understanding of financial statements? What questions do the time series of ratios in case Exhibit 7 raise? What questions do the ratios on peer firms in case Exhibits 8 and 9 raise?

Starbucks Corporation is the sector called Specialty eateries. It largest competitors are, PANERA BREAD, DIEDRICH COFFEE, and FLANIGAN'S ENTERPRSE INC. With Starbucks having more than 10 times the sales of its nearest competitor.

In general, the higher the ROI and rate of earnings growth, the higher the P/E. . In the past, for a very long period of time P/E ratios in the range of 12 to 18 were consider good P/E ratios for a company. In recent years, the 12 to 18 values have been abandoned as a norm and what can be considered the norm now is under debate.

with the massive amount of numbers in company financial statements. For example, they can compute the percentage of net profit a company is generating on the funds ithas deployed. All other things remaining the same, a company that earns a higher percentage of profit compared to other companies is a better investment option.

PE Ratio looks at the relationship between the stock price and the earnings of the company. Therefore, the value of this multiple gives a fair idea of the much market price, an investor can invest based on the comparable companies. Based on this idea, he can decide whether it is wise to invest in the company at the current price or not.

for risk analysis. Equity investors use the ratios for stock valuation and to estimate the value of the organization.

The P/E ratio plays an important role in economists’ research and practical investment. Since for different applications