Question
Asked Sep 30, 2019
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Discuss what the leverage ratios reveal about Starbucks financial health, including any description of trend analysis, benchmarks, standard measurements or other types of analysis used once the ratio amount is known.

Industry
2018
2017
Amounts
Answer
Amounts
Answer
Average
Debt (Leverage) (Long-term Solvency) Ratios
$
Debt to
Total Liabilities
8,908.6
22,980.6
0.95
0.62
0.7857
Assets
Total Assets
14,365.6
24,156.4
$
Debt to
Total Liabilities
22,980.6
19.54
1.63
8,908.6
10.589
Total Equity
$
Equity
1,175.8
5,457.0
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Industry 2018 2017 Amounts Answer Amounts Answer Average Debt (Leverage) (Long-term Solvency) Ratios $ Debt to Total Liabilities 8,908.6 22,980.6 0.95 0.62 0.7857 Assets Total Assets 14,365.6 24,156.4 $ Debt to Total Liabilities 22,980.6 19.54 1.63 8,908.6 10.589 Total Equity $ Equity 1,175.8 5,457.0

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Expert Answer

Step 1

Leverage ratio is a financial performance measure. It depicts the amount which has been raised by the company in the form of debts and how well a company can repay this amount. This ratio is useful in checking the ability of the company to pay for the amount raised by it in form of debts.

it includes debt to asset ratio & debt to equity ratio.

Step 2

Following analysis can be made from the debt to asset ratio of the company for two years:

Debt to asset ratio: The debt to asset ratio is calculated by dividing total debts from total assets of company. It tells the amount of asset available to pay for the debt raised by company. This ratio has been increased from 0.62 to 0.95 in year 2018. It reveals that increase in debt amount is more than increase in asset amount. This is not a good condition as the company is having less asset to pay for the debts.

The average industry ratio/benchmark is...

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Accounting

Accounting Ratio Analysis

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