Sbucks Activity Ratios
The purpose of this project is to compare and analyze the two companies: Starbucks and Green Mountain Coffee Roasters. Within the report we will focus on the financial Ratios for both companies spanning from the years 2010 to 2012 and compare the two while discussing the trends within both and deciding which company is best to invest in.
1. Liquidity & Activity Ratios- What are the trends?
Liquidity and Activity Ratios consist of: Current Ratio, Acid-Test (Quick Ratio), Receivables Turnover, Inventory Turnover, and Asset Turnover.
Current Ratio is the determination of a firm’s ability to meet current financial obligations and necessities in order for the business to survive. SBUX had an average of 1.76 for the years 2010-2012 …show more content…
As it is known, the higher the number of this ratio, the better a company is standing financially. SBUX has a Quick Ratio average of 0.9 while GMCR has an average of 0.7 meaning that financially SBUX is better off than GMCR. Receivables turnover is a statistic is a way of determining how and when a company uses its assets. SBUX has a receivables turnover average of 30.3 while GMCR has an average of 9.26. It is clear that SBUX is more active with their assets and collecting debt. Inventory turnover is the measure the pace of how fast goods are sold with respect to the inventory. Naturally, the faster inventory is in and out of the company the better the company stands financially. SBUX has an inventory turnover average of 5.53 while GMCR has an average of 3.08. Because Starbucks is in demand more than Green Mountain, the results are almost 1.5x greater than GMCR. Finally, Asset Turnover Ratio is the measure of how efficiently assets of a company turn into revenue which benefits the company. Although STBUX has a lower asset turnover over ratio, “High- margin businesses often have low asset turnover ratios because each dollar assets works harder in producing revenue.” (Smith, …show more content…
The average EPS for SBUX is 1.55 while the average for GMCR is 1.39. The two companies are very close in numbers with EPS. EPS is a very important factor that investors observe when they decide on investing in a business.
4. Which company would you invest in? What are the reasons for your decisions?
After researching the different aspects of these two companies, my safest and best choice would have to be Starbucks. Investing in a business requires research and calculations beyond what this project has asked us to do. Yet, these results give individuals an idea of what they are dealing with allowing them to make the right choice that suits their needs. Both companies thrive to be the best that they can be, and although Starbucks is a much larger company than GMCR, GMCR works hard in order to be the best it can be and survive successfully in this competitive market.
Luckily, Starbucks has managed to stay in the upper-scale of the coffee market allowing investors to feel comfortable to enter the market with Starbucks. That being said, it is unlucky for many businesses that are not benefiting like Starbucks to have to close down. Other smaller corporations feel the need to leave the coffee industry keeping Starbucks at an even higher
1. Liquidity & Activity Ratios- What are the trends?
Liquidity and Activity Ratios consist of: Current Ratio, Acid-Test (Quick Ratio), Receivables Turnover, Inventory Turnover, and Asset Turnover.
Current Ratio is the determination of a firm’s ability to meet current financial obligations and necessities in order for the business to survive. SBUX had an average of 1.76 for the years 2010-2012 …show more content…
As it is known, the higher the number of this ratio, the better a company is standing financially. SBUX has a Quick Ratio average of 0.9 while GMCR has an average of 0.7 meaning that financially SBUX is better off than GMCR. Receivables turnover is a statistic is a way of determining how and when a company uses its assets. SBUX has a receivables turnover average of 30.3 while GMCR has an average of 9.26. It is clear that SBUX is more active with their assets and collecting debt. Inventory turnover is the measure the pace of how fast goods are sold with respect to the inventory. Naturally, the faster inventory is in and out of the company the better the company stands financially. SBUX has an inventory turnover average of 5.53 while GMCR has an average of 3.08. Because Starbucks is in demand more than Green Mountain, the results are almost 1.5x greater than GMCR. Finally, Asset Turnover Ratio is the measure of how efficiently assets of a company turn into revenue which benefits the company. Although STBUX has a lower asset turnover over ratio, “High- margin businesses often have low asset turnover ratios because each dollar assets works harder in producing revenue.” (Smith, …show more content…
The average EPS for SBUX is 1.55 while the average for GMCR is 1.39. The two companies are very close in numbers with EPS. EPS is a very important factor that investors observe when they decide on investing in a business.
4. Which company would you invest in? What are the reasons for your decisions?
After researching the different aspects of these two companies, my safest and best choice would have to be Starbucks. Investing in a business requires research and calculations beyond what this project has asked us to do. Yet, these results give individuals an idea of what they are dealing with allowing them to make the right choice that suits their needs. Both companies thrive to be the best that they can be, and although Starbucks is a much larger company than GMCR, GMCR works hard in order to be the best it can be and survive successfully in this competitive market.
Luckily, Starbucks has managed to stay in the upper-scale of the coffee market allowing investors to feel comfortable to enter the market with Starbucks. That being said, it is unlucky for many businesses that are not benefiting like Starbucks to have to close down. Other smaller corporations feel the need to leave the coffee industry keeping Starbucks at an even higher