Starbucks Executive Summary

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The DuPont system is a way to determine how well firm has executed its business strategy as measured by the overall return generated for its owners. There are three key ratios that are subdivided from the DuPont system: the profit margin, asset utilization, and financial leverage. From the financial reports the return on equity (annual ratio report) for 2011 was 28.409%. Compared to the industry average of 17.62% Starbucks is exceeding by over 10% which confirms that the company is doing well in its performance. The return on asset ratio for Starbucks in 2011 was 16.92% and the financial leverage ratio is 1.679 which is both fairly reasonable for this company. The current ratio as of June 2012 is 2.2642 (annual balance sheet) with a ratio of more than 2/1. This shows that the company has a comfortable liquidity cushion. The quick ratio for 2011 is shown to be 1.174 which is satisfactory.

In their SWOT analysis it shows that Starbucks’ weaknesses are the weakening potential in the US and the product recalls that adversely affect brand image (Datamonitor p.26). during 2011 the company had closed 51 company-operated stores in just the US. Additionally in 2011, the company also reported the closure of 475 licensed Seattle’s Best Coffee locations in Borders Bookstores due to the Borders Bankruptcy in April 2011 (Datamonitor p.28). The SWOT analysis clearly shows the critical issue of having to close underperforming U.S. locations and the setback that occurred in 2011 to the already slow pace of the U.S. expansion.
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