Starbucks Research Paper

Topics: Financial ratios, Starbucks, Coffee Pages: 11 (3399 words) Published: November 14, 2010
Company Background

There are many competitors in the world of coffee. These companies take the simplicity of a coffee bean and create a complex beverage that people all over the world crave. The leading competitor in this industry is Starbucks Coffee Company. This company thrives on the quality of coffee it serves and its exceptional customer service. Starbucks’ mission statement states: “Establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow. The following six guiding principles will help us measure the appropriateness of our decisions:

- Provide a great work environment and treat each other with respect and dignity. - Embrace diversity as an essential component in the way we do business. - Apply the highest standards of excellence to the purchasing, roasting and fresh delivery of our coffee. - Develop enthusiastically satisfied customers all of the time. - Contribute positively to our communities and our environment. - Recognize that profitability is essential to our future success.” In order to maintain this mission many steps are taken to enhance each store within the vast company.” (Our Starbucks Mission)

Over the course of a decade, Starbucks has successfully made specialty coffee part of the American experience. Beyond that, Starbucks seized growth opportunities in other markets that now make them an intense competitor with businesses outside of the coffee industry. Starbucks not only sells the world’s finest coffee but also manufactures and sells other products to the public. They created a name that is internationally known due to the heightened sales of their coffee and other products.

Research Paper Task

The purpose of this research paper is to evaluate the United States Securities and Exchange Commission’s (SEC) Annual 10-K Report for Starbucks. Utilizing the Annual Report, major accounting ratios will be evaluated for this company and for other competitors within its industry. This research paper will also identify the company’s current corporate issues and violations and will also seek solutions to prevent future occurrences of these violations.

Major Accounting Ratios
The SEC Annual 10-K for Starbucks provides financial accounting data in various financial accounting statements. To make sense of this data, major accounting ratios can be determined to understand the relationships that exist between the data. The following section defines fifteen major accounting ratios for Starbucks. The section will compare the accounting ratios from 2008 to 2009, and it will also compare Starbucks’ ratios to the ratios found in Starbucks’ major competitors. According to the SEC Annual 10-K report, “The Company’s primary competitors for coffee beverage sales are quick-service restaurants and specialty coffee shops” (SEC 10-K Starbucks Corporation) McDonald’s and Diedrich Coffee were the companies selected for a comparison of the major accounting ratios. McDonald’s represents a “quick-service restaurant,” and Diedrich Coffee represents a “specialty coffee shop”. The following two tables summarize the major accounting ratios for Starbucks, McDonald’s and Diedrich Coffee for 2008 and 2009. The ratios were calculated based on data provided in each company’s SEC Annual 10-K report.

Table 1: Major Accounting Ratio Comparison for 2008

Table 2: Major Accounting Ratio Comparison for 2009
The first of the major accounting ratios is financial leverage, and it is defined as average total assets divided by average stockholders’ equity. The financial leverage ratio communicates the company’s financial strength by identifying how much of the company’s funding is its own funds or if the company borrows most of it’s funding. Financial leverage for 2008 and 2009 for all three companies ranges between 1.0 and 3.0. Thus, each company generally operates more-so under its own funding, which is approximately...
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