The American University in Cairo
Starbucks Financial Analysis
Dr. Adel Ibrahim
Mahmoud El Gindy
Mohammed Abo Solyman
Table of Contents
Financial Statement Analysis
Consolidated Balance Sheet
Consolidated Income Statement
Consolidated Cash Flow Statement
Consolidated Statement of Changes in Owner’s Equity
Net Profit Margin
Current Ratio/Acid Test (Quick) Ratios
Financial Leverage Measures
Leverage ratio/ debt ratio/ debt to equity ratio
Investment Returns Measures
Return on Investment (ROI)
Return on Equity (ROE)
Management Efficiency Measures
As one of the most recognizable brands worldwide, Starbucks is considered a monumental success story and an investors’ paradise. In this report, through interpreting the financial statements from 2003 on to 2007, we can a clear and concise picture of the biggest American coffee corporation performance.
Our Evaluation and analysis of the company’s performance starts with Gross Margin and Profit Margin both of which shows the company operating on a satisfactory level comparing to the industry. Moving on to Liquidity measures, we notice that the company’s trend is to keep their cash levels at minimum. This can be explained by the explosive expansion of the chain worldwide and is another indicator of Starbucks’ confidence in its future plans.
Our next measures are Financial Leverage ratios. Starbucks relies relatively heavily on debt to finance its ambitious expansions. Solid sales and revenues ensures the company’s capability of fulfilling their obligations in due time. This is further explained by observing both the ROI and ROE, Both of them show high returns compared to the industry’s standards.
Throughout this report we noticed that the combination of administrative and executive performance is sure to keep credit flowing to the company’s projects. This fact can be illustrated by analyzing some of the management efficiency measures. Through the asset turnover and inventory turnover ratios, the managerial side of Starbucks is put under the lens and it’s clear that the company’s doing a great job increasing the efficiency and productivity of its operations.
With more than a 100 branches opening every month, Starbucks offers a great opportunity for investments and through this report, we hope we have made investors decision easier and profitable.
Starbucks is arguably the largest coffee company in the world today. Starbucks offers a wide variety of products ranging from fresh, rich-brewed coffees, Italian-style espresso beverages, premium teas, cold blended beverages, a variety of complimentary food items, and coffee related accessories. In addition, Starbucks also markets books, music and film via their “Starbucks Entertainment” division and different brands.
Founded originally in Washington, Starbucks has a goal of becoming a global market leader in the coffee business. Having such a goal and determination, Starbucks is now the largest coffeehouse company in the world; it’s a market leader in the US (domestic market) and has invaded European markets, and recently the Middle East regions as well. To do so, Starbucks has made several joint ventures around the globe to well develop its brand image in the market, and this has proved to yield significant figures.
Originally, Starbucks was found by three partners, Jerry Baldwin, Zev Siegel, and Gordon Bowker. However, it was not until businessman Howard Schultz took over that Starbucks started the successful path. Having...
References: “Annual Reports.” Starbucks. *
Marshall, David H, et al. Accounting: What the Numbers Mean Eighth Edition. New York: McGraw-Hill, 2008.
“Starbucks.” MSN Money. *
Starbucks. Starbucks Corporation. [www.starbucks.com]
“Starbucks.” Wikipedia: The Free Encyclopedia. 23 May, 2008.
* These are the references used to obtain the financial statements for the years 2003-2007. Due to the massive length of these documents they are not printed in an appendix.
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