Starbucks Financial Statement Analysis Assignment - 5225 Words

Starbucks Financial Statement Analysis Assignment (Research Paper Sample) Content: StarbucksNameInstitutionTable of Contents TOC \o "1-3" \h \z \u Introduction PAGEREF _Toc435180762 \h 4Starbucks and McDonalds Overview PAGEREF _Toc435180763 \h 4Market Capitalization PAGEREF _Toc435180764 \h 4Financial Ratio Analysis PAGEREF _Toc435180765 \h 4Current Ratio PAGEREF _Toc435180766 \h 5Quick Ratio PAGEREF _Toc435180767 \h 5Return on Equity PAGEREF _Toc435180768 \h 6Return on Operations Assets Ratio PAGEREF _Toc435180769 \h 7Return on Assets Ratio PAGEREF _Toc435180770 \h 7Asset Utilization Ratio PAGEREF _Toc435180771 \h 8Equity Multiplier Ratio PAGEREF _Toc435180772 \h 8Overhead Efficiency Ratio PAGEREF _Toc435180773 \h 9Operating Profit Margin PAGEREF _Toc435180774 \h 10Net Profit Margin PAGEREF _Toc435180775 \h 10Earnings per Share PAGEREF _Toc435180776 \h 11Price Earnings Ratio PAGEREF _Toc435180777 \h 12Time Series Analysis PAGEREF _Toc435180778 \h 12Cross Sectional Analysis PAGEREF _Toc435180779 \h 19Conclusion PAGEREF _Toc435180780 \h 22References PAGEREF _Toc435180781 \h 23IntroductionFinancial analysis of a company is significant as it enables not only prospective investors but also the stakeholders of a company to determine the financial performance and standpoint of the company. This is done by scrutinizing the financial statements of a company. Appropriate and effective analysis of these financial statements makes it possible to achieve valued financial information, which can be proficiently utilized for decision making. The preceding and prevailing financial position of a corporation can be attained from financial statements (Fridson and Alvarez, 2011). The following paper will encompass the financial analysis of Starbucks Corporation and compare its financial performance against that of McDonalds Corporation as the industry peer.Starbucks and McDonalds OverviewStarbucks Corporation (Starbucks) is a company that was founded in the year 1971 and is based in the United States. It is considered to be one of the biggest ro aster, marketer as well as retailer of specialty coffer all over the world. The company offers a variety of consumer products including coffee as well as tea, readymade beverages and also ice cream. Aside from its main Starbucks brand, the company also undertakes its marketing operations through other brands such as Tazo, Teavana, Evolution Fresh, Seattles Best Coffee and many others. Starbucks Corporations has operations in over 64 nations all through the continents of Europe, Africa, the Americas, The Middle East and also Asia-Pacific. Starbucks Corporation is publicly listed on the NASDAQ under SBUX. Starbucks is ranked amongst the top 500 largest companies in the world. In the preceding year, Starbucks Corporation was ranked 52nd by Forbes in terms of being the most valuable brand in the globe. In addition, valuation of the companys brand was ranked at more than $11.1 billion in the present year which is a significant increase compared to the $9.9 billion the previous year (Thal man, 2015).McDonalds is considered to be the worlds leading international food service retailer with over 35,000 retail outlets serving about 70 million consumers in more than 100 nations every single day. Statistics indicate that about four-fifths of the companys restaurants across the world are owned and operated by independent local business persons. One of the strong suits of McDonalds over the years has been the effective alignment between the company, its suppliers and its franchisees. In particular, McDonalds has been able to pinpoint, execute and scale notions that take into account the constantly changing preferences and needs of the consumers simply by leveraging its system. More so, the company has been successful owing to the fact that it incessantly provides locally pertinent restaurant experiences to its consumers (McDonalds, 2015).Market CapitalizationIn definition, market capitalization is the total worth value of the shares or stock of a company. Also commonly refer red to as market cap, it is computed simply by taking the total outstanding number of shares of a company and multiplying it with the prevailing price of such shares in the stock market. This is what provides the total market value of a company. Basically, the resulting figure is the amount of money that would be paid if at all the company would be sold in the open market. The market capitalization of Starbucks Corporation is 90.70B while that of McDonalds Corporation is 102.94B. This indicates that McDonalds is valued greater compared to Starbucks in the open market (Yahoo Finance, 2015).Financial Ratio AnalysisFinancial ratio analysis enables a prospective investor to assess and examine the financial health of a company. The financial statements presented by a company offer a restrictive insight into the understanding its performance. In order to obtain a richer and clearer discernment of what goes on, there has to be a pertinent basis of appraisal and evaluation (Vandyck, 2006). Not only is the potential investor able to examine the financial performance of a company but the ratios also make it possible to compare the performance of companies with their rival companies and also with benchmarks in the industry (Vandyck, 2006). This section of the report takes into account of financial ratios that are calculated from the published annual reports of Starbucks Corporation in the past five years.Current RatioThe current ratio is a liquidity financial ratio. The term current suggests that the period taken into account is less than or equal to one financial year. The current ratio is a metric that is indicative of the current assets in relation to the current liabilities to determine and conclude whether the company has sufficient assets that can be liquidated instantaneously in order to pay off debts and obligations. The current ratio is obtained by dividing the total current assets with the total current liabilities. The following is a calculation of Starbuckss current ratio in the past five years between 2010 and 2014.Starbucks 2014 2013 2012 2011 2010 Total Current Assets 4,168,700 5,471,400 4,199,600 3,794,900 2,756,400 Total Current Liabilities 3,038,700 5,377,300 2,209,800 2,075,800 1,779,100 Current Ratio 1.3718695 1.0174995 1.9004435 1.8281626 1.549323 McDonald's 2014 2013 2012 2011 2010 Total Current Assets 4,185,500 5,050,100 4,922,100 4,403,000 4,368,500 Total Current Liabilities 2,747,900 3,170,000 3,403,100 3,509,200 2,924,700 Current Ratio 1.5231631 1.5930915 1.4463577 1.2547019 1.4936575 Quick RatioThe quick ratio is also referred to as the acid test ratio and is also a liquidity ratio. In particular, the quick ratio is fairly comparable and can be associated to the current ratio. However, in this case, the current assets in the computation do not include inventories. The following is a calculation of Starbuckss quick ratio in the past five years between 2010 and 2014.Starbucks 2014 2013 2012 2011 2010 Total Current Assets 4, 168,700 5,471,400 4,199,600 3,794,900 2,756,400 Inventories 1,090,900 1,111,200 1,241,500 965,800 543,300 Total Current Assets devoid of Inventories 3,077,800 4,360,200 2,958,100 2,829,100 2,213,100 Total Current Liabilities 3,038,700 5,377,300 2,209,800 2,075,800 1,779,100 Quick Ratio 1.0128673 0.810853 1.3386279 1.3628962 1.243944 McDonald's 2014 2013 2012 2011 2010 Total Current Assets 4,185,500 5,050,100 4,922,100 4,403,000 4,368,500 Inventories 110,000 123,700 121,700 116,800 109,900 Total Current Assets devoid of Inventories 4,075,500 4,926,400 4,800,400 4,286,200 4,258,600 Total Current Liabilities 2,747,900 3,170,000 3,403,100 3,509,200 2,924,700 Quick Ratio 1.4831326 1.5540694 1.4105962 1.221418 1.456081 Return on EquityThe return on equity ratio is a financial metric that is indicative of the profitability and effectiveness of a company. In particular, it indicates the return that an investor or shareholder obtains from the stake of equity invested in a corporation in rela tion to the net income generated by a company.Starbucks 2014 2013 2012 2011 2010 Net Income 2,068,100 8,300 1,383,800 1,245,700 955,600 Total Equity 5,272,000 4,480,200 5,109,000 4,387,300 3,682,300 Return on Equity 0.39228 0.0018526 0.2708554 0.2839332 0.259512 McDonald's 2014 2013 2012 2011 2010 Net Income 4,757,800 5,585,900 5,464,800 5,503,100 4,946,300 Total Equity 12,853,400 16,009,700 15,293,600 14,390,200 14,634,200 Return on Equity 0.3701589 0.3489072 0.3573259 0.38242 0.3379959 Return on Operations Assets Rat...