The liquidity ratios are slightly above the consumer services industry, but lower than its main competitors, McDonald's Corporation and Priceline Group. But, the solvency ratios for the firm have been on an upward trend since 2013 which implies that the firm's financial risk in increasing. Starbuck's core business is always concentrating on growing and constructing more stores. This leads to greater organizational cost and the past; they were forced to close down many of their stores. Until the American and global economy improves, I would propose that the firm should focus more on innovation and the product expansion, rather than increasing the number of stores. Further, the firm should strive to generate more revenues from its existing stores and use the revenues to fund its operations rather than using debt. Debt is expensive due to interest charged and increases the financial costs and risks of the company.
Financial Analysis: Starbucks Corporation 16 References Berry, L. E. (2011). Financial accounting demystified . New York, NY: McGraw-Hill. Bussing-Burks, M. (2009). Starbucks . Santa Barbara, Calif: Greenwood Press. Delen, D., Kuzey, C., & Uyar, A. (August 01, 2013). Measuring firm performance using financial ratios: A decision tree approach. Expert Systems with Applications, 40, 10, 3970-3983. Dorchester, J. (2011). Market value, fair value, and duress. Journal of Property Investment & Finance J of Property Inv & Finance, 29 (4/5), 428-447. Harrison, W. T., Horngren, C. T., & Thomas, C. W. (2015). Financial accounting . Upper Saddle River, N.J: Pearson Education/Pearson Prentice Hall. Johnson, J., & Churyk, N. (2011). The Effect of New Accounting Rules on Capital Leases: A Study of Current Reporting Practices. The Journal of Equipment Lease Financing, 29 (1), 1c-6c. Retrieved February 14, 2016. Kimmel, P. D., Weygandt, J. J., Kieso, D. E., & Kimmel, P. D. (2008). Accounting: Tools for business decision making . Hoboken, N.J: John Wiley & Sons, Inc. Libby, R., Libby, P. A., & Short, D. G. (2011). Financial accounting . New York: McGraw- Hill/Irwin. Moore, J. (2006). Tribal knowledge: Business wisdom brewed from the grounds of Starbucks corporate culture . Chicago, IL: Kaplan Pub. Starbucks Corporation (2015). Annual report 2015 . Ross, S. (2015, December 14). The Biggest Risks of Investing in Starbucks Stock (SBUX). Teed, D. (2013). Legislation of Ethics in the Early Years of the Securities and Exchange Commission. Review of Business & Finance Studies, 1 (10). USA. (2012). Agency financial report / US Securities and Exchange Commission . (Agency financial report.) Washington, DC: s.n.
Financial Analysis: Starbucks Corporation 17
Financial Analysis: Starbucks Corporation 18 Appendix. Ratio calculations KEY FINANCIAL STATEMENT RATIOS THIS YEAR LAST YEAR Indus- try Amounts An- swer Amounts An- swer Aver- age Liquidity ratios Current Ratio Current Assets = 4,352,700 = 1.191 4 4,168,700 = 1.371 9 2.20 Current Liabilities 3,653,500 3,038,700 Quick Ratio, or Quick Assets * 3,046,300 0.833 8 3,077,800 1.012 9 1.53 "Acid Test" Current Liabilities 3,653,500 3,038,70 0 * Quick assets include Cash, Marketable Securities, and Accounts Receivable (excludes Inventory) Asset Management Ratios Inventory Cost of Goods Sold 7,787,500 5.961 6,858,800 6.287 3 1.12 Turnover Inventory* 1,306,400 1,090,900 Accts Receivable Sales 19,162,700 17.41 16,447,800 17.34 3 27.20 Turnover Accts Receivable* 1,100,700 948,400
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