Financial Health of Starbucks Coffee

Presented By: Author

•Coffee House opened in 1971 in a small town in Seattle, Washington

•In 1987 Starbucks expanded beyond Seattle

•In 1996 Starbucks went international starting in Japan

Starbucks Liquid Ratios

• Current Ratio: 1748.0 ÷ 2189.7 = .798 times• Quick Ratio: (1748 – 692.8) ÷ 2189.7 = .482

times• Average Collection Period: 329.5 ÷ (10383 ÷

365) = 11.583 days• Days Inventory Held: 692.8 ÷ (4645.3 ÷ 365) =

54.435 days• Days Payable Outstanding: 324.9 ÷ (4645.3 ÷

365) = 25.528• Cash Conversion Cycle: 11.583 + 54.435 –

25.528 = 40.49 days

Starbucks Activity Ratios

• Accounts Receivable Turnover: 10,383 ÷ 329.5 = 31.511 times

• Inventory Turnover: 4,645.3 ÷ 692.8 = 6.705 times

• Accounts Payable Turnover: 4,645.3 ÷ 324.9 = 14.297 times

• Fixed Asset Turnover: 10,383 ÷ 2956.4 = 3.512 times

• Total Asset Turnover: 10,383 ÷ 5672.6 = 1.830 times

Starbucks Leverage Ratios

• Debt Ratio: 3,181.7 ÷ 5,672.6 = 56%

• Long-Term Debt to Total Capitalization: 549.6 ÷ (549.6 + 2,490.9)= 18%

• Debt to Equity: 3,181.7 ÷ 2,490.9 = 1.277 times

• Times Interest Earned: 503.9 ÷ 53.4 = 9.436 times

Starbucks Profitability Ratios• Gross Profit Margin: 5,737.7 ÷

10,383 = 55%• Operating Profit Margin: 1,258.7 ÷

10,383 = 12%• Net Profit Margin: 315.5 ÷ 10,383 =

3%• Return on Total Assets (ROA): 315.5

÷ 5,672.6 = 5.5%• Return on Equity (ROE): 315.5 ÷

2,490.9 = 12.6%• Cash Return on Assets: 1,258.7 ÷

5,672.6 = 22%

Industry ComparisonStarbucks

• Debt/Equity Ratio0.33

• Current Ratio 0.9• Quick Ratio 0.6• Interest Coverage

NA• Leverage Ratio

2.1• Book Value/Share

3.50

Industry• Debt/Equity Ratio

0.32• Current Ratio 0.9• Quick Ratio 0.7 • Interest Coverage

0.0 • Leverage Ratio

1.7 • Book Value/Share

3.65

References• Fraser, L. M., & Ormiston, A. (2007).

Understanding financial statements (8th ed.). Upper Saddle River, NJ: Pearson/Prentice Hall.

• MSN Money Central (2009). Starbucks Corp: Company Report. Retrieved July 14, 2010 from http://moneycentral.msn.com/companyreport?Symbol=US%3aSBUX

• Starbucks Corporation (2009). Financial Statements. Retrieved July 14, 2010 from http://www.starbucks.com