Starbucks Financial Statement Analysis Assignment (Research Paper Sample)

Starbucks
Name
Institution
Table 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 23
Introduction
Financial 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 McDonald’s Corporation as the industry peer.
Starbucks and McDonalds Overview
Starbucks 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 roaster, 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, Seattle’s 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 company’s 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 (Thalman, 2015).
McDonald’s is considered to be the world’s 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 company’s restaurants across the world are owned and operated by independent local business persons. One of the strong suits of McDonald’s over the years has been the effective alignment between the company, its suppliers and its franchisees. In particular, McDonald’s 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 (McDonald’s, 2015).
Market Capitalization
In definition, market capitalization is the total worth value of the shares or stock of a company. Also commonly referred 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 McDonald’s Corporation is 102.94B. This indicates that McDonald’s is valued greater compared to Starbucks in the open market (Yahoo Finance, 2015).
Financial Ratio Analysis
Financial 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 Ratio
The 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 Starbucks’s 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 Ratio
The 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 Starbucks’s 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 Equity
The 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 relation 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...