Starbucks corporation internal analysis. 1 Essay Example

  • Category:
    Management
  • Document type:
    Case Study
  • Level:
    Masters
  • Page:
    2
  • Words:
    829

Starbucks Corporation internal analysis

(Lecturer)

Profit ratios: — four different profit margins do exist in the income statement. These are the gross profit, pretax profit, operating profit and net profit. In the case of the Starbucks Cooperation, the profit margins refers to particular figure of profit level or the percentage of net sales (Needles & Powers, 2012). The main importance of profit margin analysis is to account for the consistency of the company revenues.

In the year 2013, the company had a negative operating net margin of 0.1% and 0.2% return on equity. However, in 2014 and 2015, the company picked up and had a net margin of 12.6 and 14.4 respectively.

Therefore,

Starbucks (Financial Rationed Internal AnalysisGross marargin = Gross profit

Starbucks (Financial Rationed Internal Analysis 1Operating margin = Operating profit

Starbucks (Financial Rationed Internal Analysis 2Net margin = Net income

Gross profit

$ 8,484,500

$ 9,589,000

11,375,200

Gross margins

Operating margin

Net margin

(Capital IQ, 2015)

Activity ratios refers to the measure of the company proficiency in converting various accounts within the balance sheet to revenues or sales. Equally, it is a measure of the corporation efficiency in terms of leverage, and assets that are key in evaluating the company management. Activity ratio factor in turnover ratio and inventory turnover (Wahlen, 2016). If the turnover ratio is low, then it suggest a deficiency in revenue collection. On the other hand, asset turnover ratio look at how the company effectively utilize the reliable assets to maximize on sales (Pitts & Lei, 2002).

Inventory turnover ratio = Cost of goods sold

Average inventory

Total asset turnover ratio = Total sale

Total assets

Total asset turnover

Inventory turnover

(Capital IQ, 2015)

Leverage ratios,

Starbucks Company depend on a mix of stakeholder’s equity and debts for financial operations. Therefore, leverage ratio is key in conducting a measurements on how the company capital is acquired through debts and evaluating the company ability to achieving the financial activities (Pitts & Lei, 2002).

Liquidity ratios gives a description of the Starbucks Corporation ability to repay debts commitments. The ratio is key in establishing a safety margin by calculating current ratio, operating cash flow ratio, and quick ratio. For Starbucks Corporation, current ratio, cash ratio, and quick ratio can be applied in measuring liquidity (Wahlen, 2016). If the current ratio has a 1 value, then the company has current liquid assets that is in a position of taking care of current liabilities. For the last five years, Starbucks Corporation has maintained a current ratio of 1.46. Moreover, the cash ratio over the period is at 0.46. Therefore, the company is in a position of achieving short-term financial obligations.

Current ratio

Quick ratio

Cash ratio

(Capital IQ, 2015)

Market ratios;

Starbuck cooperation has received from various organization considering the company good position in the market (Needles & Powers, 2012). The company has maintained good performance in the market, considering various market ratio such as market capitalization, enterprise value multiplication, enterprise values, earnings per share, price earnings ratio and market to book ratio.

Market capitalization

60662.73

59364.36

90695.06

Enterprise value

64463.33

62999.76

95709.96

Enterprise value multiplication

Earnings per share

Price earnings ratio

Market to book ratio

13.5611.25

(Capital IQ, 2015)

Internal analysis of strengths and weaknesses.

Considering the financial analysis or Starbucks Corporation, the company is in a good position and is expanding hence establishing a stronger position across the globe. The corporation maintains a 36.7% of the market share. The company excellently leverage quality product equity by improving service quality and competitive advantage (Capital IQ, 2015). Through the establishment and maintenance of the competitive benefit to venture into global market. Maintenance of good customer care and public relations has seen the success of economies of scale. Through the financial results, it is quite evidence to the company has maintained and is improving on quality service provision (Wahlen, 2016). By offering low cost of the product, the company is in a position of attracting more customers, hence an increase in the sales and profitability. The company also offer high-quality products hence will help keep the customers. Finally, having customer based loyalty through the loyalty based program.

Weaknesses; Despite the production of high-quality products, come with an expense hence making the product expensive to other clients. The company is also over depended on the US market. Therefore, the cooperation may require cooperation may not achieve the long term projected growth (Pitts & Lei, 2002).

References.

Capital IQ. (2015). Starbucks Corporation (NasdaqGS:SBUX) Public Company Profile. Retrieved November 11, 2015, from S&P Capital IQ: https://www.capitaliq.com/CIQDotNet/company.aspx?companyId=34745

Capital IQ. (2015, December 17). Krispy Kreme Doughnuts, Inc. Retrieved December 17, 2015, from S&P Capital IQ: https://www.capitaliq.com/CIQDotNet/Financial/BalanceSheet.aspx?CompanyId=41125 4 S&P

Needles, B. E., & Powers, M. (2012). Financial accounting. Mason, OH: South-Western Cengage Learning.

Pitts, R. A., & Lei, D. (2002). Strategic management: Building and sustaining competitive advantage. Princeton, N.J: Recording for the Blind & Dyslexic.

Starbucks Coffee Company, Starbucks Coffee Company. (2015). Company Information. Retrieved November 11, 2015, from Starbucks: http://www.starbucks.com/about-us/company-information.

Wahlen, J. M. (2016). Intermediate accounting: Reporting and analysis, copyright update. Place of publication not identified: South-Western.