Financial Statement Analysis: A Case Study of Starbucks: Sashikant Majhi
Financial Statement Analysis: A Case Study of Starbucks: Sashikant Majhi
Financial Statement Analysis: A Case Study of Starbucks: Sashikant Majhi
STUDY OF STARBUCKS
BBA_LLB
Submitted By
Sashikant Majhi
ROLL NO- 051901028
Session- 2019-24
CERTIFICATE__________________________________________________1
DECLARATION_________________________________________________2
ACKNOWLEDGEMENT__________________________________________3
INTRODUCTION________________________________________________4
LITERATURE
REVIEW_______________________________________________________5
DATA AND
METHODOLOGY_______________________________________________7
RESULTS AND
DISCUSSIONS__________________________________________________9
CONCLUSION_________________________________________________12
DECLARATION
I do hereby declare that the project entitled “RATIO ANALYSIS OF A COMPANY
(STARBUCKS)” submitted by me as a part of course curriculum of the paper financial
management for the course BBA-LLB (19-24) to Birla Global University. It is the original
piece of project work done by SASHIKANT MAJHI under the guidance of Mr. Sakti
Ranajan Dash as my faculty guide and has not been submitted to any University / institution
for the award of any other degree elsewhere in full or in part
ACKNOWLEDGEMENT
I would like to express my special thanks of gratitude to my faculty(MR. SAKTI RANJAN
DASH ) who gave me the golden opportunity to do this wonderful project on the topic
(RATIO ANALYSIS OF A COMPANY (STARBUCKS), which also helped me in doing a
lot of Research due to which I came to know many things about the financial statements of
BMW.
Literature Review
A literature review is a finding of results of different analysis that is related to contemporary
research. The report is primarily the consideration of past analysis which is further linked
with current studies in a more dependable technique. The following are some reviews from
the earlier analysis that related to a recent research study. A researcher named Dr. M
Ravichandran studies the financial performance of several companies that could be ranked
within the market industry according to the effectiveness of multiple financial tools, for
example, the researchers examined the profitability ratio, solvency ratio, and comparative
statement. According to the researcher on the finding analysis, any business must arrange
sufficient capital to satisfy its debts & liabilities, and, the income statement of the corporation
that presents the transactions carried by the company.
Along with this, the increased flow of transactions during the entire year that matters because
of the reasonable price leading to an increase in the profitability of the company. Another
research MS Ganga took into consideration of the evolution of the financial performance of
large corporations in Asian countries. The researcher concluded that for all extensive
business ratio analysis are incredibly significant to plan and control the financial resources.
In-depth analysis results that the companies focus on researching numerous techniques to
evaluate the financial performance of the organization during every quarter of the year. This
resulted in finding that the executives of the organization focus on the grey areas of the
financial statements which are helpful for the planning for future growth and probability of
any company. If the managers of the companies realize the significance of the ratio analysis
that fundamentally leader any company towards its success with time [ CITATION Sar15 \l
1033 ]. The researcher stresses on the ratios analysis, which fluctuates during the whole year
as per the sale of the production. Depending upon the variation of the sale and purchase the
ratio increased or decrease. The increase in the ratios rates indicates that the company is in a
good position of financial status. In addition to this, the study also means that existing
customers are satisfied as compared to the previous year’s satisfaction of customers, and the
company can expect a potential number of customers due to the comfort of the existing ones.
The ratios analysis is also dependent on the situation of shareholder equity of the company.
The ratios analysis is also reliant on the status of shareholder equity of the company which
when increases; means that the potential and existing investors are willing to float more
capital in the company due to outstanding financial performance. (Prof. (Dr.) Kapil Khatter,
2018)
Data & Methodology
Table 1 FINANCIAL DATA (STARBUCKS COMPANY)
The data has been collected for Starbucks for the last four financial years 2016 to 2019. The
data has been collected from the secondary source from Yahoo Finance. The data has been
collected for different variables extracted from the income statement and balance sheet of
Starbucks Company. Different ratios are used in the analysis like:
Liquidity Ratios: these ratios are used to measure the ability of an organization in
dealing with its short term liabilities with the help of current assets. The ratios that
have been calculated to evaluate the liquidity position of Starbucks Company are
current, quick, and cash ratio.
Current Ratio
2.50
2.00
1.50 Current Ratio
1.00
0.50
0.00
2019 2018 2017 2016
Quick Ratio
2.50
2.00
1.50 Quick Ratio
1.00
0.50
0.00
2019 2018 2017 2016
Table 5 Cash ratio of Starbucks
Cash Ratio
1.80
1.60
1.40
1.20 Cash Ratio
1.00
0.80
0.60
0.40
0.20
0.00
2019 2018 2017 2016
The overall liquidity position of the company has decreased from 2016 to 2019. The current
fiscal year position of the company reflects that company is not having enough cash and
current assets to pay its current liabilities. The company does not have a strong liquidity
position to deal with its short term obligations[ CITATION ESU19 \l 1033 ].
Inventory Turnover
14.00
12.00
10.00
8.00 Inventory Turnover
6.00
4.00
2.00
0.00
2019 2018 2017 2016
The activity ratio shows a decrease in the performance of the company from 2016 to 2019.
The decrease indicates that assets are not being used effectively for the generation of sales.
The management needs to revise its business policies and must effectively use its assets.
2018
2019
2018
2019
The debt ratio is increasing from 2016 to 2019 and that shows management is using more of
debt to run its operational activities. Moreover, the time's interest earned ratio has shown that
management has earned more of EBIT against its interest income in the current fiscal year. it
shows a moderate sign of health for Starbucks management[ CITATION Dia181 \l 1033 ].
Return on Assets
0.2050
0.2000
0.1950 Return on Assets
0.1900
0.1850
0.1800
2019 2018 2017 2016
Profit Margin
20.00%
18.00%
16.00%
14.00%
12.00% Profit Margin
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
2019 2018 2017 2016
The ROE is negative in the current fiscal year and that shows a negative sign for the investors
as they are losing more money against their investments being made in the Starbucks
Company. The ROA is less than 1 in all financial years and that shows the management is not
working properly for the generation of revenue with the help of its assets [ CITATION Muh201 \l
1033 ]. The management needs to utilize its assets effectively. The profit margin of the
company has decreased and that shows management is not generating enough sales and has
poor control over its overhead expenses.
Conclusion
It can be concluded from the above discussion that the management of Starbucks needs to
work harder for its survival in the target market. the need of revelation of manageability
reports, putting together monetary choices with respect to corporate maintainability in capital
planning and related angles and the estimation too moderation of supportability dangers and
with that being said that Starbucks need to implement some of the sustainability and growth
to see the development and to achieve its growth as well, as here will give a few ways to gain
the growth they need. The financial statement framework is meant to help with the
economical monetary administration engaging condition, social and administration
perspectives in the dynamic the strategy for interests in destroying environmental change,
lessening imbalance, diminishing ozone harming substance outflows and upgrading vitality
viability and social consideration.[CITATION Placeholder1 \l 1033 ] Here with the working
capital gives Starbucks an opportunity to arrange and guarantee growth, by making sure that
the productivity is full on ranged, and they are receiving the highest return to catch up with
the shortage that they are suffering with. Working capital administration takes a shot at
improving the benefit of the corporate while moreover guaranteeing that the corporates are in
the situation to take care of their obligations while keeping up their liquidity viewpoint.
[CITATION Placeholder1 \l 1033 ] The management needs to purchase more of current assets and
to maintain its inventory level management to make sure it has a strong liquidity position to
deal with its short liabilities. The business manageability dangers can be cultivated and
facilitated through the execution of arranged maintainability chance administration which is
empowering organizations to excel the method of change by thoughtful the drawn out
disclosure including quiet submission with the supportability philosophies and abstaining
from concerning pressures yet additionally progressively misuse business prospects that are
obvious in the advancement. improving the dynamic procedure through adjusting money
related systems of associating feasible issues with financial decisions and basic worth drivers.
[ CITATION AlM19 \l 1033 ] The management needs to implement effective policies to utilize its
assets properly to enhance its sales margin. The management needs to implement cost-
effective strategies that can have sound control over the expenses, money related execution
focusses on by an alternate organization partners, there is likewise more worth creation
through an increasingly ensured condition. [ CITATION Alk19 \l 1033 ]These expenses result in
the understatement of net profit margin and shareholders' wealth.