UNIVERSITI TEKNOLOGI MARA CAWANGAN TERENGGANU

FACULTY OF HOTEL AND TOURISM MANAGEMENT

BACHELOR OF SCIENCE (HONS.) HOTEL MANAGEMENT

HOSPITALITY FINANCIAL PERFORMANCE AND ANALYSIS (HTH587)

GROUP PROJECT TITLE:

THE FINANCIAL ANALYSIS OF STARBUCKS FOR THE YEARS 2019 AND 2020

PREPARED BY:

NAME STUDENT ID GROUP

MUHAMMAD FAHMY IZZALMAN B FAUZI 2020852808 HM2404AA
NUR SYAMIMI BINTI AHMAD SYUKRI 2020827948 HM2404BA
NUR AINA NABILAH BINTI MAHMOOD 2020608226 HM2404BA
NUR HASANAH BINTI OTHMAN 2020827884 HM2404AA
ZULHANIN ARISYA BINTI ZOOLKEFELY 2021124271 HM2404AA

PREPARED FOR: MADAM FAUZIAH BINTI DERAMAN

DATE OF SUBMISSION: 14ST JULY 2022

EXECITIVE SUMMURY

The project provides an overview of financial statement analysis for companies in the
hospitality and tourism industry. The process of evaluating the performance and viability of
firms, projects, budgets and other financial operations is known as financial analysis (Tuovila,
2021). For this project, we have selected the Starbucks business to review its financial analysis
for two years, 2019 and 2020. The main goal of this task is to investigate and analyse financial
performance and differentiate between the two companies over the last two years. The
assignment is divided into three sections on different types of analysis: historical data analysis,
comparative analysis (i.e., comparative horizontal analysis and standard -size vertical analysis),
and financial ratios. Analysis of historical data helped us determine performance trends for
both companies over a number of years. Tables and graphs were used for the analysis of this
historical data. Next, businesses can identify key trends and estimate future trends by analysing
financial comparisons and identifying significant or abnormal changes. Comparing the
performance of Starbucks in 2 years that is in 2019-2020 based on the financial statements
allows us to know the overall financial performance of the company. Furthermore, ratio
analysis helps us in comparing performance with each company’s benchmarks to better
understand the overall performance of the Starbucks organization. According to the findings
mentioned above, Starbucks is performing better in 2020. In 2020, Starbucks reported $ 7.8
million in equity, slightly higher than $ 6.2 million in 2019. An increase in capital stock could
benefit investors in the long run if Starbucks can issue a large number of additional shares
without experiencing a significant reduction in price share; it is a good sign for companies and
analysts. Total Assets increased to $ 29.4 million, up from $ 19.2 million. Finally, this project
allows us to apply what we have learned from this subject. It helps us in a better understanding
of a company’s financial performance tools.

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TABLE OF CONTENTS

EXECUTIVE SUMMARY .......................................................................................................

1.0 INTRODUCTION...........................................................................................................
1.1 ABOUT STARBUCKS ...............................................................................................
1.1.1 History of Starbucks Company ..............................................................................
1.1.2 Starbucks Mission and Vision ...............................................................................
1.1.3 Issue and Challenge Starbuck Cooperation……………………………………..

1.2 LITERATURE REVIEW ...........................................................................................

1.3 PURPOSE OF STUDY ...............................................................................................
2.0 FINANCIAL ANALYSIS OF STARBUCKS...............................................................
...........................................................................................................................................
2.1 HISTORICAL PERFORMANCE ANALYSIS .......................................................
2.1.1 Historical Performance Analysis of Starbucks ......................................................
2.2 COMPARATIVE AND COMMON-SIZE ANALYSIS ..........................................
2.2.1 Comparative Horizontal Analysis for Income Statement (Starbucks) ...................
2.2.2 Comparative Horizontal Analysis for Balance Sheet (Starbucks) .........................
3.0 FINANCIAL RATIO ANALYSIS (LIQUIDITY AND PROFITABILITY ..............
RATIO) ............................................................................................................................
3.1 FINANCIAL RATIO ANALYSIS OF STARBUCKS .............................................
4.0 FINDINGS .......................................................................................................................
5.0 CONCLUSION ...............................................................................................................
REFERENCES...........................................................................................................................
APPENDICES ............................................................................................................................
1.0 INTRODUCTION
1.1 ABOUT STARBUCKS
1.1.1 History of Starbucks Company
Starbucks' journey started in 1971, located in Seattle's historic Pike Place Market along
the cobblestone streets. Starbucks was introduced by Jerry Baldwin, Zev Siegl, and Gordon
Bowker. Starbucks' name was inspired by the classic novel "Moby-Dick," which evokes the
early coffee traders' maritime tradition. It offers customers fresh-roasted coffee beans, tea, and
spices from all over the world to take home. Decades later, a young New Yorker, Howard
Schultz, visits Starbucks and is fascinated by the coffee's taste from the first sip. Later in 1982,
he decided to join the company, leading to another exploration. Howard first experienced Italy's
famous espresso bar on a trip to Milan in 1983, and he returned to Seattle motivated to bring
the warmth and art forms of the country's coffee culture to Starbucks. By 1987, Starbucks was
ready to start its next chapter of their coffeehouse and had switched from brown to green
aprons.

In 1986, Howard Schultz launched his first coffee shop in the Columbia Seafirst Centre,
two others in Seattle and one in Vancouver. He also recruited Dave Olsen, one of Seattle's first
bohemian espresso bars, as a coffee consultant and staff trainer. Schultz decided to merge the
six-unit Starbucks chain, which his old colleagues had offered when Starbucks was
experiencing difficulties. He also changed Starbucks company name, and it prepared to go
national as Starbucks Corporation. When Starbucks Coffee opened its first location in Japan in
1996, it began expanding globally. In early 2000, the company signed a partnership with
Kozmo.com Incorporated, an Internet home-delivery service that sends DVDs, snacks, and
other products to its consumers. Starbucks was working to reach Schultz's high targets of 500
locations in Japan and Europe by 2003 and 20,000 stores worldwide by the early twenty-first
century. In June 2000, he resigned as CEO of the company to become the company's chief
global strategist. Jim Donald appointed Orin Smith as Chief Executive Officer (CEO) in 2005,
and the total number of stores this year is 10,241. The company then introduced the first paper
beverage cup manufactured from post-consumer recycled fibre. In 2009, the company had 16
635 stores around the world. Starbucks Coffee Company's global operations resulted in total
net revenues of USD 9.8 billion for its business sales and operations.

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1.1.2 Starbucks Mission and Vision
Starbucks Corporation's mission and vision statements represent the company's
commitment to being a market leader in the coffee and coffeehouse industries. The corporate
mission statement explains what the company does for its target customers. On the other hand,
a company's vision demonstrates its strategic direction regarding what it wishes to accomplish
in the future. Starbucks mission and vision, as well as values, are stated as below;

Mission

• Starbucks aims to "inspire and nurture the human spirit - one person, one cup, and one
neighbourhood at a time."
Vision

• “To establish Starbucks as the foremost provider of the finest coffee in the world while
retaining our uncompromising beliefs as we develop" is a Starbucks' vision statement.
Values

• Starbucks creates a welcoming culture of warmth and belonging for all.

• Starbucks acts with daring, challenging the existing quo and developing new methods
for our organization and each other to grow.
• Starbucks is connecting with openness, dignity, and respect while being present.
• Starbucks will give its all, holding itself accountable for the results.
• Through the prism of humanity, Starbucks is performance-driven.

Starbucks' mission statement represents its efforts to keep its operations functioning
smoothly. Starbucks is the world's largest famous coffee roaster and retailer, with over 30,000
branches in more than 75 countries. Starbucks wants to bring its history and an unforgettable
life experience with each cup of coffee. Starbucks is hoping to serve fantastic coffee and
contribute to a better world. The first Starbucks's opened in 1971 is just as accurate as today.

Furthermore, Starbucks also strives to become resource positive, indicating they are
giving back more to the world than they take. The corporation aims to store more carbon than
they produce, replenish more freshwater than they consume, and eliminate waste. Starbucks is
determined to engage with its customers and attract them by offering high-quality and delicious
coffees worldwide.

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1.1.3 Issue And Challenge Starbuck Cooperation

3
 1.2 LITERATURE REVIEW

According to a study conducted by Al-Nasser (2014), in his journal titled “The Impact
of Financial Analysis in Maximizing the Firm’s Value” A Case Study On The Jordanian
Industrial Companies, ”the author shows a study on the relationship between income, financial
position, and how This relationship is evolving. One hundred questionnaires were designed for
this purpose and distributed by hand to a randomly selected sample of employees from various
Jordanian industrial companies.The Statistical program of the Social Sciences Package for the
Social Sciences (SPSS) analyzed the resolution data. Finally, the study found that financial
analysis has a strong positive influence in assisting managers in making effective decisions that
increase firm profitability and value.

Based on a study by Hasanaj and Kuqi (2019), with his journal entitled "Analysis of
Financial Statements" in the “Humanities and Social Science Research” journal article, the
author asserts that the primary goal of this research is to identify, forecast, and evaluate the
best future economic conditions and company performance. The study's other purpose is to
analyse financial statements and provide relevant data to financial managers to make better-
informed decisions. The financial statement employs tools, analytical techniques, and required
approaches for business analysis. It serves as a diagnostic method for analysing financing,
investment, and operational activities and a tool for assessing management and other business
decisions. Managers, shareholders, investors, and all other interested parties use financial
statement analysis, or financial report analysis, to determine the state of the business. Managers
use financial reports to assess the company's current situation and then provide information to
shareholders to determine whether the company's investments are reasonable. The analysis of
the company's financial statements is essential to potential investors because they want to know
the company's current state before deciding whether or not to invest.

Furthermore, according to a study conducted by Endri et al. (2020) in their journal

entitled "Determinants of Profit Growth in Food and Beverage Companies in Indonesia" in
'The Journal of Asian Finance,” the purpose of the research is to determine the impact of the
current ratio (CR), current liability to inventory (CLI), total asset turnover (TAT), net profit
margin (NPM), sales growth (SG), and company size (FS) on profit growth (PG). From 2014
to 2018, the research population consisted of 18 companies in the Food and Beverage (F&B)
sector listed on the Indonesia Stock Exchange (IDX). The standard effect panel data regression
model is used in the data prediction model. The total asset turnover (TAT), net profit margin

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(NPM), and sales growth (SG) ratios positively influence profit growth (PG). In contrast, the
current ratio (CR) and current liability to inventory (CLI) ratios have a negative influence. The
size of a company has no bearing on the growth of its profits. The study's findings suggest that
if a company operates efficiently and with low liquidity, it can boost profits and encourage
growth in sales.

A study by Saputera, Saudi, and Sinaga (2021) with their journal entitled "Analysis Of
Financial Performance On Profit in The Food And Beverages Sub Sector Company." in the
"Turkish Journal of Computer and Mathematics Education," the goal of this study is to
determine the intended effect and to aid management in making decisions, as well as to identify
benefits and drawbacks, as well as financial considerations. The corporation expects profit
growth in each period, but the difference is that the profit does not match the expectation, and
the company loses money. The achievement of goals is a metric of a company's operational
success and a scale or description for future planning. Profits aren't always profits; they might
also achieve future goals. The most outstanding technique to gain information from financial
reports is through or through ratio analysis in finance. Liquidity measures, such as the Current
Ratio (CR), solvency or leverage ratios, such as the Debt to Asset Ratio (DAR), activity ratios,
such as Total Asset Turnover (TAT), and profitability ratios, such as Net Profit Margin (NPM),
can be used to assess financial circumstances or performance. Data processing entails
transporting data in the food and beverage sector (food and beverage firms). Sixteen companies
were studied during five years (2012-2016), with a sample of ten companies. On the Indonesia
Stock Exchange (IDX), ten food and beverage firms are described in detail (2012-2016).
According to simultaneous research results, the factors Current Ratio (CR), Debt to Asset Ratio
(DAR), Total Asset Turnover (TAT), and Net Profit Margin (NPM) combined affect earnings.

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1.3 PURPOSE OF STUDY
This group project of the Financial Performance Analysis course requires students to
analyse the financial analysis of companies in the hospitality and tourism industry. Students
must compare the financial performance of an organization using financial tools such as
financial ratios, financial statement analysis (i.e., historical data analysis, comparative analysis,
trend index analysis) and any other relevant financial methods. For our study, our group
selected a company from the food and beverage industry: Starbucks. We have also decided to
use two methods: the first is financial statement analysis, which uses historical data and the
second is comparative data analysis. Second, to compare the financial results of the two
organizations for 2019 and 2020, we used ratio analysis. Financial accounting is important in
the industry because it allows managers to plan and generate budgets, track overall financial
performance, assess public perceptions, develop short- and long -term strategies, etc.

We may obtain results from the analysis of historical data to view and compare the short
-term and long -term performance trends of the company by completing this report. Based on
the diagram provided, we can describe the analysis of historical data. In addition, we obtain
financial performance results through comparative analysis. Comparative analysis is divided
into comparative horizontal analysis and normal size vertical analysis. This analysis is
compared using income statement and balance sheet. Comparative analysis is a technique for
comparing items and identifying their similarities and differences. We will learn to compare
items and report the information gathered using this comparative analysis.

Finally, ratio analysis gives us new information that we can use to assess a firm’s
performance trends over time. We also learn about ratio formulas and computation as well as
explain our cumulative ratios. Financial analysis tools are important to understand because they
are commonly used in the hospitality and tourism industries. When students start working, they
will use the financial analysis they have learned. The Financial Performance Analysis course
is designed to help students become better managers because of the importance of financial
analysis in decision making. Managers must understand how to use this financial information
to improve the overall financial performance of the company. Not only that but financial
research helps in the budgeting process. Strategic forecasting is necessary to prepare for
challenges and implement strategic planning.

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2.0 FINANCIAL ANALYSIS OF STARBUCKS
2.1 HISTORICAL PERFORMANCE ANALYSIS
2.1.1 Historical Performance Analysis of Starbucks
Table 1: The Component Historical Performance Analysis of Starbucks for Two Years

2019 Years (USD) 2020 Years (USD)

Sales 26,508,600,000 23,518,000,000
Expenses 22,728,700,000 22,278,800,000
Net Income (Profit for the 3,599,200,000 928,300,000
financial years)
Total Assets 19,219,600,000 29,374,500,000
Total Liabilities 25,450,600,000 37,173,900,000
Equities 6,231,000,000 7,799,400,000
Current Assets 5,653,900,000 7,806,400,000
Current Liabilities 6,168,700,000 7,346,800,000

Graph 1: The Historical Performance Analysis of Starbucks for Two Years

The Historical Performance Analysis of Starbucks for 2020-

2019
40,000,000,000
35,000,000,000
30,000,000,000
25,000,000,000
20,000,000,000
15,000,000,000
10,000,000,000
5,000,000,000
0
Sales Expenses Net Income Total Total Equities Current Current
(Profit for Assets Liabilities Assets Liabilities
the
financial
years)

2019 Years (USD) 2020 Years (USD)

7
 Graph 1 shows the performance of historical analysis on Starbucks from 2019 to 2020
with every eight financial components. From the graph 1, we can see sales is decrease from
2019 to 2020 which is different $2,990,600,000 ($26,508,600,000 – $23,518,000,000). The
sale dropped because the consolidated net revenues of $6.2 billion were down 8% from the
previous year, mostly owing to sales lost due to the COVID-19 epidemic. The consequences
of changed operations, fewer hours, reduced consumer traffic, and temporary shop closures
resulted in $1.2 billion in lost revenue relative to the company’s estimates before the epidemic.
In expenses, also show a decrease from $22,728,700,000 to $22,278,800,000 in both 2019 and
2020. The dip was caused by Starbucks taking initiatives to recover revenue by the
consequences of changed operations, fewer hours, reduced consumer traffic, and temporary
shop closures, resulting in $1.2 billion in lost revenue relative to the company’s estimates
before the epidemic. Following to net income showing the biggest drop among all the
components of historical analysis. The biggest drop in net income can be seen in graph one;
recorded net income dropped which is $928,300,000 and $3,599,200,000 in 2019 and 2020.
With the difference of this amount, $2,670,900,000 ($3,599,200,000 - $928,300,000),
Starbucks’ challenge in achieving a steady value net income is reduced sales and greater costs.

Besides, in total assets of Starbucks show rise from $19,219,600,000 in 2019 to

$29,374,500,000 in 2020 with different recorded $10,127,900,000. Increase in total assets due
to all recognized assets' carrying amounts as of the balance sheet date. Assets are the likely
future economic gains that an entity receives or controls due to previous transactions or
occurrences. The total liabilities reached an enlargement from 2019 to 2020, $25,450,600,000
and $37,173,900,000. The difference recorded is $11,723,300,000 ($25,450,600,000 –
$37,173,900,000) because Starbuck's consumption of money is reduced as a result of this
condition, which may indicate a cash flow. Meanwhile, for the equities of Starbucks, there is a
slightly rise from $6,231,000,000 in 2019 to $7,799,400,000 in 2020 with the different
$1,568,400,000 ($6,231,000,000 – $7,799,400,000).

Furthermore, based on the graph 1 show the trend of current assets is increased from
$5,653,900,000 in 2019 to $7,806,400,000 which recorded $2,152,500,000 ($5,653,900,000 -
$7,806,400,000). While the current liabilities have recorded a rising with the amount
$6,168,700,000 to $7,346,800,000 in both 2019 and 2020. The difference of amount increased
is $1,178,100,000 ($6,168,700,000 – $7,806,400,000).

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2.2 COMPARATIVE AND COMMON-SIZE ANALYSIS
2.2.1 Comparative Horizontal Analysis for Income Statement (Starbucks)
Table 1: The Comparative Horizontal Analysis Income Statement of Starbucks

(In Millions, Except Per Share Data)

Year Ending Increase or Decrease from

September 29 the Year 2019 to 2020
United Percent
2019 2020
States Dollar Change
(USD) (USD)
(USD) (%)
Net Revenues:
Company-Operated Stores 21,544.4 19,164.6 -2,379.8 -11.05
Licensed Stores 2,875.0 2,327.1 -547.9 -19.06
Other 2,089.2 2,026.3 -62.9 -3.01
Total Net Revenues 26,508.6 23,518.0 -2,990.6 -11.28

Product and Distribution Costs 8,526.9 7,694.9 -832 -9.76

Store Operating Expenses 10,493.6 10,764.0 +270.4 +2.58
Other Operating Expenses 371.0 430.3 +59.3 +15.98
Depreciation and Amortization 1,377.3 1,431.3 +54 +3.92
Expenses
General and Administrative 1,824.1 1,679.6 -144.5 -7.92
Expenses
Restructuring and Impairments 135.8 278.7 +142.9 +105.23
Total Operating Expenses 22,728.7 22,278.8 -449.9 -1.98

Income from Equity Investees 298.0 322.5 +24.5 +8.22

Operating Income 4,077.9 1,561.7 -2,516.2 -61.70

Gain Resulting from Acquisition - - - -

of Joint Venture
Net Gain Resulting from 622.8 - -622.8 -100
Divestiture of Certain Operations

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 Interest Income and Other, Net 96.5 39.7 -56.8 -58.86
Interest Expense (331.0) (437.0) +106 +32.02
Earnings Before Income Taxes 4,466.2 1,164.4 -3,301.8 -73.93

Income Tax Expense 871.6 239.7 -631.9 -72.50

Net Earnings Including Non- 3,594.6 924.7 -2,669.9 -74.28
Controlling Interests
Net Loss Attributable to Non- (4.6) (3.6) -1 -21.73
Controlling Interests
Net Earnings Attributable to
3,599.2 928.3 -2,670.9 -74.21
Starbucks

Earnings Per Share — Basic 2.95 0.79 -2.16 -73.22

Earnings Per Share — Diluted 2.92 0.79 -2.13 -72.95

Weighted Average Shares

Outstanding:
Basic 1,221.2 1,172.8 -48.4 -3.96
Diluted 1,233.2 1,181.8 -51.4 -4.17

The analysis of Starbucks' income statement is presented in the table above. According
to the analysis, Starbucks has a negative revenue trend from 2019 to 2020, evidenced by a -
2,990,600,000 USD reduction with a -11.28 percent change in the United States Dollar. This
drop comes as a result of Starbucks' low overall income. Many customers were hesitant to dine
out or go outside due to the pandemic COVID-19. Net revenue is calculated by deducting
discounts and returns from sales revenue. Net revenue is sometimes referred to as the "true top
line" because it displays total revenues after deducting only direct sales-related expenses.

Furthermore, viewing the total operating expenses has described a reduction with the
changes in United States Dollar is much -449,900,000 USD at -1.98%. The decline from 2019
to 2020 towards Starbucks Coffee company is despite Starbucks lowering its own cost of goods
sold (COGS), which refers to a direct cost of manufacturing products or services, such as
reducing the labor and material costs previously used. A company incurs an operating expense
due to its routine business activities. Rent, equipment, inventory costs, marketing, payroll,

10
insurance, step charges, and monies allocated for research and development are all examples
of operating expenses.

Moreover, the difference in operating income generated by Starbucks is -2,516,200,000

USD, with a percent change of -61.70 percent from 2019 to 2020. Operating income represents
earnings before other income and expenses and income taxes. The identifiable assets by
segment disclosed in this note are identified within each part. They include cash and cash
equivalents, ROU assets, net property, plant and equipment, equity and cost investments,
goodwill, and other intangible assets. Business assets are not assigned to reportable operating
segments. They are primarily made up of cash and cash equivalents available for general
corporate purposes, investments, assets of the corporate headquarters and roasting facilities,
and inventory.

Starbucks' earnings before income taxes from 2019 to 2020 similarly showed a negative
record, with a -3,301,800,000 USD drop at a -73.93 percent decline. Earnings before taxes
(EBT) is a metric used to assess a company's financial performance. It is a calculation of a
company's earnings before taxes. Revenue fewer expenses, excluding taxes, is the computation.
EBT is a line item on the income statement of a business. It displays a company's earnings after
deducting the cost of goods sold (COGS), interest, depreciation, general and administrative
expenses, and other operating expenses from gross sales.

Lastly, net earnings attributable to Starbucks have decreased by -2,670,900,000 USD,

representing a -74.21 percent reduction from 2019 to 2020. Net income is the net profit or loss
after all sales, income items, and expenses have been deducted. Starbucks' net income
attributable, also known as net income applicable to common shareholders, is computed by
taking net income and subtracting a part that belongs to what is known as minority interests.

2.2.2 Comparative Horizontal Analysis for Balance Sheet (Starbucks)

Table 2: The Comparative Horizontal Analysis Balance Sheet of Starbucks
Corporation (In Millions, Except Per Share Data)

United States
2019 2020 Percent
Dollar Change
(USD) (USD) Change
(USD)
ASSETS
Current Assets:

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Cash and Cash Equivalents 2,686.6 4,350.9 +1,664.3 +61.95
Short-Term Investments 70.5 281.2 +210.7 +298.87
Accounts Receivable, Net 879.2 883.4 +4.2 +0.48
Inventories 1,529.4 1,551.4 +22 +1.44
Prepaid Expenses and Other Current 488.2 739.5 +251.3 +51.47
Assets
Total Current Assets 5,653.9 7,806.4 +2,152.5 +38.07

Long-Term Investments 220.0 206.1 -13.9 -6.32

Equity Investments 396.0 478.7 +82.7 +20.88
Property, Plant and Equipment, Net 6,431.7 6,241.4 -190.3 -2.96
Operating Lease, Right-Of-Use - 8,134.1 +8,134.1 +100
Asset
Deferred Income Taxes, Net 1,765.8 1,789.9 +24.1 +1.36
Other Long-Term Assets 479.6 568.6 +89 +18.56
Other Intangible Assets 781.8 552.1 -229.7 -29.38
Goodwill 3,490.8 3,597.2 +106.4 +3.05
TOTAL ASSETS 19,219.6 29,374.5 +10,154.9 +52.84

LIABILITIES AND
SHAREHOLDERS'
EQUITY/(DEFICIT)
Current Liabilities:
Accounts Payable 1,189.7 997.9 -191.8 -16.12
Accrued Liabilities 1,753.7 1,160.7 -593 -33.81
Accrued Payroll and Benefits 664.6 696.0 +31.4 +4.72
Income Taxes Payable 1,291.7 98.2 -1,193.5 -92.40
Current Portion of Operating Lease - 1,248.8 +1,248.8 +100
Liability
Stored Value Card Liability and 1,269.0 1,456.5 +187.5 +14.78
Current Portion of Deferred
Revenue
Short-Term Debt - 438.8 +438.8 +100

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 Current Portion of Long-Term Debt - 1,249.9 +1,249.9 +100
Total Current Liabilities 6,168.7 7,346.8 +1,178.1 +19.10

Long-Term Debt 11,167.0 14,659.6 +3,492.6 +31.28

Operating Lease Liability - 7,661.7 +7,661.7 +100
Deferred Revenue 6,744.4 6,598.5 -145.9 -2.16
Other Long-Term Liabilities 1,370.5 907.3 -463.2 -33.80
Total Liabilities 25,450.6 37,173.9 +11,723.3 +46.06

Shareholders’ Deficit:
Common Stock ($0.001par Value) 1.2 1.2 - -
— Authorized, 2,400.0 Shares;
Issued and Outstanding, 1,173.3
And 1,184.6 Shares, Respectively
Additional Paid-In Capital 41.1 373.9 +332.8 +809.73
Retained Deficit (5,771.2) (7,815.6) +2,044.4 +35.42
Accumulated Other Comprehensive (503.3) (364.6) -138.7 -27.56
Loss
Total Shareholders’ Deficit (6,232.2) (7,805.1) +1,572.9 +25.24

Non-controlling Interests 1.2 5.7 +4.5 +375

Total Deficit (6,231.0) (7,799.4) +1,568.4 +25.17
TOTAL LIABILITIES AND
SHAREHOLDERS' 19,219.6 29,374.5 +10,154.9 +52.84
EQUITY/(DEFICIT)

Table 2 shows Starbucks' comparative horizontal analysis balance sheet from 2019 to
2020. Under assets, we can see that Starbucks' total current assets have increased by
+2,152,500,000 USD or a +38.07 percent increase. This good trend has caused Starbucks to
rise from 5,653,900,000 USD to 7,806,400,000 USD in 2019 and 2020. Based on the
computation of non-current and current assets, Starbucks' total assets show a positive change
in United States Dollars of +10,154,900,000 USD and +52.84 percent. Total assets in 2019 are

13
smaller than total assets in 2020, with both sums being 19,219,600,000 USD and
29,374,500,000 USD.

Meanwhile, Starbucks' current liabilities are unfavorable because 2019 has a lesser
record than 2020, with both amounts totaling 6,168,700,000 USD and 7,346,800,000 USD.
The increase in current liabilities is proven by a change of percent +19.10%, and the United
States Dollar is +1,178,100,00 USD. As a result of these liabilities, Starbucks' overall liabilities
increased significantly in 2019 and 2020, from 25,450,600,000 USD to 37,173,900,000 USD.
This situation makes Starbucks unfavorable, with a USD change of +11,723,300,000 at a
+46.06 percent change.

Next, the total shareholders’ deficit shows an increase in 2020 at 7,805,100,000 USD
compared to the year 2019 at 6,232,200,000 USD. The total shareholders’ deficit rise indicates
a change in United States Dollar by noting +1,572,900,000 USD and +25.24% change. A
shareholder deficit can and frequently is a warning sign. It signifies that the company has not
only been losing money but has also lost more money than its owners invested into it in the
first place.

Lastly, the total liabilities and shareholders' equity show a higher in 2020 at
29,374,500,000 USD, and the lowest is in 2019 at 19,219,00,000 USD. This situation makes
Starbucks favorable because of the United States Dollar record change +10,154,900,000 at
+52.84% change. However, after subtracting total liabilities from total assets, shareholders'
equity is the claim. If shareholders' equity is positive, the company has enough assets to cover
its liabilities, but if it is negative, its liabilities exceed its assets.

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3.0 FINANCIAL RATIO ANALYSIS (LIQUIDITY AND PROFITABILITY
RATIO)
3.1 FINANCIAL RATIO ANALYSIS OF STARBUCKS

LIQUIDITY RATIO

Application 2019 2020

Compute:
1. Current Ratio $ 5,653,900,000 $ 7,806,400,000
Formula: Current Assets
$ 6,168,700,000 $ 7,346,800,000
Current Liabilities
= 0.92: 1 = 1.06: 1
2020 = 1.06: 1
Explanation For every $1 Current Liability, the Starbucks Corporation
has 1.06:1 Current Assets to settle Current Liabilities.
This situation allows Starbucks Corporation to manage its
short-term resources to pay for its short-term debt.
Application 2019 2020
Compute:
2. Quick Ratio $ 2,686,600,000 + $ 4,350,900,000 +
Formula: $ 879, 200, 000 + $ 883, 400, 000 +
Cash + Account Receivables $ 70, 500, 000 $ 281, 200, 000
+ Marketable Securities
$ 6, 168, 700, 000 $ 7, 346, 800, 000
Current Liabilities = 0.59: 1 = 0.75: 1

2020 = 0.75: 1
Explanation For every $1 Current Liability, the Starbucks Corporation
has 0.75:1 Quick Assets to settle Current Liabilities. This
situation allows Starbucks Corporation to manage its
short-term resources to pay for its short-term debt.
Application 2019 2020

15
Compute:
3. Cash Ratio $ 2,686, 600, 000 $4,350,900,000
Formula: Cash
$ 6, 168, 700, 000 $ 7, 346, 800, 000

Current Liabilities
= 0.44: 1 = 0.59: 1

2020 = 0.59: 1
Explanation For every $1 Current Liability, the Starbucks Corporation
has $ 0.59 Cash to settle Current Liabilities. The larger
ratio can indicate Starbucks Corporation has efficient in
generating its cash to pay for its short-term debt.

16
 Application 2019 2020
Compute: ($ 693,100,000 + $ ($ 879,200,000 + $
4. Account Receivable as 879,200,000) ÷ 2 883,400,000) ÷ 2
Percentage of Sales Revenue = $ 786,150,000 = $ 881,300,000
Formula:
$786,150,000 $881,300,000
Average Acc Receivable

$ 26,508,600,000 $ 23,518,000,000
Sales Revenue
= 2.97% = 3.75%
*Average Account Receivable
= (Ac Receivables Previous
Year + Ac Receivables
Present Year) ÷ 2
2020 = 3.75%
Explanation For every $1 Sales Revenue, the Starbucks Corporation
has 3.75% Credit Sales. This situation shows that the
Starbucks Corporation ratio is smaller, indicating a better
ability of their selling activities and a better opportunity
to generate cash from sales.
Application 2019 2020
Compute: ($ 693,100,000 + $ ($ 879,200,000 + $
5. Account Receivable 879,200,000) ÷ 2 883,400,000) ÷ 2
Turnover = $ 786,150,000 = $ 881,300,000
Formula:
$ 26,508,600,000 $ 23,518,000,000
Sales Revenue

$ 786,150,000 $ 881,300,000
Average Acc Receivable
= 33.72 Times = 26.69 Times
*Average Account Receivable
= (Ac Receivables Previous
Year + Ac Receivables
Present Year) ÷ 2
2020 = 26.69 times

17
Explanation From the total sales revenue, Starbucks Corporation can
offer credit sales 33.72 times from the current level on
Account Receivable in 2019 and 26.69 times from the
current status on Account Receivable. The bigger this
ratio indicates the better ability of Starbucks to generate
sales.
Application 2019 2020
Compute:
6. Average Collection Period 365 Days 365 Days
Formula:
33.72 Times 26.69 Times
365 Days
= 10.8 @ 11 Days = 13.7 @ 14 Days
Receivable Turnover

2020 = 14 Days
Explanation Starbucks Corporation can collect its debts from the
Credit Sales for every 11 days in 2019 and 14 days in
2020. This ratio shows that in 2019, Starbuck has a
smaller gap for the collection of debts if compared to
2020.

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 PROFITABILITY RATIO

Application 2019 2020

Compute:
1. Net Income to Revenue $ 3, 599, 200, 000 $ 928, 300, 000
Ratio
Formula: Net Income $ 26, 508, 600, 000 $ 23, 518, 000, 000

Sales Revenue = 13.58% = 3.95%

2020= 3.95%
Explanation For every $1 Sales Revenue, Starbucks generates 3.95% net
income. This ratio measures the ability of Starbucks to
generate Net Income from sales activities. This shows that
Starbucks only generated 3.95% profits in 2020, which is
lower than 2019, 13.58%.
Application 2019 2020
Compute:
2. Net Income to Asset Average Total Assets= Average Total Assets=
Ratio (Return on Assets) ($ 24, 156, 400, 000 + ($ 19, 219, 600, 000 + $ 29,
$ 19, 219, 600, 000) ÷ 2 374, 500, 000) ÷ 2

Formula: Net Income = $ 21, 688, 000, 000 = $ 24, 297, 050, 000

Average Total $ 3, 599, 200, 000 $ 928, 300, 000

Assets
$ 21, 688, 000, 000 $ 24, 297, 050, 000
*Average Total Asset =
(Total Assets Previous
Year + Total Assets Present
Year) ÷ 2

= 16.60% = 3.8%

2020: 3.8%

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Explanation For every $1 Total Asset, Starbucks generates 3.8% net
income for 2020. Starbucks generates Net Income in 2019 is
16.60%, which is higher than in 2020. It shows that in 2019,
their operation of generating income is better than in 2020.
Application 2019 2020
Compute:
3. Assets Turnover Ratio Average Total Assets= Average Total Assets=
($ 24, 156, 400, 000 + ($ 19, 219, 600, 000 + $ 29,
$ 19, 219, 600, 000) ÷ 2 374, 500, 000) ÷ 2
Formula: Sales Revenue
= $ 21, 688, 000, 000 = $ 24, 297, 050, 000
Average Total
Assets $ 26, 508, 600, 000 $ 23, 518, 000, 000

*Average Total Asset =

$ 21, 688, 000, 000 $ 24, 297, 050, 000
(Total Assets Previous
Year + Total Assets Present
= 1.22: 1 = 0.97: 1
Year) ÷ 2

2020= 0.97: 1
Explanation For every $1 Total Asset, Starbucks generates 0.97 Sales
Revenue for 2020. Starbucks generated Sales revenue in
2019 is 1.22, higher than in 2020. This shows that Starbucks
can generate sales revenue from total assets.

Application 2019 2020

Compute: $ 70, 500, 000 + $ 220, 000, $ 281, 200, 000 + $ 206, 100,
4. Return on Investment 000 + $ 396, 000, 000 000 + $ 478, 700, 000
(ROI) = $ 686, 500, 000 = $ 966, 000, 000
Formula: Net Income
$ 3, 599, 200, 000 $ 928, 300, 000
Total Investment
$ 686, 500, 000
$ 966, 000, 000
Starbucks Balance Sheet: = 524.28%
= 96.10%
*Total Investment= Short-
term Investments + Long-
term Investments + Equity
Investments

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 2020= 96.10%
Explanation For every $1 Investment, Starbucks generates 96.10% net
income. Starbucks can generate net income from the
investment made (capital) into their business. Thus, it shows
that Starbucks generated 524.28% net income in 2019,
which is better than 2020.

Application 2019 2020

Compute:
5. Return on Equity (ROE) $ 3, 599, 200, 000
$ 928, 300, 000

$ (6, 231, 000, 000)

Formula: Net Income
$ (7, 799, 400, 000)
Total Equity
= - 57.76%

= - 11.90%
2020= -11.90%
Explanation For every $1 Equity, Starbucks generates -11.90% net
income. Starbucks cannot generate net income from the
investment made (capital) by the owners/shareholders.

21
 4.0 FINDINGS

Due to the COVID-19 pandemic, Starbucks Corporation faced a decline in sales of $

2,990,600,000 from 2019 to 2020. The business did not operate normally and generate revenue.
Due to the closure of the business, revenue experienced lower expenses because costs (i.e.,
salaries, taxes and utilities) were lower. Recorded net income decreased from $ 3,599,200,000
in 2019 to $ 928,300,000 in 2020 because it was lower than expenses. Despite the reduction in
spending, it still exceeds income. Next, there is a trend in total assets, $ 10,154,900,000 from
2019 to 2020, due to shareholder investment becoming greater to recover finances during a
pandemic. Furthermore, total liabilities face a decrease of $ 11,723,300,000 from 2019 to 2020
and a decrease in current liabilities as they restructure their liabilities. Equity also increased
from $ 6,231,000,000 in 2019 to $ 7,799,400,000 in 2020. Equity increased because of offers,
such as cheaper deals (i.e., packages or discounts), to attract and gain customer trust. The
current asset trend is trending with a difference of $ 5,152,500,000 as they have more short -
term resources in 2020 than in 2019.

22
 5.0 CONCLUSION

In short, Starbucks Corporation had an outstanding performance even in a pandemic

season. They can offer excellent customer value and attract customers with their marketing
strategies. The unique way and creativity of their Coffee house attracts the attention of their
customers who want the environment they provide for their customers. Starbucks Corporation
can manage and plan their finances properly, such as expenses, investments, equity, etc. Not
only that, but they are also able to increase their sales by offering new menus by collaborating
with other well -known brands such as Nestle. , which is a ‘Ready to Drink’ coffee drink to
reach more consumers across the region and community figures such as a collaboration with
Taylor Swift for the ‘Red’ promotion.

Because of the Covid-19 Pandemic, many businesses suffered badly, including

Starbucks Corporation, but they were able to maintain their business and still be profitable in
those situations. They come up with new ideas to solve the world’s problems even though many
countries impose closures for everyone. Meanwhile, Starbucks introduced a ‘Starbucks
Reward’ for those who buy their products to increase their loyalty program and improve their
digital touch points such as mobile ordering. In a pandemic situation, many people prefer to
order using online platforms to meet their customers ’growing needs for convenience.

Furthermore, Starbucks Corporation is doing well as they improve their Drive past
system. This may have good implications for their average screening in the future. In addition,
they are always following and always in touch with trends and linking their products. In
conclusion, Starbucks Corporation has a more outstanding performance in 2019 and 2020.

23
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 APPENDICES

1. Starbucks Financial Report

Figure 1 Income Statement

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Figure 2 Balance Sheet (2019 and 2020)

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Figure 3 Balance Sheet (2017 and 2018)

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2. Gloria Jean’s Coffees Financial Report

Figure 4 Income Statement (2019 and 2020)

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30