Starbucks Financial Ratios and Financial Statements Analysis and Review

In "Starbucks 2018 Financial Statements and Financial Ratios: Defined, Discussed, and Analyzed for 5 Years” that was written by, Paul Borosky, MBA., doctoral candidate, and owner of Quality Business Plan and Finance Homework Help, the author summarized Starbucks 2019 10k, Starbucks 2018, 10k annual report, Starbucks 2017 10k annual report, and Starbucks 2016 10k annual reports as the basis for information gathering.  After all of Starbucks' 10k annual statements were collected, which included Starbucks Income Statements and Starbucks Balance Sheets, he then used proprietary financial templates to calculate different financial ratios such as Starbucks ROE, ROA, and debt ratio.

Starbucks 2015 to 2018 Income Statement Summarized

Summary Income Statement Starbucks 2014 - 2018
Column120182017201620152014
Revenues             24,720             22,387             21,316             19,163              16,448
COGS             10,175              9,034              8,509              7,788               6,859
Gross Profit             14,545             13,353             12,807             11,375               9,589
 
SG&A              1,759              1,451              1,409              1,197                  991
Depreciation              1,247              1,011                 981                 894                  710
R & D                 224                 154                   -                   -                    -
Other                   -                   -                   -                   -                    -
Operating Expenses              7,733              6,994              6,564              5,934               5,096
EBIT              3,883              4,135              4,172              3,601               3,081
Other Income                 191                 181                 103                   43                  143
Interest Expense                 170                   93                   81                   71                    64
EBT              5,780              4,318              4,199              3,903               3,160
Taxes              1,262              1,433              1,380              1,144               1,092
Net Income              4,518               2,885               2,818               2,757                2,068
Tax Rate21.8%33.2%32.9%29.3%34.6%

Starbucks 2018 Revenues Analysis:

Revenue Growth: In the last five years, Starbucks revenues have grown by approximately 10.8% annually.  Further, the organizations cost of goods sold grew by approximately 10.4% on an annual basis.  This indicates that the company is able to pass on their increased raw material costs to the customers.  This shows that the firm may have a loyal following and they are willing to pay more money for products offered.

Revenues  
Revenues and Growth
20182017201620152014
Revenues             24,720             22,387             21,316             19,163              16,448
Revenue Growth10.4%5.0%11.2%16.5%N/A

Starbucks 2018 SG&A Analysis:

SG&A:    Starbuck’s SG&A percentage, as compared to revenues, has increased from 6% in 2014 to 7.1% in 2018.  This shows that the firm is spending more money on overhead and advertising to generate less sales.

SG&A as % of Revenues
Income Statement 2018
20182017201620152014
Revenues             24,720             22,387             21,316             19,163              16,448
SG&A              1,759              1,451              1,409              1,197                  991
SG&A %
Revenues
7.1%6.5%6.6%6.2%6.0%

Starbucks 2018 Operating Expenses Analysis:

Operating expenses: Starbucks operating expenses has stayed relatively consistent at approximately 31% of sales over the last five years.  This indicates that the company’s management team is doing a relatively decent job in controlling costs.

Operating Expenses
Column120182017201620152014
Operating Expenses            7,732.5            6,993.6            6,563.5            5,933.5             5,095.5
%  of Sales.31.3%31.2%30.8%31.0%31.0%

Starbucks 2015 to 2018 Balance Sheet Summarized

Startbucks Summary Balance Sheet
20182017201620152014
Cash                8,756            2,462            2,129            1,530            1,708
Short Term Investment                  182               229               134                 81               135
Account Receivable                  693               870               769               719               631
Inventory                1,401            1,364            1,379            1,306            1,091
Other                1,463               358               350               334               286
Current Assets              12,494             5,283             4,761             3,971             4,169
Net PPE                5,929            4,920            4,534            4,088            3,519
Goodwill                3,542            1,539            1,720            1,575               856
Other                  602            1,024            1,496               665               472
Total Assets              24,156            14,366            14,330            12,416            10,753
 
Accounts Payable                1,179               783               731               684               534
Accrued Expense                2,298            1,935            1,999            1,755            1,514
Accrued Taxes                    -                 -                 -                 -                 -
Notes Payable                    -                 -                 -                 -                 -
LT Debt - Current                  350                 -               400                 -                 -
Other                    -                 -                 -                 -                 -
Total Current Liabilities                5,684            4,221            4,547            3,648            3,039
 
LT Debt                9,090            3,933            3,202            2,348            2,048
Other                1,431               751               690               601               392
Total Liabilities              22,981             8,909             8,439             6,597             5,479
 
Common Stock                    42                 43                 43                 43                 40
Treasury                    -                 -                 -                 -                 -
Retained Earnings                1,457            5,563            5,950            5,975            5,207
Other                    -                 -                 -                 -                 -
Total Equity                1,176             5,457             5,891             5,818             5,275
Total Equity & Liability              24,156            14,366            14,330            12,416            10,753

Starbucks 2018 Cash Analysis:

Cash:    Starbuck’s cash position had jumped from 2.4 billion to $8.7 billion in the last two years.  The substantial cash position indicates that the firm may not be utilizing their current assets in an optimal fashion.

Cash as a % of Sales
Balance Sheet
20182017201620152014
Cash                8,756            2,462            2,129            1,530            1,708
% of Sales35.4%11.0%10.0%8.0%10.4%
% of Total Assets36.2%17.1%14.9%12.3%15.9%

Starbucks 2018 Accounts Receivable Analysis:

 Accounts Receivable:  The organization’s Accounts Receivable had fallen from $870 million in 2017 to $693 million in 2018.  The reduction in Accounts Receivable may indicate that the company is tightening their credit policies with their franchisees and retail outlets.

Accounts Receivable as a % of Sales
Balance Sheet
20182017201620152014
Accounts Receivables                  693               870               769               719               631
% of Sales2.8%3.9%3.6%3.8%3.8%

Accounts Payable:    Starbucks accounts payable has increased from $783 million to $1.1 billion in the last two years.  This means that the firm is taking longer to pay their invoices to suppliers.

Accounts Payable as a % of Sales
Balance Sheet
20182017201620152014
 Accounts Payable                1,179               783               731               684               534
% of Sales4.8%3.5%3.4%3.6%3.2%

Starbucks 2018 Financial Ratios

Starbucks Liquidity Ratios
Ratios20182017201620152014
Current Ratio                  2.20             1.25             1.05             1.09             1.37
Cash Ratio                  1.54             0.58             0.47             0.42             0.56
Quick Ratio                  1.95             0.93             0.74             0.73             1.01
Asset Utilization
Ratios20182017201620152014
Total Asset Turnover                  1.02             1.56             1.49             1.54             1.53
Fixed Asset Turnover                  4.17             4.55             4.70             4.69             4.67
Days Sales Outstanding                10.23           14.19           13.16           13.70           14.00
Profitability Ratios
Ratios20182017201620152014
Return on Assets18.70%20.08%19.66%22.21%19.23%
Return on Equity384.27%52.86%47.83%47.39%39.21%
Net Profit Margin18.28%12.89%13.22%14.39%12.57%

Starbucks Current Ratio Analysis:

Current Ratio:  Starbucks current ratio is at approximately 2.2.  This means that the company has enough short-term assets to cover their short-term liabilities.

Starbucks 2018 Cash Ratio Analysis:

Cash Ratio:  The company’s cash ratio has grown from .56 to 1.5 for the last five years.  Most of the growth has come from new debt issuance.

Starbucks 2018 Fixed Asset Turnover Analysis:

Fixed Asset Turnover:  In 2017, Starbucks had a fixed asset turnover of 4.55.  In the following year, 2018, this line item declined to 4.17.  This indicates that the organization is not using their assets as optimally as they have in the past.

Starbucks 2018 Total Asset Turnover Analysis:

Total Asset Turnover:  Starbucks total asset turnover has decline from 1.53 in 2014 to 1.02 in 2018.  This indicates that the company may not be optimally utilizing all assets in the organization.

Starbucks 2018 Return of Assets Analysis:

Return on Assets:    Starbucks return on assets has declined from 22.2% in 2015 to 18.7% in 2018.  This shows that the company is not utilizing their assets as highly as they have in the past.

Starbucks 2018 Return of Equity Analysis:

Return on Equity:  The company’s return on equity has skyrocketed from 52.8% in 2017 to 384.2% in 2018.  A main reason for this increase is the significant accumulation of debt in the last two years.

Starbucks 2018 Profit Margin Analysis:

Net Profit Margin:    Starbucks profit margin has increased from 12.5% in 2014 to 18.2% in 2018.  This indicates that the company is increasing their profitability.  However, due to the substantial amount of debt taken on recently, this number may decline in the future.