Starbucks Corporation Company Evaluation

Operating Activities Analysis

  • Income from normal operations
  • Growth of over $2 Billion each year (2014-2016)
  • Operating expenses are increasing

Starbucks' revenue, net income, and cash flows have been trending consistently, but not significantly, upward. Based on this consistency, and the quality of income, it can be reasonably assumed that future earnings will continue to trend as they have in years past.

Cash Flow Analysis

  • Increase in overall cash flows
  • Operating Activities - providing cash
  • Investing and Financing Activities - using cash

Since Starbucks is a growing company, we can expect to see its operating activities bring in cash, and its investing and financing activities use cash in the future.

Unrecorded Asset Analysis

  • Starbucks' worldwide presence, menu consistency, and customer atmosphere are its greatest unrecorded assets
  • These assets bring value and a strong customer following to the company

Comparative Analysis

  • Income statement analysis indicates that Starbucks falls between its largest competitors with regard to net income at 14% of sales, with McDonalds at 18% and Dunkin' Donuts at 13%
  • Starbucks' financial leverage is nearly even between debt (53%) and equity (47%), while their competitors are highly debt leveraged

In comparison to the competitors and the industry average, Starbucks is in a healthy financial position.

Future Prospects

  • Based on the MD&A and prior growth, sales are expected to increase 11% per year
  • As the company continues to grow, there will be an increase in operating cash flow, as well as continued use of cash from investing and financing activities
  • Starbucks is exploring many growth opportunities, such as higher-end stores, reserve coffees, and an expanded food menu

Starbucks has established a strong national and international presence in the specialty eateries industry. The company’s 2014-2016 financial statements indicate that they are in a healthy financial position, and they should expect to see continued sales growth and company expansion in the coming years.

References:

Financial Statement Analysis (Vol. 1). (2016). McGraw-Hill Education.

Starbucks Financial Statements. (n.d.). Retrieved February 20, 2017, from https://www.sec.gov/cgi-bin/viewer?action=view&cik=829224&accession_number=0000829224-16-000083&xbrl_type=v#

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