The financial statements of Green Mountain Coffee are presented in Appendix B, following the financial statements for
Question:
The financial statements of Green Mountain Coffee are presented in Appendix B, following the financial statements for Starbucks in Appendix A.
\section*{Instructions}
(a) Based on the information contained in these financial statements, compute the following 1996 ratios for each company:
(1) Debt to total assets
(2) Times interest earned
(b) Starbucks reports required future operating lease payments of \(\$ 364,740,000\), and Green Mountain Coffee reports \(\$ 5,097,000\). If these transactions had instead been reported as purchases, the reported assets and liabilities of Starbucks would increase by approximately \(\$ 225,000,000\) and those of Green Mountain Coffee would increase by \(\$ 3,500,000\). Recalculate the debt to assets ratio for each company treating these transactions as purchases.
(c) What conclusions concerning the companies' long-run solvency can be drawn from these ratios? What are the implications of your findings in part (b)?
Step by Step Answer:
Financial Accounting Tools For Business Decision Making
ISBN: 9780471169192
1st Edition
Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso