Your parents are considering investing in Starbucks Corporation commonstock. They ask you, as an accounting expert, to
Question:
Your parents are considering investing in Starbucks Corporation commonstock. They ask you, as an accounting expert, to make an analysis of the company forthem. Fortunately, excerpts from a current annual report of Starbucks are presented inAppendix A of this textbook. Note that all dollar amounts are in thousands.Instructions
(a) Make a 5-year trend analysis, using 1992 as the base year, of (1) net revenues and (2)operating income. Comment on the significance of the trend results.
(b) Compute for 1996 and 1995 the (1) debt to total assets ratio and (2) times interestearned ratio. How would you evaluate Starbucks' long-term solvency?
(c) Compute for 1996 and 1995 the (1) profit margin ratio, (2) asset turnover ratio,(3) return on assets ratio, and (4) return on common stockholders' equity ratio. Howwould you evaluate Starbucks' profitability? Total assets at October 2, 1994, were\(\$ 231,421\), and total stockholders' equity at October 2, 1994, was \(\$ 109,898\).
(d) What information outside the annual report may also be useful to your parents inmaking a decision about Starbucks?
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