Mini Case # 1: You are given the following income statement and balance sheet for Starbucks and McDonald Companies. StarBucks (SBUX) Mc Donalds (MCD) Income Statement PERIOD ENDING 27-Sep-09 31-Dec-08 Total Revenue $9,774,600.00 $22,744,700.00 Cost of Revenue $4,324,900.00 $13,952,900.00 Gross Profit $5,449,700.00 $8,791,800.00 Total Operating Expenses $4,887,700.00 $1,950,800.00 Operating Income or Loss $562,000.00 $6,841,000.00 Income from Continuing Operations Total Other Income/Expenses Net $36,300.00 $354,000.00 Earnings Before Interest And Taxes $598,300.00 $6,487,000.00 Interest Expense $39,100.00 $0.00 Income Before Tax $559,200.00 $6,487,000.00 Income Tax Expense $168,400.00 $1,936,000.00 Net Income $390,800.00 $4,551,000.00 Starbucks (SBUX) Mc Donalds (MCD) Balance Sheet PERIOD ENDING Cash & Cash Equivalents Accounts receivable Inventories Other Current Assets Total Current Assets Long Term Investments Property Plant & Equipment Good will Other Assets Total assets Liabilities 27-Sep-09 $599,800.00 $557,600.00 $664,900.00 $213,500.00 $2,035,800.00 $423,500.00 $2,536,400.00 $0.00 $581,100.00 $5,576,800.00 31-Dec-08 $1,796,000.00 $1,060,400.00 $106,200.00 $453,700.00 $3,416,300.00 $1,212,700.00 $21,531,500.00 $2,425,200.00 $1,639,200.00 $30,224,900.00 Accounts Payable Short/Current Long Term Debt Other Current Liabilities Total Current Liabilities Long Term Debt Other Long Term Liabilities Deferred long term liability charges Total Liabilities Total Stockholder Equity Total Liabilities & Owner's Equity $1,192,100.00 $200.00 $388,700.00 $1,581,000.00 $549,300.00 $400,800.00 $0.00 $2,531,100.00 $3,045,700.00 $5,576,800.00 $2,970,600.00 $18,100.00 $0.00 $2,988,700.00 $10,560,300.00 $1,363,100.00 $1,278,900.00 $16,191,000.00 $14,033,900.00 $30,224,900.00 Required: 1. Calculate for both companies: current ratio, acid test ratio, average collection period, account receivable turnover, inventory turnover, total asset turnover, fixed asset turnover, debt ratio, times interest earned, gross profit margin, operating profit margin, operating return on assets and return on equity. 2- Analyze your results for both companies in terms of liquidity, asset management efficiency, financial leverage and profitability. 3- What conclusion can you draw if you were given the following two market ratios? PE ratio Market to Book Ratio SBUX 17.67 6.14 MCD 15.74 6.12 4. What are the disadvantages of using ratio analysis