Please show the work in Excel

Review the requirements of the Chapter 3 Mini-Case, parts b through j. Then apply those requirements to do an analysis of Starbucks. Do the analysis on the basis of the figures for the most recent year. For part g, use the 2 most recent years.

Download 10K financial statements for the most recent year for Starbucks. A good source is the company's home page. Also compare the Starbucks ratios to the industry averages and comment on significant differences. You'll need the company's stock price for several of the ratios; use the fiscal year end price.

Please see attachment for the assignment and example of the Excel mini case.

A 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 B C D E F Chapter 3 Mini Case The first part of the case, presented in Chapter 2, discussed the situation of Computron Industries after an expansion program. A large loss occurred in 2016, rather than the expected profit. As a result, its managers, directors, and investors are concerned about the firm's survival. Jenny Cochran was brought in as assistant to Computron's chairman, who had the task of getting the company back into a sound financial position. Cochran must prepare an analysis of where the company is now, what it must do to regain its financial health, and what actions to take. Your assignment is to help her answer the following questions, using the recent and projected financial information shown next. Provide clear explanations, not yes or no answers. Input Data: 2015 $8.50 100,000 40% $40,000 2016 $6.00 100,000 40% $40,000 2017E $12.17 250,000 40% $40,000 Assets Cash and equivalents Short-term investments Accounts receivable Inventories Total current assets Gross Fixed Assets Less Accumulated Dep. Net Fixed Assets Total Assets 2015 $9,000 $48,600 $351,200 $715,200 $1,124,000 $491,000 $146,200 $344,800 $1,468,800 2016 $7,282 $20,000 $632,160 $1,287,360 $1,946,802 $1,202,950 $263,160 $939,790 $2,886,592 2017E $14,000 $71,632 $878,000 $1,716,480 $2,680,112 $1,220,000 $383,160 $836,840 $3,516,952 Liabilities and equity Accounts payable Notes payable Accruals Total current liabilities Long-term bonds Total liabilities Common stock (100,000 shares) Retained earnings Total common equity Total liabilities and equity $145,600 $200,000 $136,000 $481,600 $323,432 $805,032 $460,000 $203,768 $663,768 $1,468,800 $324,000 $720,000 $284,960 $1,328,960 $1,000,000 $2,328,960 $460,000 $97,632 $557,632 $2,886,592 $359,800 $300,000 $380,000 $1,039,800 $500,000 $1,539,800 $1,680,936 $296,216 $1,977,152 $3,516,952 2015 $3,432,000 $2,864,000 $18,900 $340,000 $3,222,900 $209,100 $62,500 $146,600 $58,640 $87,960 $0.880 $0.220 $6.638 2016 $5,834,400 $4,980,000 $116,960 $720,000 $5,816,960 $17,440 $176,000 ($158,560) ($63,424) ($95,136) ($0.951) $0.110 $5.576 2017E $7,035,600 $5,800,000 $120,000 $612,960 $6,532,960 $502,640 $80,000 $422,640 $169,056 $253,584 $1.014 $0.220 $7.909 Year-end common stock price Year-end shares outstanding Tax rate Lease payments Balance Sheets Income Statements Net sales Costs of Goods Sold Except Depr. Depreciation and amortization Other Expenses Total Operating Cost Earnings before interest and taxes (EBIT) Less interest Pre-tax earnings Taxes (40%) Net Income before preferred dividends EPS DPS Book Value Per Share Cochran must prepare an analysis of where the company is now, what it must do to regain its financial health, and what actions should be taken. Your assignment is to help her answer the following questions. Provide clear explanations, not yes or no answers. a. Why are ratios useful? What three groups use ratio analysis and for what reasons? Answer: See Chapter 03 Mini Case Show b. (1.) Calculate the current and quick ratios based on the projected balance sheet and income statement data. Calculated Data: Ratios Liquidity ratios Current Ratio Quick Ratio 2015 2016 2017E Industry Average 2.33 0.85 1.46 0.50 2.58 0.93 2.70 1.00 78 79 80 (2.) What can you say about the company's liquidity position? We often think of ratios as being useful (1) to managers to help run the business, (2) to bankers for credit analysis, and (3) to stockholders for stock valuation. Would these different types of analysts have an equal interest in the liquidity ratios? Answer: See Chapter 03 Mini Case Show 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 117 118 119 120 121 122 123 124 125 126 127 128 129 130 131 132 133 134 135 136 137 138 139 140 141 142 143 144 145 146 147 148 149 150 151 152 153 154 155 156 157 158 159 160 161 162 163 164 165 166 167 168 169 170 171 172 173 174 175 176 177 178 179 180 181 182 183 184 185 186 187 188 189 190 191 192 193 194 195 196 197 198 199 200 201 202 203 204 205 206 207 208 209 210 211 212 213 214 215 216 217 218 219 220 221 222 223 224 225 226 227 228 229 230 231 232 233 234 235 236 237 238 239 240 241 242 243 244 245 246 247 248 249 250 251 252 253 254 255 256 257 258 259 260 261 262 263 264 265 c. Calculate the inventory turnover, days sales outstanding (DSO), fixed assets turnover, operating capital requirement, and total assets turnover. How does Computron's utilization of assets stack up against other firms in its industry? Asset Management ratios Inventory Turnover Days Sales Outstanding Fixed Asset Turnover Total Asset Turnover 2015 4.03 37.4 9.95 2.34 2016 3.96 39.5 6.21 2.02 2017E 3.45 45.5 8.41 2.00 Industry Average 6.10 32.00 7.00 2.50 d. Calculate the debt ratio, liabilities-to-assets ratio, times-interest-earned, and EBITDA coverage ratios. How does Computron compare with the industry with respect to financial leverage? What can you conclude from these ratios? Industry Debt Management ratios 2015 2016 2017E Average Debt Ratio 35.6% 59.6% 22.7% 32.0% Liabilities-to-assets Ratio 54.8% 80.7% 43.8% 50.0% Times Interest Earned 3.35 0.10 6.28 6.20 EBITDA Coverage Ratio 2.61 0.81 5.52 8.00 e. Calculate the profit margin, basic earning power (BEP), return on assets (ROA), and return on equity (ROE). What can you say about these ratios? Industry Profitability ratios 2015 2016 2017E Average Net Profit Margin 2.6% -1.6% 3.6% 3.6% Operating Margin 6.1% 0.3% 7.1% 7.1% Gross Profit Margin 16.6% 14.6% 17.6% 15.5% Basic Earning Power 14.2% 0.6% 14.3% 17.8% Return on Assets 6.0% -3.3% 7.2% 9.0% Return on Equity 13.3% -17.1% 12.8% 18.0% f. Calculate the price/earnings ratio, price/cash flow ratio, and market/book ratio. Do these ratios indicate that investors are expected to have a high or low opinion of the company? Industry Market Value ratios 2015 2016 2017E Average Price-to Earnings Ratio 9.66 -6.31 12.00 14.20 Price-to-Cash Flow Ratio 7.95 27.49 8.14 7.60 Market-to-Book Ratio 1.28 1.08 1.54 2.90 Book Value Per Share 6.64 5.58 7.91 na g. Perform a common size analysis and percent change analysis. What do these analyses tell you about Computron? See the worksheet with the TAB "Common Size and % Change" h. Use the extended DuPont equation to provide a summary and overview of Computron's projected financial condition. What are the firm's major strengths and weaknesses? DuPont Analysis Computron 2015 Computron 2016 Computron 2017E Industry Average ROE = 13.3% -17.1% 12.8% 18.00% P.M. X 2.6% -1.6% 3.6% 3.6% T.A.T.O. X 2.3 2.0 2.0 2.5 Equity Multiplier 2.21 5.18 1.78 2.00 i. What are some potential problems and limitations of financial ratio analysis? Answer: See Chapter 03 Mini Case Show j. What are some qualitative factors analysts should consider when evaluating a company's likely future financial performance? Answer: See Chapter 03 Mini Case Show Common Common Size Size Analysis Analysis and and Percent Percent Change Change Analysis Analysis In In common common size size analysis, analysis, all all income income statement statement items items are are divided divided by by sales, sales, and and all all balance balance sheet sheet items items are are divided by total assets. divided by total assets. In In percent percent change change analysis, analysis, all all items items are are expressed expressed as as aa percent percent change change from from the the first first year, year, called called the the base base year, year, of of the the analysis. analysis. Common Size Statements Balance Sheets 2015 2016 2017E Industry Assets Cash and equivalents Short-term investments Accounts receivable Inventories Total Current Assets Net Fixed Assets Total Assets 0.6% 3.3% 23.9% 48.7% 76.5% 23.5% 100.0% 0.3% 0.7% 21.9% 44.6% 67.4% 32.6% 100.0% 0.4% 2.0% 25.0% 48.8% 76.2% 23.8% 100.0% 0.3% 0.3% 22.4% 41.2% 64.1% 35.9% 100.0% Liabilities and equity Accounts payable Notes payable Accruals Total current liabilities Long-term bonds Total common equity Total liabilities and equity 9.9% 13.6% 9.3% 32.8% 22.0% 45.2% 100.0% 11.2% 24.9% 9.9% 46.0% 34.6% 19.3% 100.0% 10.2% 8.5% 10.8% 29.6% 14.2% 56.2% 100.0% 11.9% 2.4% 9.5% 23.7% 26.3% 50.0% 100.0% Income Statements 2015 2016 2017E Industry Net sales COGS except depr. Depreciation Other Expenses EBIT Less interest Pre-tax earnings Taxes (40%) 100.0% 83.4% 0.6% 9.9% 6.1% 1.8% 4.3% 1.7% 100.0% 85.4% 2.0% 12.3% 0.3% 3.0% -2.7% -1.1% 100.0% 82.4% 1.7% 8.7% 7.1% 1.1% 6.0% 2.4% 100.0% 84.5% 4.0% 4.4% 7.1% 1.1% 5.9% 2.4% Net Income before preferred dividends 2.6% -1.6% 3.6% 3.6% Percentage Change Analysis Balance Sheets 2015 2016 2017E Assets Cash and equivalents Short-term investments Accounts receivable Inventories Total Current Assets Net Fixed Assets Total Assets 0% 0% 0% 0% 0% 0% 0% -19.1% -58.8% 80.0% 80.0% 73.2% 172.6% 96.5% 55.6% 47.4% 150.0% 140.0% 138.4% 142.7% 139.4% Liabilities and equity Accounts payable Notes payable Accruals Total current liabilities Long-term bonds Total common equity Total liabilities and equity 0% 0% 0% 0% 0% 0% 0% 122.5% 260.0% 109.5% 175.9% 209.2% -16.0% 96.5% 147.1% 50.0% 179.4% 115.9% 54.6% 197.9% 139.4% 2015 2016 2017E 0% 0% 0% 0% 0% 0% 0% 0% 0% 70.0% 73.9% 518.8% 111.8% -91.7% 181.6% -208.2% -208.2% -208.2% 105.0% 102.5% 534.9% 80.3% 140.4% 28.0% 188.3% 188.3% 188.3% Income Statements Net sales Costs of Goods Sold Depreciation Other Expenses EBIT Less interest Pre-tax earnings Taxes (40%) Net Income before preferred dividends d all all balance balance sheet sheet items items are are the the first first year, year, called called the the base base year, year, Please show the work in Excel Review the requirements of the Chapter 3 Mini-Case, parts b through j. Then apply those requirements to do an analysis of Starbucks. Do the analysis on the basis of the figures for the most recent year. For part g, use the 2 most recent years. Download 10K financial statements for the most recent year for Starbucks. A good source is the company's home page. Also compare the Starbucks ratios to the industry averages and comment on significant differences. You'll need the company's stock price for several of the ratios; use the fiscal year end price. https://www.sec.gov/Archives/edgar/data/829224/000082922415000038/sbux-9272015x10k.htm https://www.investing.com/equities/starbucks-corp STARBUCKS CORP INCOME_STATEMENT Form Type: 10-K STARBUCKS CORPORATION CONSOLIDATED STATEMENTS OF EARNINGS (in millions, except per share data) Oct 2, Fiscal Year Ended Net revenues: Company-operated stores Licensed stores CPG, foodservice and other Total net revenues Cost of sales including occupancy costs Store operating expenses Other operating expenses Depreciation and amortization expenses General and administrative expenses Litigation charge/(credit) Total operating expenses Income from equity investees Operating income/(loss) Gain resulting from acquisition of joint venture Loss on extinguishment of debt Interest income and other, net Interest expense Earnings/(loss) before income taxes Income tax expense/(benefit) Net earnings including noncontrolling interests Net earnings/(loss) attributable to noncontrolling interests Net earnings attributable to Starbucks Earnings per share - basic Earnings per share - diluted Weighted average shares outstanding: Basic Diluted Sep 27, 2016 $ $ $ $ 16,844.10 $ 2,154.20 2,317.60 21,315.90 8,511.10 6,064.30 545.40 980.80 1,360.60 17,462.20 318.20 4,171.90 2015 15,197.30 1,861.90 2,103.50 19,162.70 7,787.50 5,411.10 522.40 893.90 1,196.70 15,811.60 249.90 3,601.00 108.00 (81.30) 4,198.60 1,379.70 390.60 (61.10) 43.00 (70.50) 3,903.00 1,143.70 2,818.90 2,759.30 1.20 2,817.70 $ 1.91 $ 1.90 $ 1.90 2,757.40 1.84 1.82 1,471.60 1,486.70 1,495.90 1,513.40 STARBUCKS CORP BALANCE_SHEET STARBUCKS CORPORATION CONSOLIDATED BALANCE SHEETS (in millions, except per share data) Sep 28, 2014 $ 12,977.90 1,588.60 1,881.30 16,447.80 6,858.80 4,638.20 457.30 709.60 991.30 (20.20) 13,635.00 268.30 3,081.10 142.70 (64.10) 3,159.70 1,092.00 2,067.70 $ $ $ (0.40) 2,068.10 2.75 2.71 753.10 763.10 ASSETS Current assets: Cash and cash equivalents Short-term investments Accounts receivable, net Inventories Prepaid expenses and other current assets Deferred income taxes, net Total current assets Long-term investments Equity and cost investments Property, plant and equipment, net Deferred income taxes, net Other long-term assets Other intangible assets Goodwill TOTAL ASSETS LIABILITIES AND EQUITY Current liabilities: Accounts payable Accrued liabilities Insurance reserves Stored value card liability Current portion of long-term debt Total current liabilities Long-term debt Other long-term liabilities Total liabilities Shareholders' equity: Common stock ($0.001 par value) - authorized, 2,400.0 shares; issued and outstanding, 1,460.5 and 1,485.1 shares, respectively Additional paid-in capital Retained earnings Accumulated other comprehensive loss Total shareholders' equity Noncontrolling interests Total equity TOTAL LIABILITIES AND EQUITY STARBUCKS CORP CASH_FLOW Oct 2, Sep 27, 2016 $ $ $ $ Sep 28, 2015 2014 2,128.80 $ 134.40 768.80 1,378.50 350.00 1,530.10 81.30 719.00 1,306.40 334.20 4,760.50 1,141.70 354.50 4,533.80 885.40 417.70 516.30 1,719.60 14,329.50 $ 3,971.00 312.50 352.00 4,088.30 1,180.80 415.90 520.40 1,575.40 12,416.30 $ 1,708.40 135.40 631.00 1,090.90 285.60 317.40 4,168.70 318.40 514.90 3,519.00 903.30 198.90 273.50 856.20 $ 10,752.90 730.60 $ 1,999.10 246.00 1,171.20 400.00 4,546.90 3,202.20 689.70 8,438.80 684.20 1,755.30 224.80 983.80 3,648.10 2,347.50 600.90 6,596.50 1.50 41.10 5,949.80 (108.40) 5,884.00 6.70 5,890.70 14,329.50 $ $ 533.70 1,514.40 196.10 794.50 ### 3,038.70 2,048.30 392.20 5,479.20 1.50 0.70 41.10 39.40 5,974.80 5,206.60 (199.40) 25.30 5,818.00 5,272.00 1.80 1.70 5,819.80 5,273.70 12,416.30 $ 10,752.90 STARBUCKS CORP CASH_FLOW STARBUCKS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) Fiscal Year Ended OPERATING ACTIVITIES: Net earnings including noncontrolling interests Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization Deferred income taxes, net Income earned from equity method investees Distributions received from equity method investees Gain resulting from acquisition/sale of equity in joint ventures and certain retail operations Loss on extinguishment of debt Stock-based compensation Excess tax benefit on share-based awards Other Cash provided by changes in operating assets and liabilities: Accounts receivable Inventories Accounts payable Accrued litigation charge Stored value card liability Other operating assets and liabilities Net cash provided by operating activities INVESTING ACTIVITIES: Purchases of investments Sales of investments Maturities and calls of investments Acquisitions, net of cash acquired Additions to property, plant and equipment Net proceeds from sale of equity in joint ventures and certain retail operations Other Net cash used by investing activities FINANCING ACTIVITIES: Proceeds from issuance of long-term debt Repayments of long-term debt Cash used for purchase of non-controlling interest Proceeds from issuance of common stock Excess tax benefit on share-based awards Cash dividends paid Repurchase of common stock Minimum tax withholdings on share-based awards Other Net cash used by financing activities Effect of exchange rate changes on cash and cash equivalents Net increase/(decrease) in cash and cash equivalents CASH AND CASH EQUIVALENTS: Beginning of period End of period SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest, net of capitalized interest Income taxes, net of refunds Oct 2, Sep 27, 2016 $ 2,818.90 $ Sep 28, 2015 2,759.30 $ 2014 2,067.70 1,030.10 265.70 (250.20) 223.30 933.80 21.20 (190.20) 148.20 748.40 10.20 (182.70) 139.20 (6.10) 218.10 (122.80) 45.10 (394.30) 61.10 209.80 (132.40) 53.80 (70.20) 183.20 (114.40) 36.20 (55.60) (67.50) 46.90 180.40 248.80 4,575.10 (82.80) (207.90) 137.70 170.30 261.50 3,749.10 (79.70) 14.30 60.40 (2,763.90) 140.80 418.30 607.80 (1,585.70) 680.70 27.90 (1,440.30) (567.40) 600.60 18.80 (284.30) (1,303.70) (1,652.50) 1,454.80 456.10 (1,160.90) 69.60 24.90 (2,222.90) 8.90 6.80 (1,520.30) 103.90 (19.10) (817.70) 1,254.50 160.70 122.80 848.50 (610.10) (360.80) 191.80 132.40 748.50 139.70 114.40 (1,178.00) (1,995.60) (106.00) (8.40) (1,750.00) (928.60) (1,436.10) (75.50) (18.10) (2,256.50) (783.10) (758.60) (77.30) (6.90) (623.30) (3.50) (150.60) (34.10) 598.70 (178.30) (867.30) $ 1,530.10 2,128.80 $ 1,708.40 1,530.10 $ 2,575.70 1,708.40 $ $ 74.70 $ 878.70 $ 69.50 $ 1,072.20 $ 56.20 766.30 Return on Invested Capital and Free Cash Flow Starbucks Measures 2016 2015 2014 Net operating working capital (NOWC) Total net operating capital Net operating profit after taxes (NOPAT) Operating profitability (OP) ratio Capital requirement (CR) ratio Return on invested capital (ROIC) Free cash flow (FCF) Liquidity Ratios Current Ratio Quick Ratio 1.05 0.74 1.09 0.73 1.37 1.01 Asset Management Ratios Total Assets Turnover Ratio Fixed Assets Turnover Ratio Average Collection Period (days) Inventory Turnover 1.49 4.70 13 6.89 1.54 4.69 14 6.65 1.53 4.67 14 6.94 0.27 0.24 0.23 Debt Management Ratios Debt to Assets Ratio Debt to Equity Ratio Market Debt Ratio Liability to Assets Ratio Times Interest Earned Ratio EBITDA Coverage Ratio Profitability Ratios Net Profit Margin Operating Profit Margin Gross Profit Margin Basic Earning Power Ratio Return on Total Assets Return on Common Equity Market Value Ratios Price/Earnings Ratio Market/Book Ratio Market Cap Industry Average STARBUCKS CORP INCOME_STATEMENT Form Type: 10-K STARBUCKS CORPORATION CONSOLIDATED STATEMENTS OF EARNINGS (in millions, except per share data) Oct 2, Fiscal Year Ended Net revenues: Company-operated stores Licensed stores CPG, foodservice and other Total net revenues Cost of sales including occupancy costs Store operating expenses Other operating expenses Depreciation and amortization expenses General and administrative expenses Litigation charge/(credit) Total operating expenses Income from equity investees Operating income/(loss) Gain resulting from acquisition of joint venture Loss on extinguishment of debt Interest income and other, net Interest expense Earnings/(loss) before income taxes Income tax expense/(benefit) Net earnings including noncontrolling interests Net earnings/(loss) attributable to noncontrolling interests Net earnings attributable to Starbucks Earnings per share - basic Earnings per share - diluted Weighted average shares outstanding: Basic Diluted Sep 27, 2016 $ $ $ $ 16,844.10 $ 2,154.20 2,317.60 21,315.90 8,511.10 6,064.30 545.40 980.80 1,360.60 17,462.20 318.20 4,171.90 2015 15,197.30 1,861.90 2,103.50 19,162.70 7,787.50 5,411.10 522.40 893.90 1,196.70 15,811.60 249.90 3,601.00 108.00 (81.30) 4,198.60 1,379.70 390.60 (61.10) 43.00 (70.50) 3,903.00 1,143.70 2,818.90 2,759.30 1.20 2,817.70 $ 1.91 $ 1.90 $ 1.90 2,757.40 1.84 1.82 1,471.60 1,486.70 1,495.90 1,513.40 STARBUCKS CORP BALANCE_SHEET STARBUCKS CORPORATION CONSOLIDATED BALANCE SHEETS (in millions, except per share data) Sep 28, 2014 $ 12,977.90 1,588.60 1,881.30 16,447.80 6,858.80 4,638.20 457.30 709.60 991.30 (20.20) 13,635.00 268.30 3,081.10 142.70 (64.10) 3,159.70 1,092.00 2,067.70 $ $ $ (0.40) 2,068.10 2.75 2.71 753.10 763.10 ASSETS Current assets: Cash and cash equivalents Short-term investments Accounts receivable, net Inventories Prepaid expenses and other current assets Deferred income taxes, net Total current assets Long-term investments Equity and cost investments Property, plant and equipment, net Deferred income taxes, net Other long-term assets Other intangible assets Goodwill TOTAL ASSETS LIABILITIES AND EQUITY Current liabilities: Accounts payable Accrued liabilities Insurance reserves Stored value card liability Current portion of long-term debt Total current liabilities Long-term debt Other long-term liabilities Total liabilities Shareholders' equity: Common stock ($0.001 par value) - authorized, 2,400.0 shares; issued and outstanding, 1,460.5 and 1,485.1 shares, respectively Additional paid-in capital Retained earnings Accumulated other comprehensive loss Total shareholders' equity Noncontrolling interests Total equity TOTAL LIABILITIES AND EQUITY STARBUCKS CORP CASH_FLOW Oct 2, Sep 27, 2016 $ $ $ $ Sep 28, 2015 2014 2,128.80 $ 134.40 768.80 1,378.50 350.00 1,530.10 81.30 719.00 1,306.40 334.20 4,760.50 1,141.70 354.50 4,533.80 885.40 417.70 516.30 1,719.60 14,329.50 $ 3,971.00 312.50 352.00 4,088.30 1,180.80 415.90 520.40 1,575.40 12,416.30 $ 1,708.40 135.40 631.00 1,090.90 285.60 317.40 4,168.70 318.40 514.90 3,519.00 903.30 198.90 273.50 856.20 $ 10,752.90 730.60 $ 1,999.10 246.00 1,171.20 400.00 4,546.90 3,202.20 689.70 8,438.80 684.20 1,755.30 224.80 983.80 3,648.10 2,347.50 600.90 6,596.50 1.50 41.10 5,949.80 (108.40) 5,884.00 6.70 5,890.70 14,329.50 $ $ 533.70 1,514.40 196.10 794.50 ### 3,038.70 2,048.30 392.20 5,479.20 1.50 0.70 41.10 39.40 5,974.80 5,206.60 (199.40) 25.30 5,818.00 5,272.00 1.80 1.70 5,819.80 5,273.70 12,416.30 $ 10,752.90 STARBUCKS CORP CASH_FLOW STARBUCKS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) Fiscal Year Ended OPERATING ACTIVITIES: Net earnings including noncontrolling interests Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization Deferred income taxes, net Income earned from equity method investees Distributions received from equity method investees Gain resulting from acquisition/sale of equity in joint ventures and certain retail operations Loss on extinguishment of debt Stock-based compensation Excess tax benefit on share-based awards Other Cash provided by changes in operating assets and liabilities: Accounts receivable Inventories Accounts payable Accrued litigation charge Stored value card liability Other operating assets and liabilities Net cash provided by operating activities INVESTING ACTIVITIES: Purchases of investments Sales of investments Maturities and calls of investments Acquisitions, net of cash acquired Additions to property, plant and equipment Net proceeds from sale of equity in joint ventures and certain retail operations Other Net cash used by investing activities FINANCING ACTIVITIES: Proceeds from issuance of long-term debt Repayments of long-term debt Cash used for purchase of non-controlling interest Proceeds from issuance of common stock Excess tax benefit on share-based awards Cash dividends paid Repurchase of common stock Minimum tax withholdings on share-based awards Other Net cash used by financing activities Effect of exchange rate changes on cash and cash equivalents Net increase/(decrease) in cash and cash equivalents CASH AND CASH EQUIVALENTS: Beginning of period End of period SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest, net of capitalized interest Income taxes, net of refunds Oct 2, Sep 27, 2016 $ 2,818.90 $ Sep 28, 2015 2,759.30 $ 2014 2,067.70 1,030.10 265.70 (250.20) 223.30 933.80 21.20 (190.20) 148.20 748.40 10.20 (182.70) 139.20 (6.10) 218.10 (122.80) 45.10 (394.30) 61.10 209.80 (132.40) 53.80 (70.20) 183.20 (114.40) 36.20 (55.60) (67.50) 46.90 180.40 248.80 4,575.10 (82.80) (207.90) 137.70 170.30 261.50 3,749.10 (79.70) 14.30 60.40 (2,763.90) 140.80 418.30 607.80 (1,585.70) 680.70 27.90 (1,440.30) (567.40) 600.60 18.80 (284.30) (1,303.70) (1,652.50) 1,454.80 456.10 (1,160.90) 69.60 24.90 (2,222.90) 8.90 6.80 (1,520.30) 103.90 (19.10) (817.70) 1,254.50 160.70 122.80 848.50 (610.10) (360.80) 191.80 132.40 748.50 139.70 114.40 (1,178.00) (1,995.60) (106.00) (8.40) (1,750.00) (928.60) (1,436.10) (75.50) (18.10) (2,256.50) (783.10) (758.60) (77.30) (6.90) (623.30) (3.50) (150.60) (34.10) 598.70 (178.30) (867.30) $ 1,530.10 2,128.80 $ 1,708.40 1,530.10 $ 2,575.70 1,708.40 $ $ 74.70 $ 878.70 $ 69.50 $ 1,072.20 $ 56.20 766.30 Return on Invested Capital and Free Cash Flow Starbucks Measures 2016 2015 2014 Net operating working capital (NOWC) Total net operating capital Net operating profit after taxes (NOPAT) Operating profitability (OP) ratio Capital requirement (CR) ratio Return on invested capital (ROIC) Free cash flow (FCF) Liquidity Ratios Current Ratio Quick Ratio 1.05 0.74 1.09 0.73 1.37 1.01 Asset Management Ratios Total Assets Turnover Ratio Fixed Assets Turnover Ratio Average Collection Period (days) Inventory Turnover 1.49 4.70 13 6.89 1.54 4.69 14 6.65 1.53 4.67 14 6.94 0.27 0.24 0.23 Debt Management Ratios Debt to Assets Ratio Debt to Equity Ratio Market Debt Ratio Liability to Assets Ratio Times Interest Earned Ratio EBITDA Coverage Ratio Profitability Ratios Net Profit Margin Operating Profit Margin Gross Profit Margin Basic Earning Power Ratio Return on Total Assets Return on Common Equity Market Value Ratios Price/Earnings Ratio Market/Book Ratio Market Cap Industry Average STARBUCKS CORP INCOME_STATEMENT Form Type: 10-K STARBUCKS CORPORATION CONSOLIDATED STATEMENTS OF EARNINGS (in millions, except per share data) Oct 2, Fiscal Year Ended Net revenues: Company-operated stores Licensed stores CPG, foodservice and other Total net revenues Cost of sales including occupancy costs Store operating expenses Other operating expenses Depreciation and amortization expenses General and administrative expenses Litigation charge/(credit) Total operating expenses Income from equity investees Operating income/(loss) Gain resulting from acquisition of joint venture Loss on extinguishment of debt Interest income and other, net Interest expense Earnings/(loss) before income taxes Income tax expense/(benefit) Net earnings including noncontrolling interests Net earnings/(loss) attributable to noncontrolling interests Net earnings attributable to Starbucks Earnings per share - basic Earnings per share - diluted Weighted average shares outstanding: Basic Diluted Sep 27, 2016 $ $ $ $ 16,844.10 $ 2,154.20 2,317.60 21,315.90 8,511.10 6,064.30 545.40 980.80 1,360.60 17,462.20 318.20 4,171.90 2015 15,197.30 1,861.90 2,103.50 19,162.70 7,787.50 5,411.10 522.40 893.90 1,196.70 15,811.60 249.90 3,601.00 108.00 (81.30) 4,198.60 1,379.70 390.60 (61.10) 43.00 (70.50) 3,903.00 1,143.70 2,818.90 2,759.30 1.20 2,817.70 $ 1.91 $ 1.90 $ 1.90 2,757.40 1.84 1.82 1,471.60 1,486.70 1,495.90 1,513.40 STARBUCKS CORP BALANCE_SHEET STARBUCKS CORPORATION CONSOLIDATED BALANCE SHEETS (in millions, except per share data) Sep 28, 2014 $ 12,977.90 1,588.60 1,881.30 16,447.80 6,858.80 4,638.20 457.30 709.60 991.30 (20.20) 13,635.00 268.30 3,081.10 142.70 (64.10) 3,159.70 1,092.00 2,067.70 $ $ $ (0.40) 2,068.10 2.75 2.71 753.10 763.10 ASSETS Current assets: Cash and cash equivalents Short-term investments Accounts receivable, net Inventories Prepaid expenses and other current assets Deferred income taxes, net Total current assets Long-term investments Equity and cost investments Property, plant and equipment, net Deferred income taxes, net Other long-term assets Other intangible assets Goodwill TOTAL ASSETS LIABILITIES AND EQUITY Current liabilities: Accounts payable Accrued liabilities Insurance reserves Stored value card liability Current portion of long-term debt Total current liabilities Long-term debt Other long-term liabilities Total liabilities Shareholders' equity: Common stock ($0.001 par value) - authorized, 2,400.0 shares; issued and outstanding, 1,460.5 and 1,485.1 shares, respectively Additional paid-in capital Retained earnings Accumulated other comprehensive loss Total shareholders' equity Noncontrolling interests Total equity TOTAL LIABILITIES AND EQUITY STARBUCKS CORP CASH_FLOW Oct 2, Sep 27, 2016 $ $ $ $ Sep 28, 2015 2014 2,128.80 $ 134.40 768.80 1,378.50 350.00 1,530.10 81.30 719.00 1,306.40 334.20 4,760.50 1,141.70 354.50 4,533.80 885.40 417.70 516.30 1,719.60 14,329.50 $ 3,971.00 312.50 352.00 4,088.30 1,180.80 415.90 520.40 1,575.40 12,416.30 $ 1,708.40 135.40 631.00 1,090.90 285.60 317.40 4,168.70 318.40 514.90 3,519.00 903.30 198.90 273.50 856.20 $ 10,752.90 730.60 $ 1,999.10 246.00 1,171.20 400.00 4,546.90 3,202.20 689.70 8,438.80 684.20 1,755.30 224.80 983.80 3,648.10 2,347.50 600.90 6,596.50 1.50 41.10 5,949.80 (108.40) 5,884.00 6.70 5,890.70 14,329.50 $ $ 533.70 1,514.40 196.10 794.50 ### 3,038.70 2,048.30 392.20 5,479.20 1.50 0.70 41.10 39.40 5,974.80 5,206.60 (199.40) 25.30 5,818.00 5,272.00 1.80 1.70 5,819.80 5,273.70 12,416.30 $ 10,752.90 STARBUCKS CORP CASH_FLOW STARBUCKS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) Fiscal Year Ended OPERATING ACTIVITIES: Net earnings including noncontrolling interests Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization Deferred income taxes, net Income earned from equity method investees Distributions received from equity method investees Gain resulting from acquisition/sale of equity in joint ventures and certain retail operations Loss on extinguishment of debt Stock-based compensation Excess tax benefit on share-based awards Other Cash provided by changes in operating assets and liabilities: Accounts receivable Inventories Accounts payable Accrued litigation charge Stored value card liability Other operating assets and liabilities Net cash provided by operating activities INVESTING ACTIVITIES: Purchases of investments Sales of investments Maturities and calls of investments Acquisitions, net of cash acquired Additions to property, plant and equipment Net proceeds from sale of equity in joint ventures and certain retail operations Other Net cash used by investing activities FINANCING ACTIVITIES: Proceeds from issuance of long-term debt Repayments of long-term debt Cash used for purchase of non-controlling interest Proceeds from issuance of common stock Excess tax benefit on share-based awards Cash dividends paid Repurchase of common stock Minimum tax withholdings on share-based awards Other Net cash used by financing activities Effect of exchange rate changes on cash and cash equivalents Net increase/(decrease) in cash and cash equivalents CASH AND CASH EQUIVALENTS: Beginning of period End of period SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest, net of capitalized interest Income taxes, net of refunds Oct 2, Sep 27, 2016 $ 2,818.90 $ Sep 28, 2015 2,759.30 $ 2014 2,067.70 1,030.10 265.70 (250.20) 223.30 933.80 21.20 (190.20) 148.20 748.40 10.20 (182.70) 139.20 (6.10) 218.10 (122.80) 45.10 (394.30) 61.10 209.80 (132.40) 53.80 (70.20) 183.20 (114.40) 36.20 (55.60) (67.50) 46.90 180.40 248.80 4,575.10 (82.80) (207.90) 137.70 170.30 261.50 3,749.10 (79.70) 14.30 60.40 (2,763.90) 140.80 418.30 607.80 (1,585.70) 680.70 27.90 (1,440.30) (567.40) 600.60 18.80 (284.30) (1,303.70) (1,652.50) 1,454.80 456.10 (1,160.90) 69.60 24.90 (2,222.90) 8.90 6.80 (1,520.30) 103.90 (19.10) (817.70) 1,254.50 160.70 122.80 848.50 (610.10) (360.80) 191.80 132.40 748.50 139.70 114.40 (1,178.00) (1,995.60) (106.00) (8.40) (1,750.00) (928.60) (1,436.10) (75.50) (18.10) (2,256.50) (783.10) (758.60) (77.30) (6.90) (623.30) (3.50) (150.60) (34.10) 598.70 (178.30) (867.30) $ 1,530.10 2,128.80 $ 1,708.40 1,530.10 $ 2,575.70 1,708.40 $ $ 74.70 $ 878.70 $ 69.50 $ 1,072.20 $ 56.20 766.30 Return on Invested Capital and Free Cash Flow Starbucks Measures 2016 2015 2014 Net operating working capital (NOWC) Total net operating capital Net operating profit after taxes (NOPAT) Operating profitability (OP) ratio Capital requirement (CR) ratio Return on invested capital (ROIC) Free cash flow (FCF) Liquidity Ratios Current Ratio Quick Ratio 1.05 0.74 1.09 0.73 1.37 1.01 Asset Management Ratios Total Assets Turnover Ratio Fixed Assets Turnover Ratio Average Collection Period (days) Inventory Turnover 1.49 4.70 13 6.89 1.54 4.69 14 6.65 1.53 4.67 14 6.94 0.27 0.24 0.23 Debt Management Ratios Debt to Assets Ratio Debt to Equity Ratio Market Debt Ratio Liability to Assets Ratio Times Interest Earned Ratio EBITDA Coverage Ratio Profitability Ratios Net Profit Margin Operating Profit Margin Gross Profit Margin Basic Earning Power Ratio Return on Total Assets Return on Common Equity Market Value Ratios Price/Earnings Ratio Market/Book Ratio Market Cap Industry Average STARBUCKS CORP INCOME_STATEMENT Form Type: 10-K STARBUCKS CORPORATION CONSOLIDATED STATEMENTS OF EARNINGS (in millions, except per share data) Oct 2, Fiscal Year Ended Net revenues: Company-operated stores Licensed stores CPG, foodservice and other Total net revenues Cost of sales including occupancy costs Store operating expenses Other operating expenses Depreciation and amortization expenses General and administrative expenses Litigation charge/(credit) Total operating expenses Income from equity investees Operating income/(loss) Gain resulting from acquisition of joint venture Loss on extinguishment of debt Interest income and other, net Interest expense Earnings/(loss) before income taxes Income tax expense/(benefit) Net earnings including noncontrolling interests Net earnings/(loss) attributable to noncontrolling interests Net earnings attributable to Starbucks Earnings per share - basic Earnings per share - diluted Weighted average shares outstanding: Basic Diluted Sep 27, 2016 $ $ $ $ 16,844.10 $ 2,154.20 2,317.60 21,315.90 8,511.10 6,064.30 545.40 980.80 1,360.60 17,462.20 318.20 4,171.90 2015 15,197.30 1,861.90 2,103.50 19,162.70 7,787.50 5,411.10 522.40 893.90 1,196.70 15,811.60 249.90 3,601.00 108.00 (81.30) 4,198.60 1,379.70 390.60 (61.10) 43.00 (70.50) 3,903.00 1,143.70 2,818.90 2,759.30 1.20 2,817.70 $ 1.91 $ 1.90 $ 1.90 2,757.40 1.84 1.82 1,471.60 1,486.70 1,495.90 1,513.40 STARBUCKS CORP BALANCE_SHEET STARBUCKS CORPORATION CONSOLIDATED BALANCE SHEETS (in millions, except per share data) Sep 28, 2014 $ 12,977.90 1,588.60 1,881.30 16,447.80 6,858.80 4,638.20 457.30 709.60 991.30 (20.20) 13,635.00 268.30 3,081.10 142.70 (64.10) 3,159.70 1,092.00 2,067.70 $ $ $ (0.40) 2,068.10 2.75 2.71 753.10 763.10 ASSETS Current assets: Cash and cash equivalents Short-term investments Accounts receivable, net Inventories Prepaid expenses and other current assets Deferred income taxes, net Total current assets Long-term investments Equity and cost investments Property, plant and equipment, net Deferred income taxes, net Other long-term assets Other intangible assets Goodwill TOTAL ASSETS LIABILITIES AND EQUITY Current liabilities: Accounts payable Accrued liabilities Insurance reserves Stored value card liability Current portion of long-term debt Total current liabilities Long-term debt Other long-term liabilities Total liabilities Shareholders' equity: Common stock ($0.001 par value) - authorized, 2,400.0 shares; issued and outstanding, 1,460.5 and 1,485.1 shares, respectively Additional paid-in capital Retained earnings Accumulated other comprehensive loss Total shareholders' equity Noncontrolling interests Total equity TOTAL LIABILITIES AND EQUITY STARBUCKS CORP CASH_FLOW Oct 2, Sep 27, 2016 $ $ $ $ Sep 28, 2015 2014 2,128.80 $ 134.40 768.80 1,378.50 350.00 1,530.10 81.30 719.00 1,306.40 334.20 4,760.50 1,141.70 354.50 4,533.80 885.40 417.70 516.30 1,719.60 14,329.50 $ 3,971.00 312.50 352.00 4,088.30 1,180.80 415.90 520.40 1,575.40 12,416.30 $ 1,708.40 135.40 631.00 1,090.90 285.60 317.40 4,168.70 318.40 514.90 3,519.00 903.30 198.90 273.50 856.20 $ 10,752.90 730.60 $ 1,999.10 246.00 1,171.20 400.00 4,546.90 3,202.20 689.70 8,438.80 684.20 1,755.30 224.80 983.80 3,648.10 2,347.50 600.90 6,596.50 1.50 41.10 5,949.80 (108.40) 5,884.00 6.70 5,890.70 14,329.50 $ $ 533.70 1,514.40 196.10 794.50 ### 3,038.70 2,048.30 392.20 5,479.20 1.50 0.70 41.10 39.40 5,974.80 5,206.60 (199.40) 25.30 5,818.00 5,272.00 1.80 1.70 5,819.80 5,273.70 12,416.30 $ 10,752.90 STARBUCKS CORP CASH_FLOW STARBUCKS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) Fiscal Year Ended OPERATING ACTIVITIES: Net earnings including noncontrolling interests Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization Deferred income taxes, net Income earned from equity method investees Distributions received from equity method investees Gain resulting from acquisition/sale of equity in joint ventures and certain retail operations Loss on extinguishment of debt Stock-based compensation Excess tax benefit on share-based awards Other Cash provided by changes in operating assets and liabilities: Accounts receivable Inventories Accounts payable Accrued litigation charge Stored value card liability Other operating assets and liabilities Net cash provided by operating activities INVESTING ACTIVITIES: Purchases of investments Sales of investments Maturities and calls of investments Acquisitions, net of cash acquired Additions to property, plant and equipment Net proceeds from sale of equity in joint ventures and certain retail operations Other Net cash used by investing activities FINANCING ACTIVITIES: Proceeds from issuance of long-term debt Repayments of long-term debt Cash used for purchase of non-controlling interest Proceeds from issuance of common stock Excess tax benefit on share-based awards Cash dividends paid Repurchase of common stock Minimum tax withholdings on share-based awards Other Net cash used by financing activities Effect of exchange rate changes on cash and cash equivalents Net increase/(decrease) in cash and cash equivalents CASH AND CASH EQUIVALENTS: Beginning of period End of period SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest, net of capitalized interest Income taxes, net of refunds Oct 2, Sep 27, 2016 $ 2,818.90 $ Sep 28, 2015 2,759.30 $ 2014 2,067.70 1,030.10 265.70 (250.20) 223.30 933.80 21.20 (190.20) 148.20 748.40 10.20 (182.70) 139.20 (6.10) 218.10 (122.80) 45.10 (394.30) 61.10 209.80 (132.40) 53.80 (70.20) 183.20 (114.40) 36.20 (55.60) (67.50) 46.90 180.40 248.80 4,575.10 (82.80) (207.90) 137.70 170.30 261.50 3,749.10 (79.70) 14.30 60.40 (2,763.90) 140.80 418.30 607.80 (1,585.70) 680.70 27.90 (1,440.30) (567.40) 600.60 18.80 (284.30) (1,303.70) (1,652.50) 1,454.80 456.10 (1,160.90) 69.60 24.90 (2,222.90) 8.90 6.80 (1,520.30) 103.90 (19.10) (817.70) 1,254.50 160.70 122.80 848.50 (610.10) (360.80) 191.80 132.40 748.50 139.70 114.40 (1,178.00) (1,995.60) (106.00) (8.40) (1,750.00) (928.60) (1,436.10) (75.50) (18.10) (2,256.50) (783.10) (758.60) (77.30) (6.90) (623.30) (3.50) (150.60) (34.10) 598.70 (178.30) (867.30) $ 1,530.10 2,128.80 $ 1,708.40 1,530.10 $ 2,575.70 1,708.40 $ $ 74.70 $ 878.70 $ 69.50 $ 1,072.20 $ 56.20 766.30 Return on Invested Capital and Free Cash Flow Starbucks Measures 2016 2015 2014 Net operating working capital (NOWC) Total net operating capital Net operating profit after taxes (NOPAT) Operating profitability (OP) ratio Capital requirement (CR) ratio Return on invested capital (ROIC) Free cash flow (FCF) Liquidity Ratios Current Ratio Quick Ratio 1.05 0.74 1.09 0.73 1.37 1.01 Asset Management Ratios Total Assets Turnover Ratio Fixed Assets Turnover Ratio Average Collection Period (days) Inventory Turnover 1.49 4.70 13 6.89 1.54 4.69 14 6.65 1.53 4.67 14 6.94 0.27 0.24 0.23 Debt Management Ratios Debt to Assets Ratio Debt to Equity Ratio Market Debt Ratio Liability to Assets Ratio Times Interest Earned Ratio EBITDA Coverage Ratio Profitability Ratios Net Profit Margin Operating Profit Margin Gross Profit Margin Basic Earning Power Ratio Return on Total Assets Return on Common Equity Market Value Ratios Price/Earnings Ratio Market/Book Ratio Market Cap Industry Average Input Data: Year-end common stock price Year-end shares outstanding Tax rate Lease payments Sep. 28, 2014 37.58 753.10 34.56% 974.20 Starbucks Corporation Consolidated Balance Sheets - USD ($) $ in Millions Sep. 28, 2014 Current assets: Cash and cash equivalents $ 1,708.40 Short-term investments 135.40 Accounts receivable, net 631.00 Inventories 1,090.90 Prepaid expenses and other current assets 603.00 Total current assets 4,168.70 Long-term investments 318.40 Equity and cost investments 514.90 Property, plant and equipment, net 3,519.00 Deferred income taxes, net 903.30 Other long-term assets 198.90 Other intangible assets 273.50 Goodwill 856.20 TOTAL ASSETS $ 10,752.90 Current liabilities: Accounts payable $ 533.70 Accrued liabilities 1,514.40 Insurance reserves 196.10 Stored value card liability 794.50 Current portion of long-term debt Total current liabilities $ 3,038.70 Long-term debt 2,048.30 Other long-term liabilities 392.20 Total liabilities 5,479.20 Shareholders' equity: Common stock ($0.001 par value) - authorized, 2,400.0 shares; issued and outstand 0.70 Additional paid-in capital 39.40 Retained earnings 5,206.60 Accumulated other comprehensive income/(loss) 25.30 Total shareholders' equity 5,272.00 Noncontrolling interests 1.70 Total equity 5,273.70 TOTAL LIABILITIES AND EQUITY $10,752.90 Consolidated Statements of Earnings - USD ($) shares in Millions, $ in Millions Net Revenues: Sep. 28, 2014 Total net revenues Cost of sales including occupancy costs Store operating expenses Other operating expenses Depreciation and amortization expenses General and administrative expenses Litigation credit Total operating expenses Income from equity investees Operating income Gain resulting from acquisition of joint venture Loss on extinguishment of debt Interest income and other, net Interest expense Earnings before income taxes Income tax expense Net earnings including noncontrolling interests Net earnings/(loss) attributable to noncontrolling interests Net earnings attributable to Starbucks Earnings per share - basic Earnings per share - diluted Weighted average shares outstanding: Basic Diluted $ $ $ $ 16,447.80 6,858.80 4,638.20 457.30 709.60 991.30 (20.20) 13,635.00 268.30 3,081.10 142.70 (64.10) 3,159.70 1,092.00 2,067.70 (0.40) 2,068.10 2.75 2.71 753.10 763.10 Cochran must prepare an analysis of where the company is now, what it must do to regain its financial health, and wha Provide clear explanations, not yes or no answers. a. Why are ratios useful? What three groups use ratio analysis and for what reasons? Answer: See Chapter 03 Mini Ca The ratios are useful because they enable the investors and other users to forecast the future of the corporation. They are help performance of the company with other companies as well as with past years. The three groups that use ratio analysis are man lenders and stockholders. Ratios are useful to managers as they help them in analysing the situation of the business and to tak whenever required. Potential investors enable themselves to know about the creditworthiness of the company and its ability to pay debts. Ratios are stockholders as they forecast earnings and dividends from their investment. b. (1.) Calculate the current and quick ratios based on the projected balance sheet and income statement data. Calculated Data: Ratios Sep. 28, 2014 Liquidity ratios Current Ratio Quick Ratio 1.37 1.01 (2.) What can you say about the company's liquidity position? We often think of ratios as being useful (1) to manage valuation. Would these different types of analysts have an equal interest in the liquidity ratios? Answer: See Chapter The current ratio was 1.37 during the fiscal year 2014 and decreaed to 1.05 during fiscal year 2016. The current ratio of the co it suggests that the Starbucks can pay its current liabillities from its current assets. The quick ratio measures ability of company liabilities from quick assets. The ratio during the fiscal year 2014 was 1.01 and it increased marginally and stood at 0.74. It indic will not be able to pay its current liabilities from its quick assets. The liquidity position of the company is better than industry as i suggests that the liquidity of the company is not good. The liquidity ratios are less useful to manaers as they are less useful for But these ratios are more useful for bankers as they perform credit analysis before providing any advance or loan. Stockholders in these ratios becasue they are more keen about return on their investments and are much interested in market ratios. c. Calculate the inventory turnover, days sales outstanding (DSO), fixed assets turnover, operating capital requiremen firms in its industry? Asset Management ratios Inventory Turnover Days Sales Outstanding Fixed Asset Turnover Total Asset Turnover Sep. 28, 2014 6.29 14.0 4.67 1.53 The inventory turnover of Starbucks has decreased from 6.29 in fiscal year 2014 to 6.17 in fiscal year 2016. It indicates that the managed its inventory more efficiently during fiscal year 2014. But it is significantly lower than the industry average of 24.68. It s Starbucks is less efficient in converting its inventory into sale. Days sales outstanding of the company is good and it converts its quickly. Fixed asset turnover of the company is also higher. it indicates that the company utilizes its assets in an efficient manne of the industry is 1.56 which is marginally higher than that of Starbucks. The ratio of Starbucks is showing a declining trend. d. Calculate the debt ratio, liabilities-to-assets ratio, times-interest-earned, and EBITDA coverage ratios. How does Co from these ratios? Debt Management ratios Debt Ratio Liabilities-to-assets Ratio Times Interest Earned EBITDA Coverage Ratio Sep. 28, 2014 19.0% 51.0% 49.29 4.54 Debts ratio and liabilities to assets ratio have shown an increasing trend and have exceeded the industry average. It suggests t increased its debts. The debt ratio of industry is lower at 23.3%. It indicates that the Starbucks have taken higher debts as com of the industry. Time interest earned of Starbucks is significantly higher at 51.64 as compared to 6.35 of the industry. It suggests a high ability to payits interest obligations as compared to the industry. The EBITDA coverage of Starbucks Corporation is also g e. Calculate the profit margin, basic earning power (BEP), return on assets (ROA), and return on equity (ROE). What c Profitability ratios Net Profit Margin Operating Margin Gross Profit Margin Basic Earning Power Return on Assets Sep. 28, 2014 12.6% 19.2% 58.3% 29.4% 153.0% Return on Equity 39.2% The profitability ratios of Starbucks Corporation are higher than its peers. Net profit margin, operating margin and gross profit m company has a superior performance in earning net income. The return on assets and return on equity of the company are also industry average. It indicates that the company is making more efficient use of its assets as well as equity of its stockholders. Th are good and show a high profitability of the company. f. Calculate the price/earnings ratio, price/cash flow ratio, and market/book ratio. Do these ratios indicate that investo Market Value ratios Price-to Earnings Ratio Price-to-Cash Flow Ratio Market-to-Book Ratio Book Value Per Share Sep. 28, 2014 13.67 0.00 5.37 7.00 The market value ratios suggest that investors are expected to have a low opinion of the company. Price to earnings ratio and p of Starbucks are lower than than industry. It suggests that the investors are expecting low price of the srock in relation to its ear The market to book ratio of the company is significantly lower. The book value per share is also lower at 4. It indicates that the i expecting good returns from the stock of the company. g. Perform a common size analysis and percent change analysis. What do these analyses tell you about Computron? See the worksheet with the TAB "Common Size and % Change" h. Use the extended DuPont equation to provide a summary and overview of Computron's projected financial conditio DuPont Analysis 2015 2016 2017 The major strength of the firm is higher profit margin. The total asset turnover of the company is also good and is equal to that o multiplier of the company is also high as the company is having assets that are more than double of its stockholder's equity. All of the DuPont anslysis indicte strength of the company and as a result of it the ROE of the company is also higher and has sho i. What are some potential problems and limitations of financial ratio analysis? Answer: See Chapter 03 Mini Case Sh Some potential problems associated with ratio analysis are discussed below: 1. The comparison among ratios is disorted by different accounting practices. 2. Ratios are impacted by seasonal factors. 3. It becomes difficult to make comparison when the firm operates in different divisions. 4. The companies often use to do window dressing to make their ratios look better. 5. Some times it becomes hard to tell that the ratio is good or bad. j. What are some qualitative factors analysts should consider when evaluating a company's likely future financial perf j. What are some qualitative factors analysts should consider when evaluating a company's likely future financial perf Following are the qualitative factors that the anslysts should consider: 1. It should be taken care that to what extend the company is relying on a single supplier. 2. The percentage of revenue tied to a single customer should also be checked. 3. It should also be taken care that what is the level of competition that the company faces. 4. The revenue generated from overseas operations. 5. The percentage of revenue tied to a single product should be taken care. Sep. 27, 2015 Oct. 02, 2016 54.14 54.14 1,495.90 1,471.60 29.30% 32.86% 1,137.80 1,223.20 Sep. 27, 2015 Oct. 02, 2016 $1,530.10 81.30 719.00 1,306.40 334.20 3,971.00 312.50 352.00 4,088.30 1,180.80 415.90 520.40 1,575.40 $12,416.30 $2,128.80 134.40 768.80 1,378.50 350.00 4,760.50 1,141.70 354.50 4,533.80 885.40 417.70 516.30 1,719.60 $14,329.50 684.20 1,755.30 224.80 983.80 $3,648.10 2,347.50 600.90 6,596.50 730.60 1,999.10 246.00 1,171.20 400.00 $4,546.90 3,202.20 689.70 8,438.80 1.50 41.10 5,974.80 (199.40) 5,818.00 1.80 5,819.80 $12,416.30 ### ### 5,949.80 (108.40) 5,884.00 6.70 5,890.70 $14,329.50 12 Months Ended Sep. 27, 2015 Oct. 02, 2016 STARBUCKS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) Oct 2, Fiscal Year Ended 2016 OPERATING ACTIVITIES: Net earnings including noncontrolling interes $ 2,818.90 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 1,030.10 Deferred income taxes, net 265.70 Income earned from equity method investee (250.20) Distributions received from equity method in 223.30 Gain resulting from acquisition/sale of equity in joint ventures and certain retail operations (6.10) Loss on extinguishment of debt Stock-based compensation 218.10 Excess tax benefit on share-based awards (122.80) Other 45.10 Cash provided by changes in operating assets and liabilities: Accounts receivable (55.60) Inventories (67.50) Accounts payable 46.90 Accrued litigation charge Stored value card liability 180.40 Other operating assets and liabilities 248.80 Net cash provided by operating activities 4,575.10 INVESTING ACTIVITIES: Purchases of investments (1,585.70) Sales of investments 680.70 Maturities and calls of investments 27.90 Acquisitions, net of cash acquired Additions to property, plant and equipment (1,440.30) Net proceeds from sale of equity in joint ventures and certain retail operations 69.60 Other 24.90 Net cash used by investing activities (2,222.90) FINANCING ACTIVITIES: Proceeds from issuance of long-term debt 1,254.50 Repayments of long-term debt Cash used for purchase of non-controlling int - $19,162.70 7,787.50 5,411.10 522.40 893.90 1,196.70 15,811.60 249.90 3,601.00 390.60 (61.10) 43.00 (70.50) 3,903.00 1,143.70 2,759.30 1.90 $2,757.40 $1.84 $1.82 $21,315.90 8,511.10 6,064.30 545.40 980.80 1,360.60 ### 17,462.20 318.20 4,171.90 108.00 (81.30) 4,198.60 1,379.70 2,818.90 1.20 $2,817.70 $1.91 $1.90 $1,495.90 $1,513.40 $1,471.60 $1,486.70 Proceeds from issuance of common stock 160.70 Excess tax benefit on share-based awards 122.80 Cash dividends paid (1,178.00) Repurchase of common stock (1,995.60) Minimum tax withholdings on share-based a (106.00) Other (8.40) Net cash used by financing activities (1,750.00) Effect of exchange rate changes on cash and cash equivalents (3.50) Net increase/(decrease) in cash and cash equivalents 598.70 CASH AND CASH EQUIVALENTS: Beginning of period 1,530.10 End of period $ 2,128.80 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest, net of capitalized interest $ 74.70 Income taxes, net of refunds $ 878.70 regain its financial health, and what actions should be taken. Your assignment is to help her answer the following questions. s? Answer: See Chapter 03 Mini Case Show ure of the corporation. They are helpful in comparing the roups that use ratio analysis are managers, potential e situation of the business and to take corrective actions and its ability to pay debts. Ratios are useful for and income statement data. Sep. 27, 2015 Oct. 02, 2016 1.09 0.73 1.05 0.74 Industry Average 0.86 0.26 atios as being useful (1) to managers to help run the business, (2) to bankers for credit analysis, and (3) to stockholders for stock dity ratios? Answer: See Chapter 03 Mini Case Show year 2016. The current ratio of the company is above 1 and ck ratio measures ability of company to pay its current marginally and stood at 0.74. It indicates that the company e company is better than industry as its ratios are higher. It manaers as they are less useful for running the business. ng any advance or loan. Stockholders not much interested h interested in market ratios. over, operating capital requirement, and total assets turnover. How does Computron's utilization of assets stack up against other Sep. 27, 2015 5.96 13.7 4.69 1.54 Oct. 02, 2016 6.17 13.2 4.70 1.49 Industry Average 24.68 1.56 fiscal year 2016. It indicates that the company has han the industry average of 24.68. It suggests that e company is good and it converts its sales into cash tilizes its assets in an efficient manner. Total assets turnover ucks is showing a declining trend. TDA coverage ratios. How does Computron compare with the industry with respect to financial leverage? What can you conclude Sep. 27, 2015 Oct. 02, 2016 18.9% 25.1% 53.1% 58.9% 55.36 51.64 11.03 4.75 Industry Average 23.3% 6.35 ed the industry average. It suggests that the company has ucks have taken higher debts as compared to its other peers red to 6.35 of the industry. It suggests that the company has age of Starbucks Corporation is also good. nd return on equity (ROE). What can you say about these ratios? Industry Sep. 27, 2015 Oct. 02, 2016 Average 14.4% 13.2% 3.6% 20.4% 19.7% 8.8% 59.4% 60.1% 19.9% 31.4% 29.3% 154.3% 148.8% 5.6% 47.4% 47.8% 15.0% , operating margin and gross profit margin suggests that the urn on equity of the company are also higher than the s well as equity of its stockholders. The ratio of Starbucks o these ratios indicate that investors are expected to have a high or low opinion of the company? Industry Sep. 27, 2015 Oct. 02, 2016 Average 29.37 28.28 58.69 0.00 0.00 50.54 13.92 13.53 3.89 4.00 na ompany. Price to earnings ratio and price to cash flow ratio price of the srock in relation to its earnings and cash flow, also lower at 4. It indicates that the investors are not alyses tell you about Computron? utron's projected financial condition. What are the firm's major strengths and weaknesses? ROE = 39.2% 47.4% 47.8% P.M. X 12.6% 14.4% 13.2% T.A.T.O. 1.5 1.5 1.5 X Equity Multiplier 2.04 2.13 2.43 any is also good and is equal to that of industry. The equity double of its stockholder's equity. All the three parameters company is also higher and has shown an increasing trend. swer: See Chapter 03 Mini Case Show mpany's likely future financial performance? Answer: See Chapter 03 Mini Case Show . Sep 27, Sep 28, 2015 2014 $ 2,759.30 $ 2,067.70 933.80 21.20 (190.20) 148.20 748.40 10.20 (182.70) 139.20 (394.30) 61.10 209.80 (132.40) 53.80 (70.20) 183.20 (114.40) 36.20 (82.80) (207.90) 137.70 170.30 261.50 3,749.10 (79.70) 14.30 60.40 (2,763.90) 140.80 418.30 607.80 (567.40) 600.60 18.80 (284.30) (1,303.70) (1,652.50) 1,454.80 456.10 (1,160.90) 8.90 6.80 (1,520.30) 103.90 (19.10) (817.70) 848.50 (610.10) (360.80) 748.50 - 191.80 132.40 (928.60) (1,436.10) (75.50) (18.10) (2,256.50) 139.70 114.40 (783.10) (758.60) (77.30) (6.90) (623.30) (150.60) (34.10) (178.30) (867.30) 1,708.40 2,575.70 $ 1,530.10 $ 1,708.40 LOW INFORMATION: $ 69.50 $ $ 1,072.20 $ 56.20 766.30 er the following questions. d (3) to stockholders for stock assets stack up against other rage? What can you conclude Starbucks Corporation Consolidated Balance Sheets - USD ($) $ in Millions Sep. 28, 2014 Current assets: Cash and cash equivalents 15.89% Short-term investments 1.26% Accounts receivable, net 5.87% Inventories 10.15% Prepaid expenses and other current assets 5.61% Total current assets 38.77% Long-term investments 2.96% Equity and cost investments 4.79% Property, plant and equipment, net 32.73% Deferred income taxes, net 8.40% Other long-term assets 1.85% Other intangible assets 2.54% Goodwill 7.96% TOTAL ASSETS 100.00% Current liabilities: Accounts payable 4.96% Accrued liabilities 14.08% Insurance reserves 1.82% Stored value card liability 7.39% Current portion of long-term debt 0.00% Total current liabilities 28.26% Long-term debt 19.05% Other long-term liabilities 3.65% Total liabilities 50.96% Shareholders' equity: Common stock ($0.001 par value) - authorized, 2,400.0 shares; issued and outstand 0.01% Additional paid-in capital 0.37% Retained earnings 48.42% Accumulated other comprehensive income/(loss) 0.24% Total shareholders' equity 49.03% Noncontrolling interests 0.02% Total equity 49.04% TOTAL LIABILITIES AND EQUITY 100.00% Consolidated Statements of Earnings - USD ($) shares in Millions, $ in Millions Net Revenues: Total net revenues Cost of sales including occupancy costs Store operating expenses Other operating expenses Sep. 28, 2014 100.00% 41.70% 28.20% 2.78% Depreciation and amortization expenses General and administrative expenses Litigation credit Total operating expenses Income from equity investees Operating income Gain resulting from acquisition of joint venture Loss on extinguishment of debt Interest income and other, net Interest expense Earnings before income taxes Income tax expense Net earnings including noncontrolling interests Net earnings/(loss) attributable to noncontrolling interests Net earnings attributable to Starbucks 4.31% 6.03% -0.12% 82.90% 1.63% 18.73% 0.00% 0.00% 0.87% -0.39% 19.21% 6.64% 12.57% 0.00% 12.57% Sep. 27, 2015 Oct. 02, 2016 12.32% 0.65% 5.79% 10.52% 2.69% 31.98% 2.52% 2.83% 32.93% 9.51% 3.35% 4.19% 12.69% 100.00% 14.86% 0.94% 5.37% 9.62% 2.44% 33.22% 7.97% 2.47% 31.64% 6.18% 2.91% 3.60% 12.00% 100.00% 5.51% 14.14% 1.81% 7.92% 0.00% 29.38% 18.91% 4.84% 53.13% 5.10% 13.95% 1.72% 8.17% 2.79% 31.73% 22.35% 4.81% 58.89% 0.01% 0.33% 48.12% -1.61% 46.86% 0.01% 46.87% 100.00% 0.01% 0.29% 41.52% -0.76% 41.06% 0.05% 41.11% 100.00% 12 Months Ended Sep. 27, 2015 Oct. 02, 2016 100.00% 40.64% 28.24% 2.73% 100.00% 39.93% 28.45% 2.56% 4.66% 6.24% 0.00% 82.51% 1.30% 18.79% 2.04% -0.32% 0.22% -0.37% 20.37% 5.97% 14.40% 0.01% 14.39% 4.60% 6.38% 0.00% 81.92% 1.49% 19.57% 0.00% 0.00% 0.51% -0.38% 19.70% 6.47% 13.22% 0.01% 13.22% STARBUCKS CORP INCOME_STATEMENT Form Type: 10-K STARBUCKS CORPORATION CONSOLIDATED STATEMENTS OF EARNINGS (in millions, except per share data) Oct 2, Fiscal Year Ended Net revenues: Company-operated stores Licensed stores CPG, foodservice and other Total net revenues Cost of sales including occupancy costs Store operating expenses Other operating expenses Depreciation and amortization expenses General and administrative expenses Litigation charge/(credit) Total operating expenses Income from equity investees Operating income/(loss) Gain resulting from acquisition of joint venture Loss on extinguishment of debt Interest income and other, net Interest expense Earnings/(loss) before income taxes Income tax expense/(benefit) Net earnings including noncontrolling interests Net earnings/(loss) attributable to noncontrolling interests Net earnings attributable to Starbucks Earnings per share - basic Earnings per share - diluted Weighted average shares outstanding: Basic Diluted Sep 27, 2016 $ $ $ $ 16,844.10 $ 2,154.20 2,317.60 21,315.90 8,511.10 6,064.30 545.40 980.80 1,360.60 17,462.20 318.20 4,171.90 2015 15,197.30 1,861.90 2,103.50 19,162.70 7,787.50 5,411.10 522.40 893.90 1,196.70 15,811.60 249.90 3,601.00 108.00 (81.30) 4,198.60 1,379.70 390.60 (61.10) 43.00 (70.50) 3,903.00 1,143.70 2,818.90 2,759.30 1.20 2,817.70 $ 1.91 $ 1.90 $ 1.90 2,757.40 1.84 1.82 1,471.60 1,486.70 1,495.90 1,513.40 STARBUCKS CORP BALANCE_SHEET STARBUCKS CORPORATION CONSOLIDATED BALANCE SHEETS (in millions, except per share data) Sep 28, 2014 $ 12,977.90 1,588.60 1,881.30 16,447.80 6,858.80 4,638.20 457.30 709.60 991.30 (20.20) 13,635.00 268.30 3,081.10 142.70 (64.10) 3,159.70 1,092.00 2,067.70 $ $ $ (0.40) 2,068.10 2.75 2.71 753.10 763.10 ASSETS Current assets: Cash and cash equivalents Short-term investments Accounts receivable, net Inventories Prepaid expenses and other current assets Deferred income taxes, net Total current assets Long-term investments Equity and cost investments Property, plant and equipment, net Deferred income taxes, net Other long-term assets Other intangible assets Goodwill TOTAL ASSETS LIABILITIES AND EQUITY Current liabilities: Accounts payable Accrued liabilities Insurance reserves Stored value card liability Current portion of long-term debt Total current liabilities Long-term debt Other long-term liabilities Total liabilities Shareholders' equity: Common stock ($0.001 par value) - authorized, 2,400.0 shares; issued and outstanding, 1,460.5 and 1,485.1 shares, respectively Additional paid-in capital Retained earnings Accumulated other comprehensive loss Total shareholders' equity Noncontrolling interests Total equity TOTAL LIABILITIES AND EQUITY STARBUCKS CORP CASH_FLOW Oct 2, Sep 27, 2016 $ $ $ $ Sep 28, 2015 2014 2,128.80 $ 134.40 768.80 1,378.50 350.00 1,530.10 81.30 719.00 1,306.40 334.20 4,760.50 1,141.70 354.50 4,533.80 885.40 417.70 516.30 1,719.60 14,329.50 $ 3,971.00 312.50 352.00 4,088.30 1,180.80 415.90 520.40 1,575.40 12,416.30 $ 1,708.40 135.40 631.00 1,090.90 285.60 317.40 4,168.70 318.40 514.90 3,519.00 903.30 198.90 273.50 856.20 $ 10,752.90 730.60 $ 1,999.10 246.00 1,171.20 400.00 4,546.90 3,202.20 689.70 8,438.80 684.20 1,755.30 224.80 983.80 3,648.10 2,347.50 600.90 6,596.50 1.50 41.10 5,949.80 (108.40) 5,884.00 6.70 5,890.70 14,329.50 $ $ 533.70 1,514.40 196.10 794.50 ### 3,038.70 2,048.30 392.20 5,479.20 1.50 0.70 41.10 39.40 5,974.80 5,206.60 (199.40) 25.30 5,818.00 5,272.00 1.80 1.70 5,819.80 5,273.70 12,416.30 $ 10,752.90 STARBUCKS CORP CASH_FLOW STARBUCKS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) Fiscal Year Ended OPERATING ACTIVITIES: Net earnings including noncontrolling interests Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization Deferred income taxes, net Income earned from equity method investees Distributions received from equity method investees Gain resulting from acquisition/sale of equity in joint ventures and certain retail operations Loss on extinguishment of debt Stock-based compensation Excess tax benefit on share-based awards Other Cash provided by changes in operating assets and liabilities: Accounts receivable Inventories Accounts payable Accrued litigation charge Stored value card liability Other operating assets and liabilities Net cash provided by operating activities INVESTING ACTIVITIES: Purchases of investments Sales of investments Maturities and calls of investments Acquisitions, net of cash acquired Additions to property, plant and equipment Net proceeds from sale of equity in joint ventures and certain retail operations Other Net cash used by investing activities FINANCING ACTIVITIES: Proceeds from issuance of long-term debt Repayments of long-term debt Cash used for purchase of non-controlling interest Proceeds from issuance of common stock Excess tax benefit on share-based awards Cash dividends paid Repurchase of common stock Minimum tax withholdings on share-based awards Other Net cash used by financing activities Effect of exchange rate changes on cash and cash equivalents Net increase/(decrease) in cash and cash equivalents CASH AND CASH EQUIVALENTS: Beginning of period End