StarbucksStarbucks is an American global coffee company and coffeehouse chain based in Seattle, Washington. Starbucks is the largest coffeehouse company in the world, with 23,187 stores in 64 countries, including 12,973 in the United States, 1897 in China, 1550 in Canada, 1,088 in Japan and 927 in the United Kingdom, (Wikipedia, 2014). An analysis of this organization will provide the profitability, and solvency ratios, including return on equity (ROE), and return on assets (ROA), for the years 2013,2012, and 2011.
Profitability Ratio
Profitability ratios are used to assess a business’s ability to generate earnings as compared to its expenses and other relevant costs incurred during a specific period of time, (Investopedia, 2014). The profitability ratios that we will explore are gross profit margin, return on assets, and return on equity. A comparison will be done on the years 2013, 2012, and 2011.
The gross profit margin for the Starbucks Company shows that it has decreased since 2011 by a small percentage, although the organization has the fourth highest gross profit margin of related industries, (Macroaxis, 2014). For all years Starbucks gross profit margin has exceeded 50%, which is good for a retail establishment. Starbucks has demonstrated its ability to effectively control costs and has retained at least 50% of every dollar earned.
Another profitability ratio we will consider is return on assets. Return on assets give an indication of how profitable a company is relative to total assets, and how efficiently they manage their assets. We will review the years 2013, 2012, and 2011, for the Starbucks Corporation.
The return on assets for the Starbucks organization shows a high variance from 2011 to 2013, there are many factors that could affect this figure. One noticeably variance is the net income that deteriorated from 2011 to 2013, this is one factor that affected the ROA. Also, it appears that more assets were acquired from 2011 to 2013....