Questions for Individual Analysis of Starbucks Corp

Six years ago in the media, Mr. Howard Schultz the founder of Starbucks came under intense attack and criticism.  The stock was down 75% from its high in just over a year.  Economists worried about rising economic slump, unemployment, loss of consumer confidence, consumer caution, and a sinking housing market.  This was certain to have an impact on people’s willingness to spend money on expensive lattes and mochas. Wall Street was writing off Starbucks stock for the next couple of years (or maybe forever) as dead money.  Mr. Schultz was furious!  To make matters worse McDonalds and Dunkin Donuts began serving coffee in an effort to capture customers who traditionally may have gone to Starbucks.  Mr. Schultz launched an aggressive plan to downsize the number of store locations and concentrate on the core strategy of Starbucks through consolidation.  At least during the past two years, these efforts seemed to have paid off.  The question remains whether Starbucks can continue delivering on their new strategy and can the stock continue its upward climb.

Mr. Schultz discovers that you (who he hired in spring of this year) are taking EMBA 224.  He decides that before he goes onto CNBC the next time to face grilling and pointed questions, he would like you to give him a financial briefing that he can use on CNBC to support the expectations surrounding the stock and refute economist worries.  He wants you to convince him of the future financial decisions and strategies and their stock price implications.  He also wants you to give him an honest opinion whether the company is financially sound as you will try and convince him or that there is trouble ahead (which he of course will try and keep to himself).  Try not to get fired by doing a poor job.

1. Using data in the most recent Value Line report and Yahoo Finance (or any other website), please compute the following (if computable) as part of financial statement analysis:

   Current ratio

         Quick Ratio

         Inventory Turnover Ratio

         Total Assets Turnover Ratio

         Days Sales Outstanding

         Gross Profit Margin on Sales Ratio

         Net Profit Margin on Sales Ratio

         Return On Equity Ratio

         Dividend Payout Ratio

         Total Debt Ratio

         Market to Book Ratio

         Price Earnings Ratio

         Price to Sales Ratio

        

    

2. Provide a trend analysis on each of the following measures, and then using those measures as well as those computed above provide a short commentary on how the company has been doing and expected to do in the next year: You may want to compare to its competitor and use the comparative ratios and common size statements for this.