INTRODUCTION TO FINANCE

Group Name: The Financial Fitters

Section-08
Summer-2021

Submitted to:
Ms. Sumaya Mustafa

Submitted by:
 SK.Atika Rohin Trishila-2020825
 Monera Bhuiyan Mim-2021155
 Sanzida Jarin Sonia-2020167
 Tunaj Tajrin-1911015
 Saadman Sharar Rasul Labib-2020794

Submission Date:
21st August, 2021

1|Page
Table of Contents
Acknowledgement..................................................................................................................03
Executive Summary...............................................................................................................03
Letter of Transmittal..............................................................................................................04
Company Introduction...........................................................................................................05
Profitability Ratios ................................................................................................................06
Profit Margin .........................................................................................................................06
Return on Assets (ROA)........................................................................................................07
Return on Equity (ROE)........................................................................................................08
Asset Utilization Ratios.........................................................................................................09
Receivable Turnover .............................................................................................................09
Average Collection Period ....................................................................................................10
Inventory Turnover ...............................................................................................................11
Fixed Asset Turnover ............................................................................................................12
Total Asset Turnover .............................................................................................................13
Liquidity Ratios......................................................................................................................14
Current Ratio .........................................................................................................................14
Quick Ratio ...........................................................................................................................15
Debt Utilization Ratios .........................................................................................................16
Debt to Total Asset ...............................................................................................................17
Times Interest Earned............................................................................................................18
Would I invest in it…………………………………………………………………………19
Reference…………………………………………………………………………………...20

2|Page
 Acknowledgement
First, we want to thank our lecturer Ms. Sumaya Mustafa for her generous
cooperation and regular supervision that made us confident about the desired
outcome of our Fin201-Assignment. She has provided us suggestions, valuable
time, enough information, and also provided us with the format for making and
preparing the whole Assignment. 

We want to show our warm-hearted gratitude to her for her great deal of
information's, adequate data and she finally cooperated with us for the
accomplishment of the Assignment successfully. Besides, we are especially
grateful to our Lecturer, Ms. Sumaya Mustafa, for the invaluable support and
direction that lead us to the successful completion of our Assignment.

Executive summary
The report is based on the ratio analysis of Starbucks from 2017 to 2020. It
provides coffee. We have analyzed in this report the ratio of Starbucks
Company having these companies' ratio in 4 parts: Profitability Ratios, Asset
Utilization Ratios, Liquidity Ratios, and Debt Utilization Ratio. We also show
these ratios through some charts and graphs. After that, we compare these ratios
with each year and analysis.

3|Page
 Letter of Transmittal

8th august, 2021

Ms. Sumaya Mostafa

Independent University, Bangladesh

Subject: Submission of an assignment on ratio analysis of Starbucks Corporation

Dear Ma’am,
With due regard and humble accommodation, We are really lucky to be your understudy and
might want to thank you to permit us to work on the task dependent on" Starbucks
organization We have given all necessary data and expectation that data will give a
reasonable thought of the entire cycle. We have attempted essence to complete this task with
flawlessness and have accumulated adequate data about what we have gained from the course
" FIN201". There might be botches as we are not sufficiently experienced and we are
mentioning you to consider. We modestly demand you to acknowledge this report and judge
us with some tolerance for any sort of slip-up what we have made. We trust that you would
be genial enough for our diligent effort. In any case, in the event that you have any inquiry,
we will gladly get out those inquiries without a second thought.

Much obliged to you ahead of time Ma'am, for your thoughtful help. we appreciated dealing
with the task and expectation you will consider every one of our errors liberally.

Yours sincerely,
1. SK.Atika Rohin Trishila-2020825
2. Monera Bhuiyan Mim-2021155
3. Sanzida Jarin Sonia-2020167
4. Tunaj Tajrin-1911015
5. Saadman Sharar Rasul Labib-2020794

4|Page
 Company Introduction

Starbucks Corporation is a coffee business and coffeehouse chain based in the

United States. Starbucks started in 1971 in Seattle, Washington. As of 2018, the
firm has 28,218 sites throughout the world. Starbucks locations offer hot and
cold beverages, whole-bean coffee, micro-ground instant coffee, espresso, cafe
latte, teas, including Teavana tea products, Evolution Fresh juices, Frappuccino
beverages, La Boulogne pastries, and snacks, including chips and crackers;
some items are seasonal or specific to the store's location. Pre-packaged foods,
hot and cold sandwiches, and drinkware such as mugs and tumblers are
available at many stores; some "Starbucks Evenings" places sell beer, wine, and
snacks. Grocery shops also sell Starbucks-branded coffee, ice cream, and
bottled cold coffee beverages. Outside of North America, the first Starbucks
debuted in Tokyo, Japan, in 1996, and the Philippines became the second
market in 1997. Starbucks made its debut in the United Kingdom. Starbucks
entered the market in 1998 with the $83 million purchase of the then 56-store
Seattle Coffee Company in the United Kingdom, rebranding all locations as
Starbucks. Starbucks established its first location in South America in Lima,
Peru, in August 2003 and its first outlet in Russia in 2007. Starbucks announced
its entry into Italy, its 24th market in Europe, and the espresso's birthplace in
February 2016. Starbucks announced in September 2014 that it would pay
$913.5 million for the remaining 60.5 percent of Starbuck Coffee Japan that it
did not already own. In July 2017, Starbucks acquired the remaining 50 percent
of their Chinese venture from long-term joint venture partners Unit-President
Enterprises Corporation (UPEC) and President Chain Store Corporation
(PCSC).

5|Page
 Ratio Analysis

 Probability Ratios

Profit Margin: The profit margin is a number which indicates the

efficiency of a company at its cost control. A higher profit margin shows more
efficiency of the company at converting its revenue into actual profit.

Profit Margin
20
18
16
value of profit margin

14
12
10
18.278282327717
8
13.5774805157572
6 12.8857183697536
4
2 3.94718938685262
0
1 2 3 4
years
1=2017, 2=2018, 3=2019, 4=2020

 The profit margin was 12.88%.

 In 2018, the profit margin increased from 18.27% to 12.88%. There is
more profit in 2018.
 In 2019, the profit margin decreased from 13.577% to 18.27%. There is
less profit in 2019.
 In 2020, during pandemic time the profit margin decreased from 13.5%to
3.947%.This indicates. There is no profit in 2020. So, Covid-19 did affect
in Starbucks Company profit margin.

6|Page
 Return on assets: Return on assets (ROA) measures a company's
profitability concerning its total assets. The return on assets (ROA) tells a
manager, investor, or analyst how well a company's management utilizes its
assets to create profits.

Return on Assets
25

20
value of return on assets

15

10 20.0806092331681 18.7043599211803 18.7267164769298

5
3.16022400381283
0
1 2 3 4
years
1=2017, 2=2018, 3=2019, 4=2020

 In 2017, the return on asset was 20.08%

 In 2018, the return on asset decreased from 18.70% to 20.08%. This
shows that Starbucks Company is less Profitability and efficient
compared to 2017.
 In 2019, the return on asset increased from 18.72%. To 18.70%. This
shows that Starbucks Company has more Profitability and inefficient
compared to 2018.
 In 2020 (During Covid), the return on asset decreased from 18.72% to
3.16%. That means, Starbucks Company is lesser profitability and
efficient compared to 2019.

7|Page
 Return on equity: The return on equity measures the outcome
from the shareholders equity. It measures the performance of the firm’s
efficiency and the fund management of those shareholders. Higher ROE means
more efficient.

Return on Equity
500

400
value of return om equity

300

200 386.344591705857

100
52.929304049467 -
0 -
1 2 3 11.8935055284365
4
57.7516767754565
-100
years
1=2017, 2=2018, 3=2019, 4=2020

 In 2017, the return on equity decreased to 52.92%

 In 2018, the return on equity increased from 52.92%. to 386.34%. This
indicates that each dollar of common stockholder’s equity generates more
profit compared to 2017.
 In 2019, the return on equity decreased from 386.34% to -57.75%. This
indicates that each dollar of common stockholder’s equity generates less
profit compared to 2018.
 In 2020, during Covid period the return on equity decreased from -
57.75% to -11.89%. This indicates that each dollar of common
stockholder’s equity generates less profit compared to 2019.

8|Page
  Assets Utilization Ratios

Receivable Turnover: A company’s receivables turnover show that

how quickly a company is collecting upon its accounting receivable.

Receivables turnover
value of receivables turnover

40
35
30
25
20
35.6651276872024
15 30.1508189262966
25.7201286764706 26.6221417251528
10
5
0
1 2 3 4
years
1=2017, 2=2018, 3=2019, 4=2020

 In 2017, Receivable Turnover was 25.72 times

 In 2018, Receivable Turnover increased from 25.72 times to 35.66 times.
This indicates they does not collect the receivable frequently in 2017,
which is positive and developed for the current asset of the company in
2018.
 In 2019, Receivable Turnover decreased from 35.66 times to 30.15 times.
This indicates they did collect the receivable more frequently in 2018.
 In 2020, during Covid receivable Turnover decreased from 30.15 times to
26.62 times. This indicates they did collect the receivable more
frequently in 2019.

9|Page
 Average Collection Period: The average collection period is
calculated by dividing the average balance of accounts receivable by total net
credit sales for the period and multiplying the quotient by the number of days in
the period. Average collection periods are most important for any company to
rely heavily on receivables for their cash flows.

Average collection period

value of averge collection period

365.00004
365.00002
365
364.99998
364.99996
365.000021064783 365.000018681757
364.99994 364.999995868236
364.99992
364.9999 364.999928710951
364.99988
1 2 3 4
years
1=2017, 2=2018, 3=2019, 4=2020

 In 2017, Average collection Period 364.99 days

 In 2018, Average collection Period increased from 364.99 days to 365
days. So, the average collection is faster in 2017.
 In 2019, Average collection Period decreased from 365.0000211 days to
365.0000187 days. So, the average collection is slower than 2018.
 In 2020, during Covid average collection Period increased in
365.0000187 days. So, the average collection is faster than 2019. During
Covid there is no effect.

10 | P a g e
 Inventory Turnover: The inventory turnover ratio measures how many
times a company’s inventory is sold and replaced over a given period.

Inventory turnover
18
17.5
value of inventory turnover

17
16.5
16
15.5 17.6504819707247 17.3326794821499
15 16.4126099706745
14.5 15.159211035194
14
13.5
1 2 3 4
years
1=2017, 2=2018, 3=2019, 4=2020

 In 201, the inventory turnover was 16.41 times

 In 2018, inventory turnover light increases from 16.41 times to 17.65
times. So, inventory turnover sold faster in 2018 from 2017.
 In 2019, inventory turnover decreases from 17.65 times to 17.33 times.
So, inventory turnover sold slower in 2019.
 In 2020, during Covid period inventory turnover decreases from 17.33
times to 15.15 times. In this time covid affect the Starbucks Company’s
inventory turnover and their sales gets slow.

11 | P a g e
 Fixed Asset Turnover: The fixed asset turnover ratio is a metric that
measures how effectively a company generates sales using its fixed assets.

Fixed assets turnover

3
value of fixed assets turnover

2.5

1.5
2.4649093831891
1 2.11962579959184 1.95409009487162

0.5 1.09040666539936

0
1 2 3 4
years
1=2017, 2=2018, 3=2019, 4=2020

 In 2017, the fixed asset turnover was 2.464 times

 In 2018, the fixed asset turnover was decreased from 2.646 times to 2.11
times.
 In 2019, the fixed asset turnover was decreased from 2.11 times to 1.95
times. The fixed asset turnover ratio is dragging down this companies
hugely.
 In 2020, during covid the fixed asset turnover was decreased from 1.95
times to 1.09 times. The fixed asset turnover ratio is dragging down this
company’s but only slightly.

12 | P a g e
 Total Asset Turnover: Total asset turnover ratio measures a company’s
ability to generate sales from assets. It’s the same story as fixed asset turnover.

Total assets turnover

1.8
1.6
value of total assets turnover

1.4
1.2
1
0.8 1.55836164169962
1.3792482673937
0.6
1.02331059263798 0.80062639364074
0.4 3
0.2
0
1 2 3 4
years
1=2017, 2=2018, 3=2019, 4=2020

 In 2017, total asset turnover was 1.55 times

 In 2018, total asset turnover decrease from 1.55 times to 1.02 times and
 In 2019, total asset turnover increase from 1.02 times to 1.37times, which
is positive for the company. Investors will be motivated to invest.
 In 2020, total asset turnover decrease from 1.37 times to 0.8 times.
Covid-19 affects the Starbucks Company, and they could not use their
asset efficiently.

13 | P a g e
  Liquidity Ratio

Current Ratio: A company’s current ratio provides an assessment of the

company’s ability to pay off its current liabilities using its current assets. Here
the current ratio has decreased but as it is over 1 so company can pay all the
liability using their debt.

Current Ratio
2.5

2
value of current ratio

1.5

2.19805777418106
1
1.25178287961713 0.91654643604000
0.5
8
0 0.1062430590336
1 2 3 4
years
1=2017, 2=2018, 3=2019, 4=2020

 In 2017, current ratio was 1.25 times

 In 2018, company current ratio increased from 1.25 times to 2.19 times.
 In 2019, current ratio decreased from 2.19 times to 0.91. It is huge less
preferable for investors.
 In 2020 in Covid-19 time’s current ratio decreased again from 0.91 to 0.1
so, year 2020 is not preferable near investors for investment.

14 | P a g e
 Quick Ratio: The quick ratio measures your ability to access cash
quickly to support immediate demands. The quick ratio is also more than 1
which also shows that the quick demand for the cash can be fulfilled by their
assets and other liquid funds.

Quick ratio
2.5

2
value of quick ratio

1.5

1 1.95167305865381

0.5 0.92861373705783
4 0.66861737481154
9
0.08512891143871
0 26
1 2 3 4
years
1=2017, 2=2018, 3=2019, 4=2020

 In 2017, the quick ratio was 0.92 times

 In 2018 & 2019, quick ratio increased to 1.29 times & decreased to 0.66
times.
 In 2020, when Covid-19 attack, that Pandemic time their quick ratio
decreased from 0.66 to 0.08. It’s huge and it is bad for company and
investors.

15 | P a g e
 Debt to Total Asset: Debt to total assets is a calculation of assets that
are financed by creditors rather than investors. It shows how much of the
company's resources are owned by shareholders as equity and creditors as debt.
The risk factor is calculated by investors, and companies with a higher figure
are more risky to invest in.

Debt to Total assets

100
90
value of debt to total assets

80
70
60
50
40 85.9888678956238
30 58.1021457262378
20 39.079084631816
10 27.3751183382525
0
1 2 3 4
years
1=2017, 2=2018, 3=2019, 4=2020

 In 2017, debt to total decreased to 27.37% and in 2018 it is increased in

39.07%
 In 2019, debt to total increased from 39.07% to 58.10%. So, the company
was paying a higher percentage of its profits in 2019 in principal and
interest payments.
 In 2020, during pandemic time this company debt to total asset hugely
increased in 85.98%. This year was more risky for investors.

16 | P a g e
 Times Interest Earned: The times interest earned ratio is a evaluate
of a company's ability to meet its debt obligations based on its current income.

Times interest earned

60
value of times interest earned

50

40

30
47.6756756756757
20
34.9401056958309
10
14.4930513595166
0 3.66453089244851
1 2 3 4
years
1=2017, 2=2018, 3=2019, 4=2020

 In 2017, time interest earned 47.67 times.

 In 2018, time interest earned decreased from 47.67 times to 34.94 times.
 In 2019, time interest earned decreased from 34.94 times to 14.49 times.
 In 2020, time interest earned decreased from 14.49 times to 3.66 times.
So, we can say there was higher risk for investors and creditors to invest in this
company because after 2017 all the years’ time interest earned decreased.

17 | P a g e
 Would I invest or not?

Ratio calculation 2017 2018 2019 2020

Profitability Ratios:
Profit margin (%)
Return on Assets (%)
Return on Equity (%)
12.8857
2 18.27828 13.57748052 3.947189387
20.0806
1 18.70436 18.72671648 3.160224004
52.9293 386.3446 57.75167678 11.89350553

Asset Utilization Ratios:

25.7201
Receivables turnover (times) 3 35.66513 30.15081893 26.62214173
364.999
Average collection period (days) 9 365 365.0000187 364.9999959
16.4126
Inventory turnover (times) 1 17.65048 17.33267948 15.15921104
2.46490
Fixed assets turnover (times) 9 2.119626 1.954090095 1.090406665
1.55836
Total assets turnover (times) 2 1.023311 1.379248267 0.800626394

Liquidity Ratios:
1.25178
Current ratio (times) 3 2.198058 0.916546436 0.106243059
0.92861
Quick ratio (times) 4 1.951673 0.668617375 0.085128911

Debt Utilization Ratios:

27.3751
Debt to Total assets (%) 2 39.07908 58.10214573 85.9888679
47.6756
Times interest earned (times) 8 34.94011 14.49305136 3.664530892

18 | P a g e
Stock investment necessitates a thorough examination of financial data in order
to determine a company's actual value. This is usually done by looking at the
profit and loss account, balance sheet, and cash flow statement of the firm.
Examining a company's financial statistics is a simpler method to learn about its
success. Profit Margin, Return on Equity, Current Ratio, Debt to Total Asset,
and Asset Turnover Ratio are some of the most important ratios to consider
before investing. While analyzing a company, we must see whether its profit
Margin has been rising over a period. By analyzing the Profit Margin Ratios
from 2017-2020, we see that the ratio has been declining before even covid hit
properly, which is creating a negative impact on Starbucks. Then Return on
equity (ROE) is a ratio that evaluates the profit a company generates for its
owners. It allows investors to compare the profits of businesses in the same
industry. According to calculations, The ROE has been declining since 2018.
Since the Company isn't generating that much of a profit, We, as investors,
definitely won't invest. The debt-to-total-asset ratio is higher than that of similar
businesses. We also know that a current ratio of less than one is problematic.
Starbucks' current ratio is less than one. Since 2019, the ratio has been less than
one. And lastly, Asset to Turnover shows how efficiently the management is
using assets to generate revenue. The higher the ratio, the superior it is. The
asset turnover ratio has been increasing for Starbucks after 2018, which is a
good thing. It declined during Covid, which is Considerable. Before investing in
Starbucks, we should think about all of the essential ratios. We have decided not
to invest in Company. The number of ratios that are decreasing for Starbucks
much outnumber those that are growing. As a result, if we invest, we may suffer
a significant loss.

Reference

https://finance.yahoo.com/quote/SBUX?p=SBUX&.tsrc=fin-srch

19 | P a g e
20 | P a g e