Module Seven Homework Caitlin Sallade Southern New Hampshire University ACC 340 Controllership Professor Dr. Cole April 21st, 2024
Starbucks is a global coffeehouse chain renowned for its specialty coffee beverages and cozy café ambiance. Founded in 1971 in Seattle, Washington, Starbucks has expanded to become one of the world's largest coffeehouse chains, with thousands of locations worldwide, offering a wide array of coffee blends, teas, pastries, and snacks. Starbucks submitted their latest 10-K filing on November 17th, 2023, followed by their 10-Q filing on February 16th, 2024, and their 8- K filing on March 15th, 2024. The conclusion of the company's fiscal year falls on October 1st (Starbucks, 2023). The current ratio is a financial metric used to assess a company's ability to cover its short- term liabilities with its short-term assets and is calculated by dividing a company's total current assets by its total current liabilities (Fernando, 2024). According to the most recent 10-K, Starbucks had $7.303.4 million current assets and $9,345.3 million current liabilities (Starbucks, 2023). This results in the current ratio of 0.78. For investors, the current ratio offers insights into a company's liquidity and short-term financial health. A ratio above 1 indicates that the company has more current assets than current liabilities, suggesting it can easily meet its short-term obligations. Conversely, a ratio below 1 may indicate potential liquidity issues. Investors typically prefer companies with higher current ratios, as they are better positioned to handle unexpected expenses or economic downturns without resorting to borrowing or liquidating long- term assets. Starbucks' current ratio indicates the company may have liquidity issues, but this value must also be compared with industry standards to fully interpret. The Return on Assets, or ROA, ratio measures a company's profitability relative to its total assets and is calculated by dividing the company's net income by its average total assets (Hargrave, 2024). ROA shows how efficiently a company is generating profits from its investments in assets. Starbucks had a net income of $5,401.9 million and assets totaling
$29,445.5 million which results in an ROA of 18.35% (Starbucks, 2023). A higher ROA suggests that the company is more efficient at generating profits with its available assets, which can indicate strong management and operational efficiency. Conversely, a lower ROA may indicate inefficiencies in asset utilization or operational performance. Comparing ROA across companies within the same industry or sector can help investors assess which companies are better at generating profits relative to their asset base. It's also useful for tracking a company's performance over time and evaluating management's effectiveness in deploying assets to drive profitability. Return on Equity, or ROE, is a financial ratio that measures a company's profitability relative to its shareholders' equity and is calculated by dividing the company's net income by its average shareholders' equity. ROE indicates how efficiently a company is utilizing shareholders' equity to generate profits. Utilizing the net income again and the total equity for year end 2023 of negative $7,987.8 million results in an ROE of negative 67.63% (Starbucks, 2023).