STARBUCKS CORPORATION

INTERNAL AUDIT
JUNE 20, 2019

Financial Highlights

As the results it the Coffee Connection with a learning experience about the
overall financial health of a competing business as well as additional
suggestions for financial improvements. For vertical analysis between the
income statement of 2008 up to 2010, overall there is an increased of opereting
expese up to 3.5% from 2008 to 2009 but in 2009 to 2010 it decreased up to
7.57%. There was an increased of net earnings from 2008 yo 2010 for about
5.86%. For operating income it was consistent of 5% between 2008 and 2009
but it in increased during 2010 for about 8.26%.

Vertical Analysis

Income Statement 2008 Income Statement 2009

4.85% 3.04% 5.75% 4%

Operating Income Operating Income

Net Earnings Net Earnings
96.24% Operating Expense 95.50% Operating Expense
Trend Analysis
Income Statement 2010
8.86 %

13.26%
Operating Income
Net Earnings
88.13%
Operating Expense

Balance Sheet

69.19%
63.50%
56.84% 57.54%
54.61%

43.164% 43.91%
36.505% 38.60%
30.815%
27.86%28.35%

17.04%17.49%
14.60%

CURRRENT ASSETS NON-CURRENT ASSETS CURRENT LIABILITIES NON-CURRENT SHAREHOLDER'S EQUITY

LIABILITIES

Year 2010 Year 2009 Year 2008

 Net Revenues

104%

102%

100%

98%

96%

94%

92%
Year 2008 Year 2009 Year 2010

Overall, Starbucks’ net revenues decreased from 2008 to 2009 and from 2009 to 2010 it increased.
Also, there was an decrease between 2008 - 2010 in terms of cost of goods sold which was not
illustrated above, typically encompasses the cost of materials to produce product, occupancy costs,
and involved labor costs. Both of these factors are decreasing which indicate that the overall
performance of the company is most likely trending positively and sales objectives are being
achieved. It also indicates that Starbucks is growing as a company because when a business is
growing, the cost of goods sold is a normal occurrence because a business should strive for a decrease
in the cost of goods sold ny maintaining quality since it will result in a higher gross profit and an
increase in net operating profit.
Moreover, it reveals that Starbucks had a decreased (6.93%) in accounts receivable from 2008 to 2009
and a slightly increased (10.47%) . Additionally, it highlights the fact that accounts receivable made
up 4.74 % , 4.86% and 5.81% of the total assets in 2010, 2009 and 2008 respectively. As net revenue
rose, accounts receivable did as well, indicating a correlation.

FINANCIAL RATIOS
2010 2009 2008
Current Ratio 1.55 times 1.29 times .80 times
Quick Ratio .82 times .55 times .27 times
Trade Receivable Turnover 37.33 times 32.55 times -
Inventory Turnover 7.38 times 6.37 times -
Asset Turnover 1.79 times 1.74 times -
Debt Ratio 42.46% 45.39% 56.09%
Equity Ratio 57.54% 54.61% 43.91%
 Book Value per Ordinary Share 4.97 per share 4.10 per share 3.41 per share
Times interest earned 44.94 times 15.30 times 9.60 times
Net Profit Margin 8.86% 4.00% 3.04%
Return on Equity 15.60% 12.74% 12.64%

A liquidity ratio that is common is the current ratio, which is the ratio of current assets to

current liabilities . The current ratio is calculated by dividing current assets by the total current

liabilities. “Acceptable current ratios vary from industry to industry and are generally between 1.5%

and 3% for healthy businesses. If a company's current ratio is in this range, then it generally indicates

good short-term financial strength. If the value of the current ratio is considerably high, then it could

indicate that a business may not be using its current assets efficiently it serves as a warning to

problems in managing working capital.). In 2008 and 2009 Starbucks’ current ratios were about 1.55

and 1.28. Both years seem to have ended with similar results and were close to the industry average of

1.14. The current ratio is slightly larger than 1 and Starbucks should continue to strive for one that is

higher to provide additional “padding” against unforeseeable events/incidental expenses that may

arise. The ratio is within the “healthy” range and therefore is an indicator of good short-term financial

strength. Starbucks is most likely using their current assets efficiently.

On the other way around, when the ratio is low (current liabilities exceed current assets), it

could indicate that a company may be having difficulties meeting its short-term obligations/current

liabilities. For example, and in terms of Starbucks, this could reveal their ability to pay off its short-

term bills. A high ratio would indicate a “safety,” which increases their flexibility because some of the

inventory and balances on the receivables may not be able to be converted easily to cash. In 2008
current ration .88 it had shown that is is low which means company may be having difficulties its

short-term debt or current liabilities.