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Debt Ratio

In: Business and Management

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Current ratios are determined by dividing a company’s current assets by their current liabilities. As of December 31, 2013 Starbucks current ratio is 1.273 vs. 1.847 on December 31, 2012. Current ratio determines whether a company will be able to meet their short-term obligations like paying their creditors and purchasing raw materials for its production and indicating the company’s efficiency. When a company’s current ratio is higher than a 2.0 it indicates that their current assets are larger than their short-term liabilities. When their current liabilities are greater than their current assets making the current ratio less than 1, the company may have trouble meeting their short-term debt obligations.
Debt to equity ratio is determined by the long-term debt of a company divided by their shareholder’s equity. On December 31, 2013 Starbucks debt to equity was 0.419 vs. 0.1063 on December 31, 2012. Debt to equity ratio shows a percentage of the company’s assets that were financed by their debt vs. their equity. When companies have a high debt to equity ratio it shows that the company has strongly financed their activities through their debt and have to pay the accumulated interest on the financing which could result in volatile earnings. When there is a low debt to equity ratio it shows that the company have a lower risk due to the fact that the debt holders having less claim to the company’s assets.
Return on equity ratio determines the rate of return on money that was invested from common stock owners which is kept by the company for previous years that have been profitable. Starbucks return on equity on December 31, 2013 was 2.28% vs. 28.04% on December 31, 2012. Return on equity indicates whether a company is able to generate the profits from shareholders’ equity. It also tells how companies will use their investment funds for growth.
Days receivable also…...

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