Industry Analysis
From the year ending September 29, 2013 to year ending September 28, 2014 all of the Liquidity Ratios had increased a large amount except for quick ratio, which had a decrease. Quick ratio had a decrease because 2014 fiscal year had a lesser amount of assets. Current ratio had gone up 35% and caused quick ratio to go down 59%. It had a rough start when McDonalds started selling coffee at a cheaper price, which didn’t sales. Starbucks believe that after it helped New Orleans with the damaging of their community, everything turned around which caused an increase in inventory turnover at 1.16% ("The HBR Interview) As Starbucks began to market how they’re wanting to help communities, networking capital rose 995.7 within a year.
Within the assessment of management ratios, the average collection period has gone down a substantial amount, it had a decrease of 26.73 days. However, fixed asset turnover and total asset turnover had an increase with .9 and 36.52. Asset turnover has increased due to the increase in revenue from 14,866.8 in 2013 and 16447.8 in 2014. Debt Ratio has decrease from 10.24%, which is great for the company considering that their liabilities dropped from 1, 11.2 to 1,090.9. Starbucks had a drastic increase in their ratios from 36.52 due to increase in in earnings before interest and taxes (EBIT). Gross profit margin has had a small increase but operating profit margin is where Starbucks sees a drastic change. Its operating profit margins had an increase of 19% in 2014 in comparison to 17% in 2013. This could be due to a large amount of sales leverage within the corporation.
In 2014, there was a major increase in earnings per share which increased market/book Ratios. However, the price/earnings ratio has dropped 14.55% due to a change in earnings per share. Lastly, the return on equity has grown a substantial amount which means