Question

BUSINESS DECISION: FINANCIAL RATIOS

The years 2005 to 2009 saw a coffe company's revenues grow by more than 50%. Use the following financial data to answer the questions below.

Starbucks - Selected Financial Data
(In millions, except earnings per share)
		Sept. 27,		Sept. 28,		Sept. 30,		Oct. 1,		Oct. 2,
		2009		2008		2007		2006		2005
As of and for the fiscal year ended		(52 wks)		(52 wks)		(52 wks)		(52 wks)		(52 wks)
Results of Operations
Net revenues:
Company-operated retail		$8,180.3		$8,771.6		$7,998.3		$6,583.1		$5,391.7
Specialty:
Licensing		$1,222.1		$1,171.8		$1,026.1		$860.7		$673.3
Food service and other		$372.2		$439.5		$386.6		$343.2		$304.3
Total specialty		$1,594.3		$1,611.3		$1,412.7		$1,203.9		$977.6
Total net revenues		$9,774.6		$10,382.9		$9,411.0		$7,787.0		$6,369.3
Operating income		$562.1		$503.7		$1,053.6		$894.2		$780.6
Earnings before cumulative effect of change in		$390.5		$315.5		$672.7		$581.7		$494.1
accounting principle
Cumulative effect of accounting change for asset
retirement obligations, net of taxes		_		_		_		17.4		_
Net earnings		$390.5		$315.5		$672.7		$564.3		$494.1
Earnings per common share before cumulative
effect of change in accounting principle - diluted ("EPS")		$0.53		$0.46		$0.81		$0.71		$0.67
Cumulative effect of accounting change for asset
retirement obligations, net of taxes - per common share		_		_		_		0.08		_
EPS - diluted		$0.53		$0.46		$0.81		$0.63		$0.67
Net cash provided by operating activities		$1,389.4		$1,258.9		$1,331.4		$1,331.8		$922.5
Capital ependitures (additions to property, plant
and equipment)		$445.7		$984.6		$1,080.3		$771.3		$643.2
Balance Sheet
Total assets		$5,576.5		$5,672.7		$5,343.5		$4,428.5		$3,513.9
Short-term borrowings		0.0		713.2		710.2		700.2		277.3
Long-term debt (including current portion)		549.7		550.2		550.8		2.6		3.6
Shareholders' equity		$3,045.7		$2,490.9		$2,284.1		$2,228.8		$2,090.2

a. Calculate the asset turnover ratio for 2008 and 2009. Round to the nearest hundredth.

2008:

2009:

b. Calculate the net profit margin for 2007, 2008, and 2009. Round to the nearest tenth.

Do not enter the percent symbol in your answer.

2007:  %

2008:  %

2009:  %

c. Calculate the return on investment for 2007, 2008, and 2009. Round to the nearest tenth.

Do not enter the percent symbol in your answer.

2007:  %

2008:  %

2009:  %

d. Prepare a trend analysis of the net revenue and total assets for 2005 through 2009.

Round to the nearest tenth. Do not enter the percent symbol in your answer.

	2009	2008	2007	2006	2005
Net Revenue	%	%	%	%	%
Total Assets	%	%	%	%	%

e. Prepare a trend analysis multiple-line chart for the information in part d.

Answer 1

a) Assets turnover ratio = Sales or revenue / Total assets

2008 = 10382.90 / 5672.70 = 1.83

2009 = 9774.60 / 5576.50 = 1.75

b) Net profit margin = Net profits or earnings / Revenue * 100

2007 = 672.70 / 9411.00 * 100 = 7.15%

2008 = 315.50 /10382.90 * 100 = 3.04%

2009 = 390.50 / 9774.60 * 100 = 4.00%

c) Return on investment= Net earnings/Equity*100

2007 = 672.70 / 2284.10 * 100 = 29.45%

2008 = 315.50 / 2490.90 * 100 = 12.67%

2009 = 390.50 / 3045.70 * 100 = 12.85%

d) Trend analysis = Change in figures / Figures of base year * 100

Here base year assumed to be year 2005.

Particulars	2009	2008	2007	2006	2005
Net revenue	(390.50 - 494.10)/494.10 * 100 = 20.97%	(315.50 - 494.10)/494.10 * 100 = 36.15%	(627.70 - 494.10)/494.10* 100 = 27.04%	(564.30 - 494.10) / 494.10 * 100 = 14.21%	Base year 100%
Total assets	(5576.50 - 3513.90)/3513.90 * 100 = 58.70%	(5672.70 - 3513.90)/3513.90 * 100 = 61.44%	(5343.50 - 3513.90)/3513.90 * 100 = 52.07%	(4428.50 - 3513.90)/3513.90 * 100 = 26.03%	Base year 100%

Analysis : Revenue is decreasing in year 2008 & 2009 against it's base year revenue. Total assets is in increasing trend from its base years total assets.