ACC 230 Week 9 Starbucks Financial Health Paper - (Material )
In 1985, Howard Schultz founded Starbucks. In Seattle Washington in a store called Giornale Coffee Company caught Howard’s attention; from that moment Howard had the idea of a Coffee Bar. Two years later, in 1987, Howard and other co-partners opened very first Coffee Bar and named it Starbucks. Starbucks headquarters are located in Seattle, Washington. (Business Week, 2000-2008). Howard Schultz is not only the founder of Starbucks; Howard is also the chairman, president and chief executive officer of Starbucks.
Starbucks Corporation and subsidiaries purchase, roasts, and sells whole bean coffees to the consumer. Starbucks also sells a variety of fresh brewed coffees, espressos, specialty teas, and cold blended coffee drinks at their locations. Food items such as baked treats, sandwiches and fruit are also available for purchase at Starbucks. Starbucks also specialty coffee mugs, travel mugs and a line of coffee brewing accessories through company operated retail stores. Supermarkets and liquor stores also carry a line of Starbucks ready to drink beverages.
Summary of Starbuck’s current financial performance.
According to the Starbucks Income statement, the company has had a decrease in revenue and a pick up in cost of good sold. Although the gross profit margin dollars are more then the year 2007, the company has dropped 2.25%. The SG&A expense has increased which leads me to believe that the Starbuck cooperation is either putting extra effort into coming up with new product and ways to improve, or then the company can be over staffed and will need to make the necessary adjustments. The depreciation and amortization expense has increased. The increase in depreciation and amortization could be from new equipment being purchased. Operating income and operating margin have decreased; this is due to the lack of sales. I am presuming the lack of sales are due to the economical crisis our country is in. I have heard on the news that many Starbucks locations are closing down. Non-operating income and non-operating expenses have increased as well. Income before taxes appears to be extremely low, $596m less then 2007. The net income has gone down $357m from 2007. The net profit margin has gone down over 4%. By looking at the income statement, it appears the company has gone down in revenue then previous years.
When taking a look at Starbuck’s Balance sheet, the company does not appear to be in any turmoil. The cash on hand has decreased slightly from 2007, but the net receivables have increased. Inventory has also decreased slightly from last year. What this is telling me is that Starbucks is letting their inventory decrease before making any new purchases. Total current assets have gone down a bit from the previous year. I believe the net receivables are good, business is slow and the company is doing their best to sell the product that is on hand. There was a decrease in fixed assets and an increase in non-current assets. Because of the push to get sales out and non-current assets, Starbucks has had an increase in total assets by $328m.
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