Ratio Analysis and Statement of Cash Flows

Ratio Analysis and Statement of Cash Flows for Starbucks™ and Caribou Coffee™

Stewart Stout

Financial/324

June 6, 2011

Phillip Sarakatsannis

The analysis and statement of cash flows, “They are just a convenient way to summarize large quantities of financial data and to compare firms' performance" (Brealey, Myer, & Marcus, 2007, p. 456). Financial ratios are effective method to substantiate a company's performance and financial state, facilitate decision-making by managers, and compare competing companies in the same industry to evaluate their performance. Starbucks™ and Caribou Coffee™ are the top two coffee companies in America. Starbucks™ leads the business globally operating in 16,680 stores; followed by Caribou Coffee™ as the second largest coffee chain operating 500 corporate owned stores and over than 100 franchised outlets (Franchise direct, n.d., para. 2). In this paper the subject to describe financial ratios by comparing these companies relation to the operating profitability, asset utilization, and risk management for 2009 and 2010. The industry comparison illustrating the performance of these two stores; evaluate the annual results to understand the importance of ratios, applying ratios to the organizations and in relationship to the industry.

Operating Profitability

Fiscal year 2010 Starbucks™ sales or revenues were $10,707.40 million, which was a $932.8 million increase from fiscal year 2009. Starbucks™ gross operating profit in 2009 is $5,478.30 million and $6,279.20 million for 2010 (MarketWatch, 2011). Caribou Coffee™ in 2010 posts sales of $284 million, an increase of $21.46 million in 2009. Caribou Coffee™ gross operating profit is $49.01 million in 2009 and $53.45 million in 2010 (MarketWatch, 2011). Equally the organizations had increased in sales for both years; however, Starbucks™ maintains higher revenues and gross operating profit than Caribou Coffee™.

Profitability ratios establish a company's...