Compute Ratios for Starbucks

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Starbucks is a large multinational chain of coffee shops with corporate headquarters in Seattle, Washington. The company was in part named after Starbuck, a character in Moby Dick, and its insignia is a stylized cartoon siren. It is more popular among youth. Besides coffee it also serves other drinks, both hot and cold, and pastries. The company has 130,000 employees worldwide at 11,377 stores in 37 countries and plans to grow to 30,000 stores globally. It has about 80 corporate stores in Michigan. Starbucks is opening stores at a rate of five a day and saw its sales rise 20% last year to $6.4 billion. Profits rose nearly 8% to $494 million last year (2005)
(www.en.wikipedia.org)
Ratio Analysis
The accounting data helps to know the performance of the organization. Accounting is the means by which information about an enterprise is communicated and, thus, is sometimes called the language of business. We can use the ratios to evaluate the performance of the Starbucks.
A ratio is nothing more than a simple division of two numbers. Often numbers by themselves do not convey anything until they are related. It needs a contextual reference.
In financial analysis, we need qualitative information and try to read between the numbers. We have to ask all the right questions. Over the years, there are some ratios, which have become more popular and handy for rule of thumb analysis of financial statements. Our purpose in this note is not deride them but to advice the reader to use them properly to derive the correct results.
Ratio analysis can also help us to check whether a business is doing better this year than it was last year; and it can tell us if our business is doing better or worse than other businesses doing and selling the same things. In other words it helps in inter firm and intra firm comparison.
(Pandey, I.M.)

LIQUIDITY ANALYSIS
Liquidity is a company's ability to meet its maturing short-term obligations. Liquidity is important for conducting business activity especially in times of adversity such as when operating losses occur due to economic conditions or drastic price increases of raw materials or parts. Liquidity must be sufficient to cushion such losses. Some ratios of liquidity:
Current Ratio. The current ratio is another way to express the relationship between current assets and current liabilities. A current ratio of less than 1:1 is usually unacceptable since in that case current ...