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Ethics and Compliance Paper

Autor:   •  July 30, 2014  •  Essay  •  388 Words (2 Pages)  •  813 Views

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The aim and reason for this financial analysis of Starbucks is to obtain a thorough knowledge, which is able to provide measurable conclusions about the organization. By engaging and analyzing Starbucks finance structure, bankers, investors, and stockholders will have a significant understanding the nature of Starbucks. Also the company performance would be evaluated clearly by implementing ratio analysis.

As it appears the current ratio for 2013 was higher than the year of 2012. Starbucks has 2.64% times more current assets than current liabilities. In addition, the ratio informs individuals that Starbuck’s liabilities are decreasing at a higher rate than their current assets and pushing the ratio to increase. This signifies that Starbucks was financially able to cover their own obligations.

The debt ratio is defined as the ratio of total debt to total assets, expressed in percentage, and can be interpreted as the proportion of a company’s assets that are financed by debt ("Debt Ratio", ). The method of the financial ratio it to determine and measure the extent of a company’s or consumer’s leverage. The debt ratio for 2012 and 2013 was 37.7:61%. According to the data information provided, Starbuck’s debt significantly increased. According to "David Dreman Guru Analysis For Starbuck's Corporation" (2014), “The company must have a low Debt/Equity ratio, which indicates a strong balance sheet. The Debt/Equity ratio should not be greater than 20% or should be less than the average Debt/Equity for its industry of 60.53%. SBUX's Total Debt/Equity of 41.90% is considered acceptable.” However, Starbucks was slightly over the appropriate debt percentile, and considered to be a warning. The higher the cost of debt, the higher the risk.

The Rate of Equity (ROE) is an important number in equity analysis but it's the net income/shareholder's equity from the balance sheet. To calculate

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