What Is Starbucks Ratio Analysis

Starbucks’ solvency ratios provide valuable insight into whether the company is generating sufficient cash flow to meet short-term and long-term obligations. At the end of 2014, Starbucks current assets of $4169 million and current liabilities of $3039 million produced a current ratio of 1.37. During this same period, Starbucks had quick assets of $2474 million (cash of $1708 million + short-term investments of $135 million + accounts receivable of $631 million) with current liabilities of $3039 million resulting in a quick ratio of 0.81. These ratios imply that Starbucks was reasonably liquid at the end of 2014 with $1.37 in current assets and $0.81 in quick assets for every $1 in current liabilities. In 2013, Starbucks had a current ratio of 1.02 and a quick ratio of 0.71 and the previous year the company’s current ratio was 1.90 with a quick ratio of 1.14. This data shows that Starbucks’ current ratio and quick ratio decreased considerably from 2012 to 2013 indicating a reduction in liquidity. Starbucks liabilities increased dramatically in 2013 because of an accrued

The most visible increase was seen between the years of 2008 to 2009 from 30 days to 57 days. Starbucks held inventory the most with an average of 69 days in 2012. From the years 2010 to 2012, days in inventory increased every year, which implies that the inventory remained on the shelf for a longer amount of time. Furthermore, Starbucks increasing number of days in inventory from 2005 to 2014 may be a sign of short-term troubles with over estimating sales, overproduction, or slow-moving inventory. In 2014, Starbucks turned over inventory on average approximately 59 days. This ratio shows that Starbucks managed their inventory more efficiently in 2014 compared to 2013 when Starbucks held inventory for an average of 67