Explain why financial analysts are interested in profitability and asset managem
ID: 2471153 • Letter: E
Question
Explain why financial analysts are interested in profitability and asset management [efficiency] ratios.
Ratio
2015
2014
2013
2012
2011
2010
Gross margin%
56.3%
58.0%
58.8%
Operating margin
15.0%
14.8%
13.3%
Net margin
10.4%
10.7%
8.9%
What do these ratios say about the profitability of the company? Assume I am an investor and you are my consultant and you are writing a recommendation. Include the ratio information in your response to this question.
Which of these ratios would help to support your position about the success of Starbucks in achieving its strategic objectives? Explain. Assume I am on Starbuck’s Board of Directors and you are formally writing your analysis for a presentation to the Board. Include the ratio information in your response to this question.
Trend analysis Common size $ change % change 2015 2014 2013 2012 2015 2014 2013 2012 2014-15 2013-14 2012-13 2014-15 2013-14 2012-13 Net revenues: Company-operated stores $ 15,197.30 $ 12,977.90 $ 11,793.20 $ 10,534.50 79.31% 78.90% 79.33% 79.35% $ 2,219.40 $ 1,184.70 $ 1,258.70 17.1% 10.0% 11.9% Licensed stores 1,861.90 1,588.60 1,360.50 1,210.30 9.72% 9.66% 9.15% 9.12% $ 273.30 $ 228.10 $ 150.20 17.2% 16.8% 12.4% CPG, foodservice and other 2,103.50 1,881.30 1,713.10 1,532.00 10.98% 11.44% 11.52% 11.54% $ 222.20 $ 168.20 $ 181.10 11.8% 9.8% 11.8% Total net revenues 19,162.70 16,447.80 14,866.80 13,276.80 100% 100% 100% 100% $ 2,714.90 $ 1,581.00 $ 1,590.00 16.5% 10.6% 12.0% Cost of sales including occupancy costs 7,787.50 6,858.80 6,382.30 5,813.30 49.25% 50.30% 41.33% 50.59% $ 928.70 $ 476.50 $ 569.00 13.5% 7.5% 9.8% Store operating expenses 5,411.10 4,638.20 4,286.10 3,918.10 34.22% 34.02% 27.75% 34.10% $ 772.90 $ 352.10 $ 368.00 16.7% 8.2% 9.4% Other operating expenses 522.40 457.30 431.80 407.20 3.30% 3.35% 2.80% 3.54% $ 65.10 $ 25.50 $ 24.60 14.2% 5.9% 6.0% Depreciation and amortization expenses 893.90 709.60 621.40 550.30 5.65% 5.20% 4.02% 4.79% $ 184.30 $ 88.20 $ 71.10 26.0% 14.2% 12.9% General and administrative expenses 1,196.70 991.30 937.90 801.20 7.57% 7.27% 6.07% 6.97% $ 205.40 $ 53.40 $ 136.70 20.7% 5.7% 17.1% Litigation charge/(credit) - (20.20) 2,784.10 - 0.00% -0.15% 18.03% 0.00% $ 20.20 $ (2,804.30) $ 2,784.10 -100.0% -100.7% - Total operating expenses 15,811.60 13,635.00 15,443.60 11,490.10 100% 100% 100% 100% $ 2,176.60 $ (1,808.60) $ 3,953.50 16.0% -11.7% 34.4% Income from equity investees 249.90 268.30 251.40 210.70 6.94% 8.71% -77.26% 10.55% $ (18.40) $ 16.90 $ 40.70 -6.9% 6.7% 19.3% Operating income/(loss) 3,601.00 3,081.10 (325.40) 1,997.40 100% 100% 100% 100% $ 519.90 $ 3,406.50 $ (2,322.80) 16.9% -1046.9% -116.3% Gain resulting from acquisition of joint venture 390.60 - - - 14.17% 0.00% 0.00% 0.00% $ 390.60 $ - $ - - - - Loss on extinguishment of debt (61.10) - - - -2.22% 0.00% 0.00% 0.00% $ (61.10) $ - $ - - - - Interest income and other, net 43.00 142.70 123.60 94.40 1.56% 6.90% 1489.16% 6.82% $ (99.70) $ 19.10 $ 29.20 -69.9% 15.5% 30.9% Interest expense (70.50) (64.10) (28.10) (32.70) -2.56% -3.10% -338.55% -2.36% $ (6.40) $ (36.00) $ 4.60 10.0% 128.1% -14.1% Earnings/(loss) before income taxes 3,903.00 3,159.70 (229.90) 2,059.10 141.55% 152.78% -2769.88% 148.80% $ 743.30 $ 3,389.60 $ (2,289.00) 23.5% -1474.4% -111.2% Income tax expense/(benefit) 1,143.70 1,092.00 (238.70) 674.40 41.48% 52.80% -2875.90% 48.74% $ 51.70 $ 1,330.70 $ (913.10) 4.7% -557.5% -135.4% Net earnings including noncontrolling interests 2,759.30 2,067.70 8.80 1,384.70 100% 100% 106% 100% $ 691.60 $ 2,058.90 $ (1,375.90) 33.4% 23396.6% -99.4% Net earnings/(loss) attributable to noncontrolling interests 1.90 (0.40) 0.50 0.90 0.07% -0.02% 6.02% 0.07% $ 2.30 $ (0.90) $ (0.40) -575.0% -180.0% -44.4% Net earnings attributable to Starbucks $ 2,757.40 $ 2,068.10 $ 8.30 $ 1,383.80 100% 100% 100% 100% $ 689.30 $ 2,059.80 $ (1,375.50) 33.3% 24816.9% -99.4%Explain why financial analysts are interested in profitability and asset management [efficiency] ratios.
Ratio
2015
2014
2013
2012
2011
2010
Gross margin%
56.3%
58.0%
58.8%
Operating margin
15.0%
14.8%
13.3%
Net margin
10.4%
10.7%
8.9%
Explanation / Answer
Explain why financial analysts are interested in profitability and asset management [efficiency] ratios.
Financial analysts are interested in profitability and asset management ratios because...
Profitability ratio is very helpful to get financial position of business. it is an indicator of Suffiency and adequacy of profits. It calculate the rate of return and making business comparable into industry as well as with past. This ratio very much helpful in banks and other financial institution to know about the regular payments of installments and interest amount.
Efficience ratio is also win win situation for company along with hand in hand with profitability ratio because more business efficient then they become profitable. This ratio measures that how company can utilize assets to earn income. It will help to company as well as outsider stake holder that how operations of profitability of the company.
What do these ratios say about the profitability of the company? Assume I am an investor and you are my consultant and you are writing a recommendation. Include the ratio information in your response to this question.
Profitability of customer increase in comparision with previous year and will lead firm to increase profit year by year. If we wants to invest in this company then this is possible to make good earning out of it because compnay's profit earning trend showing in upwarding side.
Which of these ratios would help to support your position about the success of Starbucks in achieving its strategic objectives? Explain. Assume I am on Starbuck’s Board of Directors and you are formally writing your analysis for a presentation to the Board. Include the ratio information in your response to this question?
The success of starbucks in acheving its strategic objectives then deal with Turnover ratio, Liquidity ratio, and profitability ratio.
Because Turnover ratio will shows material handling and all other things related to material with which directly affect into current liabilities. Liquidity ratio will shows that how has capacity to repay amount in short span of time. Profitability ratio will shows that firm's financial sound efficiency.
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