CHAPTER 8 Analysis and interpretation of financial statements 375c. the rapidity with which accounts receivables are collected
d. the ability of the entity to meet unexpected demands for working capital
e. the ability of the entity’s earnings to cover its interest commitments
f. the length of time taken by the entity to sell its inventories.8.47 Presenting trends and ratios LO3, 9, 10
The following financial ratios and information relate to Starbucks Corporation for the period 2003
to 2012.Required
a. Represent the 2012 horizontal analysis of the asset section of the balance sheet in a pie chart
and comment on Starbucks’ asset composition.
b. Represent the 2012 horizontal analysis of the liability and equity sections of the balance sheet
in a pie chart and comment on Starbucks’ financing of its assets.
c. Prepare a trend line chart of Starbucks’ liquidity and capital structure ratios. Discuss what this
trend reveals how it assists decision making.
d. Prepare a trend line chart of Starbucks’ efficiency ratios. Discuss what this trend reveals and
how it assists decision making.Horizontal analysisBalance sheet items (in %) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Cash and short-term
investments12.82 19.62 8.74 10.24 8.21 5.68 11.94 22.7 27.86 24.78Accounts receivable 4.19 4.21 5.43 5.06 5.39 5.81 4.86 4.74 5.25 5.91
Inventory 12.56 12.7 15.55 14.37 12.94 12.21 11.92 8.51 13.12 15.1
Other current assets 4.27 4.58 4.7 4.87 5.21 7.11 7.78 7.21 5.32 5.29
Total current assets 33.85 41.12 34.41 34.54 31.75 30.81 36.5 43.16 51.56 51.09
Net PPE 50.73 44.21 52.42 51.66 54.09 52.12 45.48 37.84 32 32.35
Intangibles 3.23 2.88 3.64 4.5 4.82 5.87 5.87 5.22 5.89 6.6
Other long-term assets 12.18 11.79 9.53 9.3 9.34 11.2 12.14 13.78 10.56 9.95
Total assets 100 100 100 100 100 100 100 100 100 100
Accounts payable 6.19 5.99 6.29 7.7 7.31 5.73 4.79 4.43 7.34 4.84
Short-term debt 0.03 0.02 7.9 15.82 13.31 12.58
Taxes payable 2.29 1.57 1.48 1.68
Accrued liabilities 13.39 13.87 15.74 14.95 14.16 11.11 11.53 13.09 11.3 10.2
Other short-term liabilities 2.69 3.65 4.98 5.24 5.56 9.18 9.74 8.77 8.08 10.16
Total current liabilities 22.3 23.53 34.92 43.7 40.34 38.6 28.35 27.86 28.2 26.89
Long-term debt 0.16 0.11 0.08 0.04 10.29 9.69 9.85 8.6 7.47 6.69
Other long-term liabilities 1.26 1.65 5.51 5.93 6.63 7.8 7.19 5.99 4.76 4.27
Total liabilities 23.71 25.28 40.51 49.68 57.26 56.09 45.39 42.46 40.43 37.84
Total stockholders’ equity 76.29 74.72 59.49 50.32 42.74 43.91 54.61 57.54 59.57 62.16
Total liabilities and equity 100 100 100 100 100 100 100 100 100 100
Liquidity/Capital structure 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Current ratio 1.52 1.75 0.99 0.79 0.79 0.8 1.29 1.55 1.83 1.9
Quick ratio 0.76 1.01 0.41 0.35 0.34 0.3 0.59 0.99 1.17 1.14
Financial leverage 1.31 1.34 1.68 1.99 2.34 2.28 1.83 1.74 1.68 1.61
Debt/equity 0.24 0.22 0.18 0.15 0.13 0.11
(continued)