Starbucks valuation Essay Example | Topics and Well Written Essays - 1500 words

Starbucks valuation - Essay Example her people who are keen on the financial statements of the company are the creditors of the company who are concerned with the debt ratios of the company. The creditors of a company concentrate on the financial statement of the company so that they can determine the amount of debt that should be forwarded to the company. My paper will deal with the financial analysis of Starbucks Company. The used of the horizontal and the vertical analysis are the 2 simplest ways of analyzing the financial statements of a company. Vertical analysis usually shows the relationship that exists between components that are found in the financial statements of the company. They are measured in the form of percentages. In the balance sheet, all the components are shown as a percentage of the total assets of the company in that particular financial period. In the income statements, the items are shown as a percentage of the net sales or the net revenue of the company. Horizontal analysis shows a way that can be used in the comparison of numbers that are found in different accounting periods. From the vertical analysis, the company is doing goods in terms of the gross profit since most of the revenue is been converted to profits. However, there is a large of revenue that is been channeled to selling expenses. The company should work towards the reduction of the costs of the company so that the profit that is attributable to the company should increase. The percentage of net income as compared to the total revenue is a good percentage; however, with the reduction in costs and an increase in the sales, the company will earn more net profit. From the vertical analysis of the balance sheet, cash and its equivalents take a large portion of the company total assets. That will imply that the company is more liquid. The liquidity levels that are high are usually appealing to creditors that are short term since that will imply that the company has the ability to cater for its short term