starbucks vs caribou
TRANSCRIPT
Starbucks Corporation vs. Caribou Coffee
Company Analysis
Rusty Shackleford
ACCT 547
Dr. Steven Hunt
July 26, 2010
Executive Summary
The following report details the background and financial position, in regards to
receiving credit, of Starbucks Corporation and Caribou Coffee. Starbucks is the largest roaster
and retailer of specialty coffee in the world while Caribou is the second largest premium
coffeehouse operator in the United States. Both companies offer their coffee product in licensed
retail stores and in other commercial segments including grocery stores. Each company has
branched out from just coffee by adding items like bottled drinks, teas, espressos and
cappuccinos and a line of baked goods to their menus. Each company faces similar risks
inherent to the coffee industry. These risks include fluctuating coffee bean prices, the U.S.
economy and various foreign economies. Additional risks to Caribou include the inability to
circumvent changes in interest rates or the price of supplies and charter provisions which may
prevent or delay changes in management.
Despite increasing current ratios, both companies are increasing liquidity risk by not
having a standard 2:1 ratio. Caribou looks to have more liquidity based on cash to current assets
and cash to current liability ratios but has seen a rise in days’ sales in receivables. Caribou also
converts inventory to cash quicker than Starbucks. However, Starbucks is able to pay back
obligations 3 days faster than Caribou. Though Caribou appears to be more liquid, there is a
large gap in working capital which needs to be noted. Based on cash flow ratio, Starbucks seems
less risky to lend credit to because of a higher ratio. The debt to equity ratio makes Starbucks
appear less likely to default on debt financing and Starbucks’ times interest earned ratio far
exceeds that of Caribou’s. Starbucks also fairs better in meeting obligations using only cash
from operations and has a greater return on net operating assets.
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Analysis Overview
Company Descriptions
Formed in 1985, Starbucks is the largest roaster and retailer of specialty coffee in the
world. They purchase and roast high-quality whole bean coffees and sell them, along with fresh,
rich-brewed coffees, Italian-style espresso beverages, cold blended beverages, a variety of
complementary food items, a selection of premium teas, and beverage-related accessories and
equipment, primarily through company-operated retail stores. Starbucks also sells coffee and tea
products and licenses its trademark through other channels such as licensed retail stores.
Starbucks also produces and sells a variety of ready-to-drink beverages.
Founded in 1992, Caribou Coffee is the second largest premium coffeehouse operator in
the United States based on the number of coffeehouses operated. Their coffees are also available
within the commercial segment through grocery stores, mass merchandisers, club stores, office
coffee and foodservice providers, hotels, entertainment venues and e-commerce channels.
Business Segments
Starbucks operates in three business segments: United States, International, and Global
Consumer Products Group (CPG). Caribou also has 3 business segments but they are
significantly different from Starbucks. Their business segments are retail, commercial, and
franchise. Therefore we will not be comparing business segments.
Products
In addition to brewed coffees, espressos and cappuccinos, Starbucks also offers bottled
drinks, chocolate drinks, teas, and smoothies. Starbucks also have an extensive variety of bakery
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items, fruit and snack plates, hot breakfast, salads, sandwiches, panini and wraps, ice cream and
yogurt parfaits. Similar to Starbucks, Caribou offers espressos, lattes, and cappuccinos.
Additionally, Caribou offers a variety of iced coffees, coolers, smoothies, hot chocolate and iced
teas. Caribou also offers bakery items including hand-crafted oatmeal, muffins, brownies,
breads, coffee cake, scones, cookies, bagels, and donuts as well as other local favorites.
Locations
Starbucks has 16,706 stores of which 8,850 are company owned and 7,856 licensed stores
located in over 50 countries. Caribou has 534 retail coffeehouses, including 121 franchised
locations. Caribou Coffee’s coffeehouses are located in 20 states, the District of Columbia and
international markets.
Employees
Starbucks employs approximately 142,000 people worldwide compared to Caribou with
5,917 employees of which only 1,577 are considered full-time. In the US, Starbucks employs
approximately 111,000 people.
Risk Factors
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Both companies list many of the same risk factors which are inherent in the specialty
coffee market as well as many other industries, such as the inability to import coffee beans at a
reasonable price, economic conditions in the US as well as in the countries in which they do
business, or the loss of key personnel to name a few.
In addition to these shared risks, Caribou listed two additional risk factors which could
impact our decision to issue credit. The first is that Arcapita Inc. owns 58.9% of Caribou shares.
Arcapita Inc is wholly owned by Arcapita Bank and requires that Caribou Coffee follow the
Islamic Shari’ah law which, among other things, prohibits engaging in derivative hedging
transactions such as interest rate swaps or futures, forward options or other instruments designed
to hedge against changes in interest rate or the price of commodities.
The other item of concern is that Caribou Coffee’s articles of incorporation and bylaws
contain provisions that could prevent or delay changes in control or management even though
beneficial to shareholders. These provisions make it difficult for shareholders to elect directors
among other things, and may affect the price that future shareholders would be willing to pay for
common stock.
Credit Analysis
The credit analysis examines valuation measures relating to liquidity, solvency, and
capital structure for Starbucks and Caribou. Additionally, the return on net operating assets
(RNOA) is also calculated. The results of all these valuation measures can be found in the
appendices at the end of this report.
Credit Analysis
The current ratios for Starbucks (1.29) and Caribou (1.45) have both increased over the
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last three years however both companies are increasing liquidity risk by not following the rule of
thumb 2:1. Both the cash to current assets and cash to current liabilities ratios are higher for
Caribou, indicating more liquidity. In addition, the days’ sales in receivables are identical with
Starbucks and Caribou at approximately 10 days. However, the number of days has increased
for Caribou while Starbucks has reduced the number of days. Also worth noting is days’ sales
in inventory. Caribou’s figures have been historically better, with 2009 reporting an average of
22.31 days versus Starbucks 29.96 days. The acid-test (quick) ratio is considered by the text to
be a more stringent test of liquidity. Yet again, Caribou is higher than Starbucks with 0.98 versus
0.59. Again, both companies are increasing liquidity risk by not maintaining a ratio of 2:1. The
conversion period for Caribou is shorter than Starbucks specifically 32 days versus 39 days.
Therefore, Caribou converts inventories to cash quicker than Starbucks. Additionally, it is
important to examine days’ purchases in accounts payable to understand how long it takes both
Starbucks and Caribou to pay obligations back. Starbucks pays back obligations within 12 days
versus Caribou which takes 15 days. This is important to keep in mind as a potential creditor to
know how quickly the companies can pay debt obligations. Caribou appears to be more liquid
however it is important to note that although both operate in the specialty coffee industry
Starbucks has far more assets and capital. For example, working capital in 2009 for Starbucks is
$455 million while Caribou is $14 million. It is important to note that difference. Also, Standard
and Poor’s gives Starbucks of ‘BBB’ credit rating currently while information on Caribou was
not applicable. Furthermore, as a creditor it is important to know the risk of default or the
likelihood of a borrower going into bankruptcy. Both Starbucks and Caribou’s Altman Z-Score
is over the threshold of 2.90. Starbucks is higher than Caribou with 6.79 versus 5.97. Therefore,
examining the liquidity of Starbucks and Caribou, it seems Caribou has better liquidity than
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Starbucks. Therefore, further examination of solvency and RNOA should help narrow down the
decision for which company is the best choice to lend.
In determining which company is better suited to receive credit, a few ratios can be
looked at which shed light on each company’s ability to pay off debt. The cash flow ratio helps
measure a company’s liquidity in the short term. Looking at cash flows instead of income gives
a better indication of liquidity since cash is what usually pays off bills. Based on current year
2009 figures and figures from previous years, Starbucks has a higher cash flow ratio which
means they have raised more money to meet their liabilities. Both companies however have cash
flow ratios under 1 which means they both need to raise cash to meet liabilities. Based on cash
flow ratios, it would be less risky to become a creditor to Starbucks as opposed to Caribou.
The total debt to total capital ratio helps measure a company’s financial leverage and
can tell investors whether a company is more prone to use debt financing vs. equity financing. A
higher debt to capital ratio than the industry may show weak financial strength which increases
default risk. Starbucks and Caribous have similar debt to capital ratios for the current year and
past years. Starbucks has a declining debt to equity ratio which may indicate a declining
reliance on debt financing. This may also indicate that Starbucks is less likely to default on debt
in the future which makes Starbucks marginally more attractive in terms of lending credit. Both
Starbucks and Caribou have a declining long term debt to equity ratio meaning the gap
between what each company owes long term and shareholder’s equity is closing. A declining
long term debt to equity ratio may signal that management can take on more debt to put to work
in the company. Caribou has a better long term debt to equity ratio than Starbucks.
The times interest earned ratio is used to measure a company’s ability to meet its debt
obligations by dividing earnings before taxes and interest by interest expense. The ratio
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indicates how many times a company can cover its interest charges on a pretax basis. Failure to
meet debt obligations can force a company into bankruptcy. Though Caribou has increased its
times interest earned ratio over the past 3 years, Starbucks’ worst ratio in the past three years is
better than Caribous’ best ratio in the past three years. Based on this ratio, Starbucks is more
likely to be able to meet its debt obligations by earning enough to cover its interest expenses.
Similarly, the cash flow to fixed charges ratio measures a company’s ability to meet its fixed
obligations using only cash from operations. Like times interest earned, Starbucks has a higher
cash flow to fixed charges ratio in the past year and better performance in previous years.
When deciding to issue credit, looking at a company’s operating performance may be
useful to find out if the company can effectively bring the product or service to market and
service customer needs. If a company can effectively do this then their ability to succeed and
ultimately pay off liabilities is increased. The return on net operating assets, or RNOA, isolates
the portion of ROE attributable to operations of a business. The RNOA for Starbucks in 2009 is
10.89%, compared to Caribou’s 7.18%. Starbucks receives a better return on the operating assets
of its business than does Caribou. The choice between the two companies would go to Starbucks
since it is better positioned to pay off liabilities.
Conclusion
Based on the financial position of each company, it would be less risky to lend credit to
Starbucks. Looking at certain figures Caribou is more liquid than Starbucks; however the
concern is the ability of the company to pay back creditors. Starbucks pays back obligations 3
days quicker than Caribou and looking at Altman Z-scores, Starbucks is less likely to go in
bankruptcy. Starbucks is able to raise more money to meet its liabilities than Caribou and their
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debt to equity ratio indicates a lessened likelihood of defaulting on debt in the future. The times
interest earned ratio of Starbucks far exceeds that of Caribou and indicates Starbucks can meet
its interest obligations and Starbucks is able to cover fixed charges using only cash from
operations. Starbucks also has a higher RNOA which is important since operation is considered
the most important function of a company. Additionally, Caribou’s financial figures are not
applicable for official credit ratings which may indicate the size of the company is too small to
generate an accurate forecast of credit risk. Starbucks is a more established, larger company
which better performs in operations which increases their chance of success and ultimately their
ability to pay off creditors.
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References
BIBLIOGRAPHY ADVFN. (2010). Altman Z-Score: Caribou Coffee Company. Retrieved July 23, 2010, from
ADVFN Website:
http://www.advfn.com/p.php?pid=financials&symbol=NASDAQ%3ACBOU
ADVFN. (2010). Altman Z-Score: Starbucks Corporation. Retrieved July 23, 2010, from
ADVFN Website:
http://www.advfn.com/p.php?pid=financials&symbol=NASDAQ%3ASBUX
Caribou Coffee Company. (2010, January 3). Caribou Coffee Company 10K. Retrieved July 23,
2010, from United States Securities Exchange Commission:
http://www.sec.gov/Archives/edgar/data/1332602/000095012310028838/c57090e10vk.htm
Caribou Coffee Company. (2010). Our Company: Caribou Coffee Company Website. Retrieved
July 23, 2010, from Caribou Coffee Company Website:
http://www.cariboucoffee.com/page/1/our-company.jsp
Standard & Poor's. (2010). Company Profile: Caribou Coffee Company. Retrieved July 23, 2010,
from Standard & Poor's Website:
http://www.netadvantage.standardandpoors.com.ezproxy.wiu.edu/NASApp/NetAdvantag
e/simpleSearchRun.do?ControlName=HomePageSearch
Standard & Poor's. (2010). Company Profile: Starbucks Corporation. Retrieved July 23, 2010,
from Standard & Poor's Website:
http://www.netadvantage.standardandpoors.com.ezproxy.wiu.edu/NASApp/NetAdvantag
e/simpleSearchRun.do?ControlName=HomePageSearch
Starbucks Corporation. (2010). About Us: Starbucks Corporation. Retrieved July 23, 2010, from
Starbucks Corporation Website: http://www.starbucks.com/about-us/company-information
Starbucks Corporation. (2009, September 27). Starbucks Corporation 10K. Retrieved July 23,
2010, from United States Securities and Exchange Commission:
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http://www.sec.gov/Archives/edgar/data/829224/000095012309064772/v53316e10vk.htm
Subramanyam, K. R., & Wild, J. J. (2009). Financial Statement Analysis (10th Edition ed.). New
York: McGraw-Hill Irwin.
Value Line Investment Survey. (2010). Company Profile: Caribou Coffee Company. Retrieved
July 23, 2010, from Value Line Investment Survey Website:
http://www3.valueline.com.ezproxy.wiu.edu/vlquotes/quote.aspx
Value Line Investment Survey. (2010). Company Profile: Starbucks Corporation. Retrieved July
23, 2010, from Value Line Investment Survey Website:
http://www3.valueline.com.ezproxy.wiu.edu/secure/vlispdf/stk1700/profile.aspx?ticker=SBUX
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Appendices
STARBUCKS INCOME STATEMENT ($ MILLIONS)2009 2008 2007
Net Sales $ 9,775 100%
$ 10,383 100% $ 9,411 100%
Cost of Goods Sold 7,990 82% 8,648 83% 7,509 80%Gross Profit 1,784 18% 1,735 17% 1,902 20%
Selling, General, & Administrative Exp. 453 5% 456 4% 489 5%Income from Operations 1,331 14% 1,279 12% 1,413 15%
Depreciation,Depletion,&Amortization 535 5% 549 5% 467 5%Operating Profit 797 8% 730 7% 946 10%
Interest Expense 42 0% 61 1% 42 0%Non-Operating Income/Expense 161 2% 130 1% 153 2%Special Items (356) -4% (339) -3% - 0%
Pretax Income 559 6% 460 4% 1,056 11%Total Income Taxes 168 2% 144 1% 384 4%Net Income $ 391 4% $ 316 3% $ 673 7%
CARIBOU INCOME STATEMENT ($ MILLIONS)2009 2008 2007
Net Sales $ 263 100% $ 254 100% $ 257 100%Cost of Goods Sold 214 82% 209 82% 215 84%
Gross Profit 48 18% 45 18% 42 16%Selling, General, & Administrative Exp. 26 10% 33 13% 35 14%
Income from Operations 22 8% 12 5% 7 3%Depreciation,Depletion,&Amortization 16 6% 27 11% 34 13%
Operating Profit 6 2% (15) -6% (28) -11%Interest Expense 1 0% 1 0% 1 0%Non-Operating Income/Expense 0 0% 0 0% 0 0%Special Items - 0% - 0% (3) -1%
Pretax Income 5 2% (16) -6% (31) -12%Total Income Taxes (0
)0% 0 0% (0) 0%
Items & Discontinued Operations 5 2% (16) -6% (31) -12%Net Income $ 5 2% $ (16) -6% $ (31) -12%
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STARBUCKS BALANCE SHEET ($ MILLIONS)2009 2008 2007
AssetsCash & Short-Term Investments $ 666 12% $ 322 6% $ 439 8%Net Receivables 271 5% 330 6% 288 5%Inventories 665 12% 693 12% 692 13%Other Current Assets 434 8% 403 7% 278 5%
Total Current Assets 2,036 37% 1,748 31% 1,696 32%Net Plant, Property & Equipment 2,536 45% 2,956 52% 2,890 54% Investments at Equity 313 6% 268 5% 234 4% Other Investments 110 2% 106 2% 45 1% Intangibles 327 6% 333 6% 258 5%Other Assets 254 5% 261 5% 219 4%
Total Assets $ 5,577 100% $ 5,673 100% $ 5,344 100%
LiabilitiesLong Term Debt Due In One Year $ 0 0% $ 1 0% $ 2 0%Notes Payable - 0% 713 13% 710 13%Accounts Payable 267 5% 325 6% 391 7%Taxes Payable 128 2% 76 1% 93 2%Accrued Expenses 643 12% 554 10% 526 10%Other Current Liabilities 543 10% 521 9% 434 8%
Total Current Liabilities 1,581 28% 2,190 39% 2,156 40%Long Term Debt 549 10% 550 10% 552 10%Deferred Taxes - 0% - 0% - 0%Investment Tax Credit - 0% - 0% - 0%Minority Interest 11 0% 18 0% 17 0%Other Liabilities 390 7% 424 7% 335 6%
Total Liabilities $ 2,531 45% $ 3,182 56% $ 3,060 57%EquityPreferred Stock - Redeemable $ - 0% $ - 0% $ - 0%Preferred Stock - Nonredeemable - 0% - 0% - 0%Total Preferred Stock - 0% - 0% - 0%Common Stock 1 0% 1 0% 1 0%Capital Surplus 186 3% 39 1% 39 0%Retained Earnings 2,859 51% 2,451 43% 2,244 42%Less: Treasury Stock - 0% - 0% - 0%Common Equity 3,046 55% 2,491 44% 2,284 43%
Total Equity $ 3,046 55% $ 2,491 44% $ 2,284 43%Total Liabilities & Equity $ 5,577 100% $ 5,673 100% $ 5,344 100%
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CARIBOU BALANCE SHEET ($ MILLIONS)2009 2008 2007
AssetsCash & Short-Term Investments $ 24 25% $ 11 12% $ 10 9%Net Receivables 7 8% 6 7% 5 4%Inventories 13 14% 10 11% 10 9%Other Current Assets 2 2% 1 1% 2 2%
Total Current Assets 46 49% 28 32% 27 24%Net Plant, Property & Equipment 47 50% 60 67% 84 75% Investments at Equity - 0% - 0% - 0% Intangibles - 0% - 0% - 0% Deferred Charges 0 0% 0 0% 1 0%Other Assets 1 1% 0 1% 1 1%
Total Assets $ 94 100% $ 90 100% $ 112 100%
LiabilitiesLong Term Debt Due In One Year $ - 0% $ - 0% $ - 0%Notes Payable - 0% - 0% - 0%Accounts Payable 9 10% 8 9% 10 9%Taxes Payable - 0% - 0% - 0%Accrued Expenses 14 15% 15 16% 17 15%Other Current Liabilities 9 9% 9 11% 10 9%
Total Current Liabilities 32 34% 32 36% 37 33%Long Term Debt - 0% - 0% - 0%Deferred Taxes - 0% - 0% - 0%Investment Tax Credit - 0% - 0% - 0%Minority Interest 0 0% 0 0% 0 0%Other Liabilities 11 12% 13 15% 16 14%
Total Liabilities $ 43 46% $ 46 51% $ 53 47%EquityPreferred Stock - Redeemable $ - 0% $ - 0% $ - 0%Preferred Stock - Nonredeemable - 0% - 0% - 0%Total Preferred Stock - 0% - 0% - 0%Common Stock 0 0% 0 0% 0 0%Capital Surplus 127 135% 125 140% 124 111%Retained Earnings (76) -81% (81) -91% (65) -58%Less: Treasury Stock - 0% - 0% - 0%Common Equity 51 54% 44 49% 59 53%
Total Equity $ 51 54% $ 44 49% $ 59 53%Total Liabilities & Equity $ 94 100% $ 90 100% $ 112 100%
STARBUCKS STATEMENT OF CASH FLOWS ($ MILLIONS)2009 2008 2007
Indirect Operating ActivitiesIncome Before Extraordinary Items $ 391 $ 316 $ 673Depreciation and Amortization 563 605 491Extraordinary Items and Disc. Operations - - -Deferred Taxes (70) (117) (37)Equity in Net Loss (Earnings) (25) (9) 0Funds from Operations - Other 299 389 45Inventory - Decrease (Increase) 29 (1) (49)Accounts Payable and Accrued Liabs-Inc (Dec) (53) (64) 75Income Taxes - Accrued - Inc (Dec) 57 7 86Other Assets and Liabilities - Net Change 198 133 47
Operating Activities - Net Cash Flow $ 1,389 $ 1,259 $ 1,331Investing ActivitiesInvestments - Increase $ 129 $ - $ -Sale of Investments 116 96 226Capital Expenditures 446 985 1,080Sale of Property, Plant, and Equipment 43 - -Acquisitions - 74 53Investing Activities - Other (5) (124) (294)
Investing Activities - Net Cash Flow $ (421) $(1,087) $(1,202)Financing ActivitiesSale of Common and Preferred Stock $ 57 $ 112 $ 177Purchase of Common and Preferred Stock - 311 997Cash Dividends - - -Long-Term Debt - Issuance - - 549Long-Term Debt - Reduction 1 1 1Current Debt - Changes (713) 2 10Financing Activities - Other (2) (2) (4)
Financing Activities - Net Cash Flow $ (642) $ (185) $ (172)Exchange Rate Effect 4 1 11
Cash and Equivalents - Change $ 330 $ (12) $ (31)Direct Operating ActivitiesInterest Paid - Net $ 40 $ 53 $ 35Income Taxes Paid $ 162 $ 260 $ 342
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CARIBOU STATEMENT OF CASH FLOWS ($ MILLIONS)2009 2008 2007
Indirect Operating ActivitiesIncome Before Extraordinary Items $ 5 $ (16) $ (31)Depreciation and Amortization 16 28 35Extraordinary Items and Disc. Operations - - -Deferred Taxes - - -Equity in Net Loss (Earnings) - - -Funds from Operations - Other 2 2 5Receivables - Decrease (Increase) (1) (2) (1)Inventory - Decrease (Increase) (3) 0 0Accounts Payable and Accrued Liabs-Inc (Dec) - (5) 4Income Taxes - Accrued - Inc (Dec) - - -Other Assets and Liabilities - Net Change (4) 0 0
Operating Activities - Net Cash Flow $ 16 $ 7 $ 12Investing ActivitiesInvestments - Increase - - -Sale of Investments - - -Short-Term Investments - Change - - -Capital Expenditures 3 6 17Sale of Property, Plant, and Equipment 0 0 -Acquisitions - - -Investing Activities - Other (0) 0 -
Investing Activities - Net Cash Flow $ (3) $ (6) $ (17)Financing ActivitiesSale of Common and Preferred Stock $ 1 $ - $ 1Purchase of Common and Preferred Stock - - -Cash Dividends - - -Long-Term Debt - Issuance - - -Long-Term Debt - Reduction - - -Current Debt - Changes - - -Financing Activities - Other (0) (0) (0)
Financing Activities - Net Cash Flow $ 0 $ (0) $ 0Exchange Rate Effect $ - $ - $ -
Cash and Equivalents - Change $ 13 $ 1 $ (5)Direct Operating ActivitiesInterest Paid - Net $ 0 $ 0 $ 0Income Taxes Paid $ 0 $ (0) $ 0
STARBUCKS: CREDIT ANALYSIS ($ MILLIONS)2009 2008 2007
Current Ratio 1.29 0.80 0.79Acid Test Ratio 0.59 0.30 0.34A/R Turnover 32.55 33.63 36.77
Inventory Turnover 11.77 12.49 11.31Days' Sales in Receivables (in days) 9.98 11.42 11.01Days' Sales in Inventory (in days) 29.96 28.84 33.16
A/P Turnover 26.99 24.17 20.52Days' Purchases in Account Payable (in days) 12.03 13.52 18.74
Conversion Period (in days) 39.94 40.26 44.17Cash to Current Assets Ratio 0.33 0.18 0.26
Cash to Current Liabilities Ratio 0.42 0.15 0.20Working Capital $ 455 $(442) $(459)Cash Flow Ratio 0.88 0.57 0.62
Total Debt to Total Capital Ratio 0.45 0.56 0.57Long Term Debt to Equity 0.31 0.4 0.4Short Term Debt to Equity 0.52 0.88 0.94
Earnings to Fixed Charges Ratio 14.31 8.54 26.14Times Interest Earned 12.3 6.54 24.14
Cash Flow to Fixed Charges Ratio 27.83 16.42 39.92CARIBOU: CREDIT ANALYSIS ($ MILLIONS)
2009 2008 2007Current Ratio 1.45 0.88 0.72
Acid Test Ratio 0.98 0.54 0.40A/R Turnover 38.51 45.76 62.57
Inventory Turnover 18.24 20.43 20.91Days' Sales in Receivables (in days) 10.08 8.91 6.74Days' Sales in Inventory (in days) 22.31 17.61 17.16
A/P Turnover 24.82 23.37 22.18Days' Purchases in Account Payable (in days) 15.19 14.18 16.19
Conversion Period (in days) 32.38 26.52 23.90Cash to Current Assets Ratio 0.52 0.39 0.37
Cash to Current Liabilities Ratio 0.75 0.34 0.27Working Capital $ 14 $ (4) $(10)Cash Flow Ratio 0.5 0.22 0.32
Total Debt to Total Capital Ratio 0.46 0.51 0.47Long Term Debt to Equity 0.22 0.3 0.27
Short Term Debt to Equity 0.63 0.73 0.63Earnings to Fixed Charges Ratio 6 -15 -30
Times Interest Earned 4 -15 -30Cash Flow to Fixed Charges Ratio 18 10 3
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Starbucks RNOA & ROCE
RNOA = NOPAT / Average Net Operating Assets
NOPAT = operating profit x (1-effective tax rate) Effective tax rate = tax expense / pretax profit
2009 NOPAT 557.9 2009 168/559 = .30
2008 NOPAT 547.5 2008 144/460 = .25
Average Net Operating Assets = Net Operating Assets - Net Operating Liabilities
2009 2008 2007
Total Assets 5577 5673 5344
Other Investment 110 106 45
Accounts Payable 267 325 391
Taxes Payable 128 76 93
Deferred Taxes 0 0 0
Net Operating Assets 5072 5166 4815
2009 Average NOA 5119
2008 Average NOA 4990.5
RNOA = NOPAT / Average Net Operating Assets
2009 RNOA 0.10899
2008 RNOA 0.10971
ROCE = (Net Income - Preferred Dividends) / Average Common Shareholder's Equity
2009 0.1433 (391-0) / ((3046+2491) / 2)
2008 0.1323 (316-0) / ((2491+2284) / 2)
Disaggregating Return on Net Operating Assets
NOPAT / Avg. NOA = (NOPAT / Sales) x (Sales / Avg. NOA)
2009 NOPAT / Avg. NOA 557.9 / 5119 0.10899
NOPAT / Sales 557.9 / 9775 0.057
Sales / Avg. NOA 9775 / 5519 1.77
.057 x 1.77 = 0.10089
2008 NOPAT / Avg. NOA 547.5 / 4990.5 0.10971
NOPAT / Sales 547.5 / 10383 0.0527
Sales / Avg. NOA 10383 / 4990.5 2.08
.0527 x 2.08 = 0.1096
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Caribou RNOA & ROCE
RNOA = NOPAT / Average Net Operating Assets
NOPAT = operating profit x (1-effective tax rate) Effective tax rate = tax expense / pretax profit
2009 NOPAT 6 48 x (1-0) 2009 0/5 = 0
2008 NOPAT -15 45 x (1-0) 2008 0/-16 =0
Average Net Operating Assets = Net Operating Assets - Net Operating Liabilities
2009 2008 2007
Total Assets 94 90 112
Other Investment 0 0 0
Accounts Payable 9 8 10
Taxes Payable 0 0 0
Deferred Taxes 0 0 0
Net Operating Assets 85 82 102
2009 Average NOA 83.5
2008 Average NOA 92
RNOA = NOPAT / Average Net Operating Assets
2009 RNOA 0.07186
2008 RNOA -0.163
ROCE = (Net Income - Preferred Dividends) / Average Common Shareholder's Equity
2009 0.1052 (5-0) / ((51+44) / 2)
2008 -0.3106 (-16-0) / ((44+59) / 2)
Disaggregating Return on Net Operating Assets
NOPAT / Avg. NOA = (NOPAT / Sales) x (Sales / Avg. NOA)
2009 NOPAT / Avg. NOA 6 / 83.5 0.07186
NOPAT / Sales 6 / 263 0.0228
Sales / Avg. NOA 263 / 83.5 3.149
.0228 x 3.149 = 0.07179
2008 NOPAT / Avg. NOA (15) / 92 -0.163
NOPAT / Sales (15) / 254 -0.059
Sales / Avg. NOA 254 / 92 2.76
(.059) x 2.76 = 0.1628
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