please finish the word template

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timer Asked: Jan 1st, 2018
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Please complete the word template according to the information I provided. I have completed the data part in excel and can be used directly. I have also uploaded the writing requirements and grading standards, please write according to the requirements. The time is very abundant, have more than half a month.

FINANCIAL STATEMENT ANALYSIS CASE STUDY ASSIGNMENT Starbucks Case Profile During the period 2005-2007, Starbucks Coffee Company’s shares had dropped by roughly 40%. This case encourages an examination of the possible impact of competition in the industry on Starbucks’ share price performance. Students will compare the company’s financials to one of its main rivals’ (i.e. Panera Bread’s) financials and determine whether Starbucks had been underperforming compared to its competition. Since the two companies are of different size, in order to be able to compare the two companies, students will need to use common-size financial statements. They are encouraged to explain the areas where Starbucks had underperformed when compared to its rival. As an additional task, students may examine the company’s common-size statements over the 2004-2007 period to its current common-size statements, and then explain if the firm had improved in those weaker areas. International Research Journal of Applied Finance ISSN 2229 – 6891 Vol. VII Issue – 2 February, 2016 Case Study Series Financial Statement Analysis Financial statement analysis (or financial analysis) is the process of reviewing and analyzing a company's financial statements to make better economic decisions. These statements include the income statement, balance sheet, statement of cash flows, and a statement of changes in equity. Financial statement analysis is a method or process involving specific techniques for evaluating risks, performance, financial health, and future prospects of an organization. It is used by a variety of stakeholders, such as credit and equity investors, the government, the public, and decision-makers within the organization. These stakeholders have different interests and apply a variety of different techniques to meet their needs. For example, equity investors are interested in the long-term earnings power of the organization and perhaps the sustainability and growth of dividend payments. Creditors want to ensure the interest and principal is paid on the organizations debt securities (e.g., bonds) when due. Common methods of financial statement analysis include fundamental analysis, DuPont analysis, horizontal and vertical analysis and the use of financial ratios. Historical information combined with a series of assumptions and adjustments to the financial information may be used to project future performance. ASSIGNMENT CRITERIA AND DUE DATES A. Excel Worksheets (25% of Total Project Grade): All students are required to submit via uLearn Turn-it-in on due dates, ONE EXCEL FILE with 8 separate Worksheets tabs of Common Size, Common Base year, and Ratios calculations for Pre-Approval as follows: NOTE: use the “PROJECT_Financial Statement Analysis Case Study_Starbucks and Panera Bread_EXCEL template” for your project. Worksheet 1- Common-Sized Balance Sheets for Starbucks for 2004 to 2007 Fiscal Years Worksheet 2- Common-Sized Income Statement for Starbucks for 2004 to 2007 Fiscal Years Worksheet 3- Common-Sized Balance Sheets for Panera Bread for 2004 to 2007 Fiscal Years Worksheet 4- Common-Sized Income Statement for Panera Bread for 2004 to 2007 Fiscal Years Worksheet 5- Common Size Vertical Analysis summary Worksheet 6- Application & Sources of Funds summary Worksheet 7- Common Base Horizontal Analysis summary *Worksheet 8- Ratios for Time-Trend Analysis for Starbucks and Panera Bread for 2004 to 2007 Fiscal Years ends December 31 NOTE: in WORKSHEET 8 – Ratios Time Trend Analysis, in the tab, ensure to indicate if each ratios trend is increase or decrease, if it is a positive or negative trend. B. WORD Template – Final project report submission (75% of Total Project Grade): All students are required to submit their Project report printed in person and provide as follows: This project requires you to analyze Financial Statements from a Manager’s Perspective. • First, calculate and do basic Financial Ratio Analysis and Standardizing the Financial Statements (Common- Size Ratios) – in excel template. Ensure results are accurate with Professor Vilacha. • Second, you will write a concise summary analysis for the assigned case study that o (1) evaluates Starbucks’s past 4 years’ financial performance compared to Panera Bread o (2) identifies strengths and weaknesses o (3) identifies areas for performance improvements o and (4) makes appropriate recommendations to improve performance. NOTE 1: use the “PROJECT_Financial Statement Analysis Case Study_Starbucks and Panera Bread_EXCEL template” for your project Excel analysis first. This will be started together with class in Computer Lab day. NOTE 2: use the “PROJECT_Financial Statement Analysis Case Study_WORD Template” for your project. Update your Name on Cover page and the page numbers on Table of Contents after completing writing, after writing your Financial Statement Analysis (Common size and Base Year analysis and Comparative Trend Analysis) and Overall Recommendation section in this Word document. See Guidance below. NOTE 3: Write double spaced. Financial Statements Analysis – Written 1st Section – Financial Statement Analysis Write this section (all sections), from a manager’s perspective, professional, business concise technical writing. - Based on your Common-Size Vertical Analysis and Common-Base Horizontal Analysis summary of both Starbucks and Panera Bread’s Balance Sheet and Income Statement from 2004 to 2007, write a summary of Starbucks specific positive AND negative trends/issues compared to Panera Bread for Liquidity, Efficiency, Leverage and Profitability. Highlight Starbucks good performance and weak performance over the 4 years’ time and at 2007 (the most recent year). Writing should be technical and concise (describe the ratios results, explain the significant negative trends and/or positive trends). (1) Write an INTRODUCTION paragraph about the purpose of the report/project. 2|Page (2) Then, there are FOUR Overall Themes to discuss are these four overall categories: a) Liquidity of Starbucks over the 2004 to 2007 years (compared to Panera Bread’s) b) Asset Efficiency of Starbucks over the 2004 to 2007 years (compared to Panera Bread’s) c) Leverage (Debt) of Starbucks over the 2004 to 2007 years (compared to Panera Bread’s) d) Profitability of Starbucks over the 2004 to 2007 years (compared to Panera Bread’s) Discuss the trend of the following from 2004 to 2007: • Liquidity of Starbucks (compared to Panera) – write at least two pages (double spaced) o Look at and Describe/Explain the Composition / Proportion of Assets in “Common Size Vertical Analysis” tab for Starbucks compared to Panera Bread from 2004 to 2007. ▪ The Current Assets accounts – Cash, Accounts Receivable and Inventory ▪ Compare trends of Liquidity using the Common-Size Vertical Analysis and Common Base Horizontal Analysis summary % for this. ▪ Explain more about Starbucks, but also point out Panera’s o Look at and Describe/Explain the Common Base Year trend in “Common Base Horizontal Analysis” tab ▪ At same accounts – all the Current Assets ▪ Compare trends of Liquidity and Investments in long term assets using the Common-Size Vertical Analysis and Common Base Horizontal Analysis summary % for this. ▪ Explain more about Starbucks, but also point out Panera’s o Look at and Describe/Explain the Application of Funds (Net Working Capital) in “Application & Sources of Funds” tab ▪ Net Working Capital – compare trend (growth or decline). If negative, this means fire is unhealthy. ▪ Explain more about Starbucks, but also point out Panera’s ▪ NOTE: Dollar amount $ figures will be shown and calculated in the “Application & Sources of Funds” tab o Look at and Describe/Explain the Ratios on Liquidity, using tab “Comparative Ratio Analysis” tab ▪ Ratios – Current Ratio and Current Ratio. ▪ Describe, Explain, and Compare and Contract the Trend. • Is this increasing or decreasing over time? • And is this a Positive trend (and why)? • Or is this a Negative trend that is an area of concern and need for improvement to focus on (and why)? ▪ Is Starbucks better or worse than Panera on liquidity? o Include a graph/chart/table illustrating the trend measure to show your points in your writing. • Asset Efficiency of Starbucks (compared to Panera) – write at least two pages (double spaced) o Look at and Describe/Explain the Composition / Proportion of Assets in “Common Size Vertical Analysis” tab for Starbucks compared to Panera Bread from 2004 to 2007. ▪ The Fixed Assets / Long Term and Other Assets ▪ Compare trends of Investments (Fixed Assets/Other Assets) in long term assets using the Common-Size Vertical Analysis and Common Base Horizontal Analysis summary % for this. ▪ Explain more about Starbucks, but also point out Panera’s o Look at and Describe/Explain the Common Base Year trend in “Common Base Horizontal Analysis” tab ▪ At same accounts - Fixed Assets and Other Assets ▪ Compare trends of Liquidity and Investments in long term assets using the Common-Size Vertical Analysis and Common Base Horizontal Analysis summary % for this. ▪ Explain more about Starbucks, but also point out Panera’s 3|Page o o • Look at and Describe/Explain the Ratios on Asset Efficiency, using tab “Comparative Ratio Analysis” tab ▪ Ratios – • Inventory Turnover • Day's Sales In Inventory • Accounts Receivable Turnover • Day's Sales in Receivables • Total Assets Turnover (TOA) ▪ Describe, Explain, and Compare and Contract the Trend of each ratio type (Inventory, Receivables, also look at Payables, and overall Total Assets). • Is this increasing or decreasing over time? • And is this a Positive trend (and why)? • Or is this a Negative trend that is an area of concern and need for improvement to focus on (and why)? ▪ Is Starbucks better or worse than Panera on Asset Efficiency/Usage? Include a graph/chart/table illustrating the trend measure to show your points in your writing. Leverage (Debt Usage) of Starbucks (compared to Panera) – write at least two pages (double spaced) o Look at and Describe/Explain the Debt & Equity - Capital Structure - Source of Funds in “Common Size Vertical Analysis” tab for Starbucks compared to Panera Bread from 2004 to 2007. ▪ The Current Liabilities, Long Term Liabilities, Total Debt/Liabilities, and Total Equity/Shareholders Capital ▪ Compare trends of these accounts using the Common-Size Vertical Analysis and Common Base Horizontal Analysis summary % for this. ▪ Explain more about Starbucks, but also point out Panera’s o Look at and Describe/Explain the Common Base Year trend in “Common Base Horizontal Analysis” tab ▪ At same accounts - Current Liabilities, Long Term Liabilities, Total Debt/Liabilities, and Total Equity/Shareholders Capital ▪ Compare trends of these Debt & Equity accounts using the Common-Size Vertical Analysis and Common Base Horizontal Analysis summary % for this. ▪ Explain more about Starbucks, but also point out Panera’s o Look at and Describe/Explain the Sources of Funds - Financing-Capital Structure in “Application & Sources of Funds” tab ▪ Sources of Funds - Financing-Capital Structure – Debt & Equity - compare trend (growth or decline). ▪ Explain more about Starbucks, but also point out Panera’s ▪ NOTE: Dollar amount $ figures will be shown and calculated in the “Application & Sources of Funds” tab o Look at and Describe/Explain the Ratios on Debt/Financial Leverage, using tab “Comparative Ratio Analysis” tab ▪ Ratios – • Total Debt Ratio • Debt-to-equity Ratio • Equity Multiplier (EM) ▪ Describe, Explain, and Compare and Contract the Trend of overall Leverage/Debt • Is this increasing or decreasing over time? • And is this a Positive trend (and why)? • Or is this a Negative trend that is an area of concern and need for improvement to focus on (and why)? ▪ Is Starbucks better or worse than Panera on Asset Efficiency/Usage? o Include a graph/chart/table illustrating the trend measure to show your points in your writing. 4|Page • • Profitability of Starbucks (compared to Panera) – write at least two pages (double spaced) o Look at and Describe/Explain the Profitability Margins in “Common Size Vertical Analysis” tab for Starbucks compared to Panera Bread from 2004 to 2007. ▪ The Gross Margin, Operating EBIT Margin, and Profit Margin ▪ Look at Sales dollar amount $ trend, ▪ And compare to Expenses – COGS, Operating Expenses, Depreciation and Interest Expenses and Taxes – if increased significantly compared to Sales ▪ Compare trends of these accounts using the Common-Size Vertical Analysis and Common Base Horizontal Analysis summary % for this. ▪ Explain more about Starbucks, but also point out Panera’s o Look at and Describe/Explain the Common Base Year trend in “Common Base Horizontal Analysis” tab ▪ At same accounts - Gross Margin, Operating EBIT Margin, and Profit Margin (Sales account total growth compared to growth/changes in Expenses) ▪ Explain more about Starbucks, but also point out Panera’s o Look at and Describe/Explain the Ratios on Debt/Financial Leverage, using tab “Comparative Ratio Analysis” tab ▪ Ratios – • Profit Margin (PM) • Return on assets (ROA) • Return on equity (ROE) ▪ Describe, Explain, and Compare and Contract the Trend of overall Profitability • Is this increasing or decreasing over time? • And is this a Positive trend (and why)? • Or is this a Negative trend that is an area of concern and need for improvement to focus on (and why)? ▪ ALSO, describe ROE specifically with below: ***NOTE: For ROE ratio in Profitability section, please explain in your writing in this Profitability section, the changes in ROE for Starbucks and Panera Bread using the 3 components of the DuPont Identity formula (already set up in the “Comparative Ratio Analysis” tab of Excel Workbook), by taking Profit Margin x Total Asset Turnover x Equity Multiplier. Calculated for 2004 to 2007 for Starbucks vs. Panera Bread. o We can use the tools of common-size analysis and financial ratio analysis, including the DuPont model, to help understand where a company has been. o Describe which of the three (Profit Margin, TAT or Equity Multiplier) is causing the ROE for Starbucks and the Panera Bread to lower or increase from 2004 to 2007. ▪ Is Starbucks better or worse than Panera on Asset Efficiency/Usage? o Include a graph/chart/table illustrating the trend measure to show your points in your writing. For illustrative/demonstrative presentation, create and/or paste summary tables or graphs with the data in the section area. See the Excel Worksheet for some suggested tables you can use and paste in. - REMINDER: Write double spaced. 2nd Section – Evaluation and Recommendations to improve Based on your findings from your Historical Ratio Analysis write a summary of the specific positive AND negative trends/issues that can affect future profitability of Starbucks compared to Panera Bread. Identify potential financing issues and make recommendations to improve performance. Identify financing consequences if negative trends are not reversed. - Keep within 1 page (double spaced) of writing 5|Page - REMINDER: Write double spaced. Interesting article – perspective of Dunkin Donut’s CEO Nigel Travis on future of coffee (from 2017) Dunkin Donuts CEO Reveals the Future of Coffee on National Coffee Day https://www.thestreet.com/video/14324998/dunkin-donuts-ceo-reveals-the-future-of-coffeeon-national-coffee-day.html Citations Page Only if did research outside of Textbook and Project guidelines on Starbucks and Ratio Analysis process that helped with this project, please list your citations here. Appendices A to E Paste into WORD template from the Tabs 1 to 8 from final graded Excel template. Equations for Calculating Key Ratios (also found in page 68 in TEXTBOOK – Fundamentals of Corporate Finance 11th Edition) 6|Page Also, please use the “Project_Equations Sheet with Ratios explanation” file for Descriptions of each ratio. 7|Page
Student Name: _________________________________ Class: FISV 2000 FINANCE ______________________ Date: October 29, 2017 FISV 2000 Finance: Scoring Rubric for Financial Statement Analysis Case Study Criteria and Potential Points Writing Mechanics – Potential Points 15 Financial Statement Analysis – Potential Points 20 Accuracy and Presentation of Financial Ratios Potential Points 25 Narrative Description of Financial Analysis Potential Points 20 Summary and Conclusion – Potential Points 20 Criterion Points Total Points Performance Levels EXCELLENT GOOD MARGINAL POOR Few or no spelling and grammar errors throughout the entire write up, organized as assigned, and pages numbered. Graphics, tables, and figures are very well used and are high quality and add to overall understanding of the written analysis. Overall, the report is a professional-looking document that would make an outstanding impression Occasional, independent spelling and grammar errors, organized as assigned, and pages numbered. Graphics, tables, and figures are used and are good quality and add overall understanding of the analysis. Overall, the report is a professional-looking document Wide variety of spelling and grammar errors, often repeated throughout the write up; organization unclear, pages not numbered. Graphics, tables, and figures are omitted in cases where they might add to the case, or are of poor quality and detract from the case. The report is makes a poor appearance or is generally unacceptable Potential Points (14-15.0) Performs a complete financial analysis that includes the implications of absolute and relative measures of the all firm’s financial statements from an historical and prospective point of view. Potential Points (13) Performs an adequate financial analysis that measures of the firm’s key financial statements that includes the implications of absolute and relative measures of the all firm’s financial statements from an historical and prospective point of view. Repetition of one or two types of spelling or grammar errors throughout the write up (i.e., do rather than due, there instead of their, agreement errors, etc.) with a less organized presentation, pages numbered. Graphics, tables, and figures used are of average quality and add somewhat to the analysis. The graphics may be fair to good. The report is unremarkable although it may be a well formatted document Potential Points (10.5-12.0) Performs financial analysis that measures of the firm’s key financial statements from a limited point of view. May take a limited perspective or not clearly reflect all the implications Potential Points (19-20) Potential Points (17-18) Potential Points (14-15) Potential Points (0-13) Accurately calculates the ratios and value analysis and presents them in appropriate charts or tables, and organizes them into logical categories Calculates most ratios accurately and displays them in charts or tables in a logical manner and calculates the value analysis adequately Miscalculates several ratios and some of the value analysis and presents them randomly in less clear tables and charts Miscalculates many of the ratios and the value analysis and presents them in confusing ways without adequate charts or tables Potential Points (24-25) Potential Points (21-22) Potential Points (17-20) Potential Points (0-16) Elaborates on each of the financial ratios and relates and integrates them in logical ways using benchmarks related to the value analysis Describes the ratios clearly and relates them to benchmarks when describing the value analysis Describe ratios adequately, but is less likely to relate them to other ratios and minimally refers to any benchmarks and their overall relationship to the valuing analysis Describes the ratios minimally and ignores the inter-relationships among them and ignores benchmarks and does not relate them to the valuing analysis Potential Points (19-20) Summarizes the discussion of ratios and their relationships clearly to logically reason to a conclusion justifying the valuation conclusion Potential Points (17-18) Summarizes the discussion of the ratios and their interrelationships adequately and presents them in support of the valuing assignment Potential Points (14-15) Briefly summarizes the discussion about ratios and relationships and presents a conclusion with little support for the valuing analysis Potential Points (0-13) No clear, definitive summary or no reasoned conclusion to the result of the valuing analysis Potential Points (19-20) Potential Points (17-18) Potential Points (14-15) Potential Points (0-13) Potential Points (0-10) Overlooks most of the relevant financial ratios: only provides superficial descriptions and presents an abbreviated description of the valuation process The financial analysis may be incomplete, missing absolute or relative measures of the firm’s performance. SCORE
Financial Statement Analysis Case Study FISV 2000 Finance Starbucks vs. Panera Bread Prepared by (Update:Replace with your name) Presented to Professor Viviana Vilacha Wednesday, January 31, 2018 P a g e 1 | 16 TABLE OF CONTENTS Case Study Company Profile page number Financial Statements Analysis Financial Statement Analysis: Introduction Financial Statement Analysis: Liquidity Financial Statement Analysis: Efficiency Financial Statement Analysis: Leverage Financial Statement Analysis: Profitability page number page number page number page number page number Overall Evaluation and Recommendations page number Citation Page page number Instruction only: - This page is required only if the student has used additional resources from on-line research or web images that require MLA citation. Appendices Appendix A: Historical Balance Sheets- Common size for Starbucks and Panera page number Appendix B: Historical Income Statement-Common Size for Starbucks and Panera page number Appendix C: Common-Size Vertical Analysis for Starbucks and Panera page number Appendix D: Common-Base Year Horizontal Analysis for Starbucks and Panera page number Appendix E: Comparative Trend Ratio Analysis for Starbucks and Panera page number P a g e 2 | 16 Case Profile During the period 2005-2007, Starbucks Coffee Company’s shares had dropped by roughly 40%. This case encourages an examination of the possible impact of competition in the industry on Starbucks’ share price performance. Students will compare the company’s financials to one of its main rivals’ (i.e. Panera Bread’s) financials and determine whether Starbucks had been underperforming compared to its competition. Since the two companies are of different size, in order to be able to compare the two companies, students will need to use common-size financial statements. They are encouraged to explain the areas where Starbucks had underperformed when compared to its rival. As an additional task, students may examine the company’s common-size statements over the 2004-2007 period to its current common-size statements, and then explain if the firm had improved in those weaker areas. Competition In the last few years, Starbucks has entered into a coffee-shop battle, fighting Dunkin' Donuts and McDonald's for the top position as coffee king. There are also smaller competitors like Caribou Coffee and Panera Bread. Dunkin' Donuts declared war against Starbucks in 2006. While Starbucks has a more wealthy and upscale feel, Dunkin' Donuts approaches customers with traditional advertisements, representing itself as a brand for all Americans. In 2007, in order to position itself between Starbucks and Krispy Kreme, Dunkin' Donuts introduced a new line of Espresso drinks. However, its products (especially donuts) are not attractive to health conscious consumers, so it is more of a competition to McDonalds rather than Starbucks’. McDonald's introduced flavored and iced coffees in the mid-2000s and joined the real competition. McDonalds’ existing customer base and demographic coverage were an advantage for the firm. Also, McDonalds had almost twice the number of units than that of Starbucks. Caribou Coffee had been the second largest specialty coffee house. However, Caribou’s net revenues were only 3% of that of Starbucks. Another small competitor is Panera Bread. Panera Bread caters to the health conscious consumers. It offers bakery, salad, soup, sandwiches and coffee. It also offers a selection of tea and flavored iced coffee. Panera Bread’s modern and relaxing dining atmosphere was somewhat similar to that of Starbucks. But, it is a smaller firm with revenues represented that come to less than 10% of that of Starbucks. Starbucks has been successful in maintaining the quality of their products and services. Therefore, their main focus has been increasing geographical coverage domestically and internationally. P a g e 3 | 16 Financial Statements Analysis Introduction P a g e 4 | 16 Financial Statements Analysis Liquidity P a g e 5 | 16 Financial Statements Analysis Efficiency P a g e 6 | 16 Financial Statements Analysis Leverage P a g e 7 | 16 Financial Statements Analysis Profitability P a g e 8 | 16 Overall Evaluation and Recommendation P a g e 9 | 16 CITATIONS PAGE ERASE ALL THE BELOW ONCE START WRITING: Instruction only: - This page is required only if the student has used additional resources from on-line research or web images that require MLA citation. P a g e 10 | 16 APPENDIX A – COMMON-SIZED BALANCE SHEET FOR STARBUCKS APPENDIX A – COMMON-SIZED BALANCE SHEET FOR PANERA BREAD P a g e 11 | 16 APPENDIX B – COMMON-SIZED INCOME STATEMENTS FOR STARBUCKS AND PANERA BREAD STARBUCKS PANERA BREAD P a g e 12 | 16 APPENDIX C – COMMON-SIZE VERTICAL ANALYSIS & APPLICATIONS OF AND SOURCES OF FUNDS FOR STARBUCKS AND PANERA BREAD STARBUCKS PANERA BREAD P a g e 13 | 16 APPENDIX C – COMMON-SIZE VERTICAL ANALYSIS & APPLICATIONS OF AND SOURCES OF FUNDS FOR STARBUCKS AND PANERA BREAD STARBUCKS PANERA BREAD P a g e 14 | 16 APPENDIX D – COMMON-BASE YEAR HORIZONTAL ANALYSIS FOR STARBUCKS AND PANERA BREAD STARBUCKS PANERA BREAD P a g e 15 | 16 APPENDIX E – COMPARATIVE TREND RATIO ANALYSIS FOR STARBUCKS AND PANERA BREAD STARBUCKS PANERA BREAD P a g e 16 | 16
Writing Example (do not copy wording – this is sample of how to approach - SEE EXAMPLE WRITING TO HELP START – ONCE YOU HAVE COMPLETED AND ACCURATE VERTICAL AND HORIZONTAL ANLAYSIS % IN EXCEL WORKBOOK – GRADED BY PROFESSOR VILACHA) - INSERT GRAPHS TO ILLUSTRATE THE POINTS – WHERE THERE ARE STRENGTHS AND WEAKNESSES The first section, Part A, "Financial Statement Analysis" is a 3-4 paragraphs (using the % in Vertical Analysis tab mainly, and some of the Horizontal Analysis tab in final complete answers Excel file) - 1. Intro paragraph (**see below example writing) And then - 2. Liquidity section – 2 pages double spaced (**see below example writing) - 3. Efficiency – 2 pages double spaced - 4. Leverage/Debt – 2 pages double spaced - 5. Profitability – 2 pages double spaced The last section, Part B, "Overall Recommendation and areas to improve" is a 2-3 paragraphs summary and pin point the areas Starbucks needs to improve (out of the areas analyzing in part A (liquidity, debt/leverage, efficiency (asset utilization), profitability). Include your educated (and creative) business recommendations Starbucks can look to and ways to improve these identified concerning areas. Thank you, Prof Vilacha Example for opening paragraph and transition to first explanation/interpretation of the Composition of Assets of Starbucks vs. Panera Bread. Introduction Paragraph Example: The project entailed reviewing and analyzing Starbucks and Panera Bread over 2004 to 2007 time period to determine where Starbucks has been underperforming in relation to its competitor Panera Bread. Over the 2004 to 2007 time period, Starbucks balance sheet assets increased in total dollar amounts from $3,390 Million in 2004 to $5,343 Million in 2007 (by 57.61%), and for Panera Bread the total assets in the balance sheet also increased from $324,672 Thousand to $698,752 Thousand (115.22% increase). However, although it looks like Panera Bread's assets increased by the most as percentage growth from 2004 to 2007, and Starbucks increased as well but by less, the total dollar amounts tell a less meaning story. Therefore, the following is a description of Starbucks performance related to Liquidity, Investments, Capital Structure and Profitability by interpreting the results of the Common Size Vertical analysis percentages and Composition of Assets analysis in Appending C of this report. Liquidity section short example: To overview Starbucks’ liquidity and in comparison to Panera Bread’s liquidity, the Composition of Assets for Starbucks in the Vertical Analysis performed from 2004 to 2007, liquidity is negatively trending and not performing well based on Current Assets percentage of total assets in 2004 as 39.85% decreasing to 31.74% in 2007. In comparison, Panera Bread's liquidity looks like it is increasing and positively trending from 17.93% of 2004's total assets to 21.77% of 2007's total assets….. etc… Asset Efficiency (Inventory, Accounts Receivable, Total Assets) section short example: From an Investments standpoint, Starbucks increased in Investments spending and composition of its total assets from 2004 to 2007 where in 2004 the Net Fixed Assets were 54.72% and increased to 59.33% in 2007. Panera Bread maintained an even keel position and spending on Investments, shown by the Net Fixed Assets as a percentage of total assets from 2004 to 2007 staying about the same from 62.13% to 61.54%. Overall, from the Composition of Assets, Starbucks' common size vertical analysis is signaling signs of concern in liquidity and it could be that based on the increase/positive growth of Investments, Starbucks spent a bit more on Investments in these 4 years, using more of their liquid assets and cash for Investments. Leverage section short example: To overview Starbucks’ debt leverage and in comparison to Panera Bread’s leverage, the Capital Structure for Starbucks in the Vertical Analysis performed from 2004 to 2007, ........ NOTE: It is most interesting where Starbucks is underperforming in an area and Panera is performing better, making the case, that Starbucks has a concern in that area to improve on the negative/bad trending areas.
Need to Calculate Below the common size ratios for ALL the Assets accounts, and ALL the Liabilities and Equities accounts (to row 52) APPENDIX A STARBUCKS HISTORICAL BALANCE SHEET - for Years Ending December 31 (in millions of dollars) Assets Current assets: Cash and equivalents Short-term investments Accounts receivable Inventories Prepaid Insurance and Lease Deferred Income taxes (net) -Income taxes not paid Total current assets Fixed assets -Net Long term investment (available for sale) Equity and other investment Net plant and equipment (net of depreciation) Total Fixed Assets -net Other Assets Other assets Other intangible assets (cash deposit from unearned sale) Goodwill Total other assets 2004 % of total $ $ $ $ $ $ $ 145 508 140 423 71 64 1.351 $ $ $ $ 136 168 1.551 1.855 $ $ $ $ 87 28 69 184 $ 3.390 $ $ $ $ $ $ $ 199 362 63 121 1 746 $ $ $ $ $ 21 4 145 170 916 Equity: Common stock (50,000,000 shares) Paid in capital Retained earnings (include repurchase of common stocks) Total Equity $ $ $ $ 996 1.478 2.474 Total liabilities and equity $ 3.390 Total Assets Liabilities and equity Current liabilities: Accounts payable Commercial paper and short term borrowings (Notes Payable) Accruals (Compensation, Occupancy) Accrued taxes Other Liabilities Current portion of long term debt Total current liabilities Long term liabilities: Deferred income taxes Long-term bonds Other long term liabilities (Deferred Rent, asset retirement obligations, etc.) Total Long term liabilities: Total Liabilities AKA total Debt Source: Starbucks 2007 Annual Report. Data is provided by Research Insight 2005 4,28% 14,99% 4,13% 12,48% 2,09% 1,89% 39,85% 0,00% 4,01% 4,96% 45,75% 54,72% 0,00% 2,57% 0,83% 2,04% 5,43% 0,00% 100,00% 0,00% 0,00% 0,00% 5,87% 0,00% 10,68% 1,86% 3,57% 0,03% 22,01% 0,00% 0,62% 0,12% 4,28% 5,01% 27,02% 0,00% 0,00% 0,00% 29,38% 43,60% 72,98% 0,00% 100,00% 2006 2007 COMMON-SIZE THE 4 YEARS OF BALANCE SHEET % of total % of total $ $ $ $ $ $ $ 174 133 191 546 94 71 1.209 $ $ $ $ 60 202 1.842 2.104 $ $ $ $ 73 35 93 201 $ 3.514 $ $ $ $ $ $ $ 221 277 475 78 175 1 1.227 $ $ $ $ $ 3 194 197 1.424 $ $ $ $ 130 1.960 2.090 $ 3.514 4,95% 3,78% 5,44% 15,54% 2,68% 2,02% 34,41% 0,00% 1,71% 5,75% 52,42% 59,87% 0,00% 2,08% 1,00% 2,65% 5,72% 0,00% 100,00% 0,00% 0,00% 0,00% 6,29% 7,88% 13,52% 2,22% 4,98% 0,03% 34,92% 0,00% 0,00% 0,09% 5,52% 5,61% 40,52% 0,00% 0,00% 0,00% 3,70% 55,78% 59,48% 0,00% 100,00% $ $ $ $ $ $ $ 313 141 224 636 127 89 1.530 $ $ $ $ 6 219 2.288 2.513 $ $ $ $ 187 38 161 386 $ 4.429 $ $ $ $ $ $ $ 341 700 568 94 231 2 1.936 $ $ $ $ $ 2 263 265 2.201 $ $ $ $ 1 39 2.188 2.228 $ 4.429 7,07% 3,18% 5,06% 14,36% 2,87% 2,01% 34,55% 0,00% 0,14% 4,94% 51,66% 56,74% 0,00% 4,22% 0,86% 3,64% 8,72% 0,00% 100,00% 0,00% 0,00% 0,00% 7,70% 15,80% 12,82% 2,12% 5,22% 0,05% 43,71% 0,00% 0,00% 0,05% 5,94% 5,98% 49,70% 0,00% 0,00% 0,02% 0,88% 49,40% 50,30% 0,00% 100,00% % of total $ $ $ $ $ $ $ 281 157 288 692 149 129 1.696 $ $ $ $ 21 259 2.890 3.170 $ $ $ $ 219 42 216 477 $ 5.343 $ $ $ $ $ $ $ 391 710 664 93 296 1 2.155 $ $ $ $ $ 550 354 904 3.059 $ $ $ $ 1 39 2.244 2.284 $ 5.343 5,26% 2,94% 5,39% 12,95% 2,79% 2,41% 31,74% 0,00% 0,39% 4,85% 54,09% 59,33% 0,00% 4,10% 0,79% 4,04% 8,93% 0,00% 100,00% 0,00% 0,00% 0,00% 7,32% 13,29% 12,43% 1,74% 5,54% 0,02% 40,33% 0,00% 0,00% 10,29% 6,63% 16,92% 57,25% 0,00% 0,00% 0,02% 0,73% 42,00% 42,75% 0,00% 100,00% Need to Calculate Below the common size ratios for ALL the Sales and the Expenses/Costs accounts (to row 23) APPENDIX B STARBUCKS HISTORICAL INCOME STATEMENT - for Years Ending December 31 (in millions of dollars) 2004 2005 % of total Net Sales Cost of Goods Sold, Operating costs Gross Margin Selling, general and administrative expense Earnings before interest, taxes, depreciation, and amortization (EBITDA)* Depreciation and amortization expenses Earnings before interest and taxes (EBIT) 2006 2007 COMMON-SIZE THE 4 YEARS OF INCOME STATEMENT % of total % of total % of total $ $ $ $ $ $ $ 5.294 4.160 1.134 304 830 280 550 100,00% 78,58% 21,42% 5,74% 15,68% 5,29% 10,39% 0,00% $ $ $ $ $ $ $ 6.369 4.963 1.406 362 1.044 340 704 100,00% 77,92% 22,08% 5,68% 16,39% 5,34% 11,05% 0,00% $ $ $ $ $ $ $ 7.787 6.120 1.667 479 1.188 387 801 100,00% 78,59% 21,41% 6,15% 15,26% 4,97% 10,29% 0,00% $ $ $ $ $ $ $ 9.411 7.509 1.902 489 1.413 467 946 100,00% 79,79% 20,21% 5,20% 15,01% 4,96% 10,05% 0,00% $ $ $ $ 75 625 232 $ $ $ $ 93 1 796 302 $ 494 $ $ $ $ $ $ 117 11 907 325 17 565 1,50% 0,14% 11,65% 4,17% 0,22% 7,26% 152 42 1.056 384 393 1,46% 0,02% 12,50% 4,74% 0,00% 7,76% $ $ $ $ $ 1,42% 0,00% 11,81% 4,38% 0,00% 7,42% $ 672 1,62% 0,45% 11,22% 4,08% 0,00% 7,14% $ $ 393 $ $ 494 $ $ 565 $ $ 672 $ $ $ 0,49 3,12 $ $ $ 0,63 2,65 $ $ $ 0,74 2,91 $ $ $ 0,90 3,04 Non-operating income /expense (Income from Equity Investees and Net interest Less interest Earnings before taxes (EBT) Taxes Adjustment for extraordinary items Net Income Common dividends Addition to retained earnings Per-share Data Earnings per share, Basic (EPS) - not include diluted stocks Dividends per share (DPS) Book value of Equity per share (BVPS) g = the compounded growth rate of EPS (2007 EPS/2004 EPS) = 21.87% Source: Starbucks 2007 Annual Report. Data is provided by Research Insight Need to Calculate Below the common size ratios for ALL the Assets accounts, and ALL the Liabilities and Equities accounts (to row 49) APPENDIX A PANERA BREAD HISTORICAL BALANCE SHEET - for Years Ending December 31 (in thousandths of dollars) Assets Current assets: Cash and equivalents Short-term investments Accounts receivable Inventories Prepaid expenses Deferred Income taxes Total current assets Fixed assets -Net Property and equipment, net Total Fixed Assets -net Other Asset: Investments in government securities Goodwill Other intangible assets, net Deposits and other Total other assets Total Assets Liabilities and equity Current liabilities: Accounts payable Accrued expenses Deferred revenue Total current liabilities Long term liabilities: Deferred income taxes Long-term debt Deferred rent Other long-term liabilities Total Long term liabilities: Total Liabilities AKA total Debt 2004 % of total $ $ $ $ $ $ $ 29.639 2.022 17.256 5.398 1.658 2.247 58.220 $ 201.725 $ 201.725 $ $ $ $ $ 26.393 35.327 159 2.848 64.727 $ 324.672 $ $ $ $ 5.840 48.905 960 55.705 $ $ $ $ $ $ 5.647 20.181 1.776 27.604 83.309 Equity: Common stock, $.0001 par value Paid in capital Retained earnings Total Equity $ (897) $ 130.970 $ 111.290 $ 241.363 Total liabilities and equity $ 324.672 Source: Starbucks 2007 Annual Report. Data is provided by Research Insight 2005 9,13% 0,62% 5,31% 1,66% 0,51% 0,69% 17,93% 0,00% 62,13% 62,13% 0,00% 8,13% 10,88% 0,05% 0,88% 19,94% 0,00% 100,00% 0,00% 0,00% 0,00% 1,80% 15,06% 0,30% 17,16% 0,00% 1,74% 0,00% 6,22% 0,55% 8,50% 25,66% 0,00% 0,00% -0,28% 40,34% 34,28% 74,34% 0,00% 100,00% 2006 2007 COMMON-SIZE THE 4 YEARS OF BALANCE SHEET % of total % of total $ 24.451 $ 36.200 $ 25.158 $ 7.358 $ 5.736 $ 3.871 $ 102.774 $ 268.809 $ 268.809 $ $ $ $ $ 10.108 48.540 3.219 4.217 66.084 $ 437.667 $ $ $ $ 4.422 81.559 884 86.865 $ 5.022 $ $ 23.935 $ 4.867 $ 33.824 $ 120.689 $ (897) $ 158.984 $ 158.891 $ 316.978 $ 437.667 5,59% 8,27% 5,75% 1,68% 1,31% 0,88% 23,48% 0,00% 61,42% 61,42% 0,00% 2,31% 11,09% 0,74% 0,96% 15,10% 0,00% 100,00% 0,00% 0,00% 0,00% 1,01% 18,63% 0,20% 19,85% 0,00% 1,15% 0,00% 5,47% 1,11% 7,73% 27,58% 0,00% 0,00% -0,20% 36,33% 36,30% 72,42% 0,00% 100,00% $ 52.097 $ 20.025 $ 30.919 $ 8.714 $ 12.036 $ 3.827 $ 127.618 $ 345.977 $ 345.977 $ $ $ $ $ 57.192 6.604 5.218 69.014 $ 542.609 $ 5.800 $ 102.718 $ 1.092 $ 109.610 $ $ $ 27.684 $ 7.649 $ 35.333 $ 144.943 $ (897) $ 176.241 $ 222.322 $ 397.666 $ 542.609 9,60% 3,69% 5,70% 1,61% 2,22% 0,71% 23,52% 0,00% 63,76% 63,76% 0,00% 0,00% 10,54% 1,22% 0,96% 12,72% 0,00% 100,00% 0,00% 0,00% 0,00% 1,07% 18,93% 0,20% 20,20% 0,00% 0,00% 0,00% 5,10% 1,41% 6,51% 26,71% 0,00% 0,00% -0,17% 32,48% 40,97% 73,29% 0,00% 100,00% % of total $ 68.242 $ 23.198 $ 36.792 $ 11.394 $ 5.299 $ 7.199 $ 152.124 $ 429.992 $ 429.992 $ $ 87.092 $ 21.827 $ 7.717 $ 116.636 $ 698.752 $ 6.326 $ 120.047 $ 1.393 $ 127.766 $ $ 75.000 $ 33.569 $ 14.238 $ 122.807 $ 250.573 $ 830 $ 168.386 $ 278.963 $ 448.179 $ 698.752 9,77% 3,32% 5,27% 1,63% 0,76% 1,03% 21,77% 0,00% 61,54% 61,54% 0,00% 0,00% 12,46% 3,12% 1,10% 16,69% 0,00% 100,00% 0,00% 0,00% 0,00% 0,91% 17,18% 0,20% 18,28% 0,00% 0,00% 10,73% 4,80% 2,04% 17,58% 35,86% 0,00% 0,00% 0,12% 24,10% 39,92% 64,14% 0,00% 100,00% Need to Calculate Below the common size ratios for ALL the Sales and the Expenses/Costs accounts (to row 35) APPENDIX B PANERA BREAD HISTORICAL INCOME STATEMENT - for Years Ending December 31 (in thousandths of dollars) 2004 2005 % of total Revenues (Net Sales): Bakery-cafe sales Franchise royalties and fees Fresh dough sales to franchisees Total Revenue (Net Sales) Costs and expenses: Bakery-cafe expenses: Cost of food and paper products (COGS for bakery) Labor Occupancy Other operating expenses Total bakery-cafe expenses Fresh dough cost of sales to franchisees (COGS for franchises) Gross Margin (Revenue - COGS bakery + franchise) General and administrative expenses Pre-opening expenses Earnings before interest, taxes, depreciation, and amortization (EBITDA)* Depreciation and amortization Earnings before interest and taxes (EBIT) Interest expense Other (income) expense, net Income before minority interest and income taxes Loss allocable to minority interest Earnings before taxes (EBT) Income taxes Net Income Per share data: Net income per share: Basic Diluted $ 362.121 $ 44.449 $ 72.569 $ 479.139 $ $ $ $ $ $ $ $ $ 101.832 110.790 26.730 51.044 290.396 65.627 311.680 33.338 2.642 75,58% 9,28% 15,15% 100,00% 0,00% 0,00% 0,00% 21,25% 23,12% 5,58% 10,65% 60,61% 13,70% 65,05% 6,96% 0,55% $ $ $ $ $ $ $ $ $ $ 87.136 25.298 61.838 18 1.065 60.755 60.755 22.175 38.580 18,19% 5,28% 12,91% 0,00% 0,22% 12,68% 0,00% 12,68% 4,63% 8,05% 2006 2007 COMMON-SIZE THE 4 YEARS OF INCOME STATEMENT % of total % of total $ 499.422 $ 54.309 $ 86.544 $ 640.275 $ 666.141 $ 61.531 $ 101.299 $ 828.971 142.675 151.524 35.558 70.003 399.760 75.036 422.564 46.301 5.072 78,00% 8,48% 13,52% 100,00% 0,00% 0,00% 0,00% 22,28% 23,67% 5,55% 10,93% 62,44% 11,72% 66,00% 7,23% 0,79% 197.182 204.956 48.602 92.176 542.916 85.618 546.171 59.306 6.173 80,36% 7,42% 12,22% 100,00% 0,00% 0,00% 0,00% 23,79% 24,72% 5,86% 11,12% 65,49% 10,33% 65,89% 7,15% 0,74% $ 114.106 $ 33.011 $ 81.095 $ 50 $ (1.133) $ 82.178 $ $ 82.178 $ 29.995 $ 52.183 17,82% 5,16% 12,67% 0,01% -0,18% 12,83% 0,00% 12,83% 4,68% 8,15% $ 134.958 $ 44.166 $ 90.792 $ 92 $ (1.976) $ 92.676 $ $ 92.676 $ 33.827 $ 58.849 16,28% 5,33% 10,95% 0,01% -0,24% 11,18% 0,00% 11,18% 4,08% 7,10% $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ % of total $ 894.902 $ 67.188 $ 104.601 $ 1.066.691 $ $ $ $ $ $ $ $ $ 277.715 286.238 70.398 121.325 755.676 86.579 702.397 68.966 8.289 83,90% 6,30% 9,81% 100,00% 0,00% 0,00% 0,00% 26,04% 26,83% 6,60% 11,37% 70,84% 8,12% 65,85% 6,47% 0,78% $ $ $ $ $ $ $ $ $ $ 147.181 57.903 89.278 483 333 88.462 (428) 88.890 31.434 57.456 13,80% 5,43% 8,37% 0,05% 0,03% 8,29% -0,04% 8,33% 2,95% 5,39% 1,28 1,25 1,69 1,65 1,88 1,84 1,81 1,79 30.154 30.768 30.871 31.651 31.313 32.044 31.708 32.178 Weighted average shares of common and common shares outstanding: Basic Diluted Below is Helpful for Analysis - automatically calculates for you. Use for Report explanation Graphs to Use for Written Project Report - FOR PART A. Common-size and Common-Base year Analysis - section APPENDIX C STARBUCKS STARBUCKS - ASSET COMPOSITION 57,25% 49,70% 40,52% 16,92% 20,00% 5,98% 40,00% 0,00% 0,00% 2004 Cash 2005 Accounts Receivable Inventory 2006 Current Assets 2007 Net Fixed Assets 2004 Other Assets (including Intangibles) 2005 Current Liabilities Total Debt 2006 2007 Total Equity - Shareholders' Capital Total Debt + Equity STARBUCKS - PROFITABILITY 25,00% 21,41% 10,29% 7,26% 20,21% 10,05% 7,14% 20,00% 15,00% 10,00% 2007 9,60% 5,70% 1,61% 23,52% 63,76% 12,72% 100,00% 9,77% 5,27% 1,63% 21,77% 61,54% 16,69% 100,00% 7,26% 7,14% 0,00% 9,13% 9,77% 9,60% 5,59% 0,00% 2004 Cash Accounts Receivable 2005 Inventory 2006 Current Assets Net Fixed Assets 2007 2004 Other Assets (including Intangibles) 2005 Current Liabilities PANERA BREAD - PROFITABILITY 70,00% 60,00% 50,00% 40,00% 30,00% 20,00% 8,15% 8,05% 10,00% 7,10% 5,39% 0,00% 2004 2005 Gross Margin 2006 Operating (EBIT) Profit Margin 2007 Profit Margin Long Term Debt 2006 Total Debt 35,86% 26,71% 17,58% 20,00% 6,51% 30,00% 27,58% 40,00% 7,73% 65,85% 8,37% 5,39% 50,00% 25,66% 65,89% 10,95% 7,10% 60,00% 80,00% 70,00% 60,00% 50,00% 40,00% 30,00% 20,00% 10,00% 0,00% 8,50% 66,00% 12,67% 8,15% 2007 Profit Margin PANERA BREAD - CAPITAL STRUCTURE 61,54% 18,28% 17,58% 35,86% 64,14% 100,00% 2006 Operating (EBIT) Profit Margin PANERA BREAD - ASSET COMPOSITION 70,00% 61,42% 20,20% 6,51% 26,71% 73,29% 100,00% 2005 Gross Margin 23,48% 19,85% 7,73% 27,58% 72,42% 100,00% 2004 10,00% 65,05% 12,91% 8,05% 7,76% 7,42% 5,00% 62,13% Debt & Equity - Capital Structure - Source of Funds Current Liabilities 17,16% Long Term Debt 8,50% Total Debt 25,66% Total Equity 74,34% Total Debt + Equity 100,00% 2006 17,93% Vertical Common-Size Analysis 2004 2005 21,77% 22,08% 11,05% 7,76% 63,76% 21,42% 10,39% 7,42% Assets Composition - Liquidity & Investments - Application of Funds Cash 9,13% 5,59% Accounts Receivable 5,31% 5,75% Inventory 1,66% 1,68% Current Assets 17,93% 23,48% Net Fixed Assets 62,13% 61,42% Other Assets (including Intangibles) 19,94% 15,10% Total Assets 100,00% 100,00% Profitability - Margins Gross Margin Operating (EBIT) Profit Margin Profit Margin 60,00% 10,00% PANERA BREAD Year 80,00% 5,61% 20,00% 23,52% Profitability - Margins Gross Margin Operating (EBIT) Profit Margin Profit Margin 30,00% 100,00% 27,02% 40,33% 16,92% 57,25% 42,75% 100,00% 40,00% 5,01% 43,71% 5,98% 49,70% 50,30% 100,00% 34,92% 5,61% 40,52% 59,48% 100,00% 50,00% 31,74% Debt & Equity - Capital Structure - Source of Funds Current Liabilities 22,01% Long Term Debt 5,01% Total Debt 27,02% Total Equity - Shareholders' Capital 72,98% Total Debt + Equity 100,00% 60,00% 12,95% 5,26% 5,39% 12,95% 31,74% 59,33% 8,93% 100,00% 34,55% 7,07% 5,06% 14,36% 34,55% 56,74% 8,72% 100,00% 120,00% 14,36% Assets Composition - Liquidity & Investments - Application of Funds Cash 4,28% 4,95% Accounts Receivable 4,13% 5,44% Inventory 12,48% 15,54% Current Assets 39,85% 34,41% Net Fixed Assets 54,72% 59,87% Other Assets (including Intangibles) 5,43% 5,72% Total Assets 100,00% 100,00% STARBUCKS - CAPITAL STRUCTURE 70,00% 34,41% 2007 15,54% 2006 39,85% Vertical Common-Size Analysis 2004 2005 12,48% Year 2007 Total Equity Below is Helpful for Analysis - automatically calculates for you. Use for Report explanation Graphs to Use for Written Project Report - FOR PART A. Common-size and Common-Base year Analysis - section STARBUCKS - APPLICATION OF FUNDS 2.513,00 1.530,00 1.936,00 (406,00) 2.107,00 $ $ $ $ $ 3.170,00 1.696,00 2.155,00 (459,00) 2.711,00 Sources of Funds - Financing-Capital Structure Loan Funds (Total Debt) $ Shareholders' Funds (Total Equity) $ Total Debt + Equity $ 916,00 2.474,00 3.390,00 $ $ $ 1.424,00 2.090,00 3.514,00 $ $ $ 2.201,00 2.228,00 4.429,00 $ $ $ 3.059,00 2.284,00 5.343,00 2004 Net Fixed Assets Sources of Funds - Financing-Capital Structure Loan Funds (Total Debt) $ 83.309,00 Shareholders' Funds (Total Equity) $ 241.363,00 Total Debt + Equity $ 324.672,00 $ 268.809,00 $ 102.774,00 $ 86.865,00 $ 15.909,00 $ 284.718,00 $ 120.689,00 $ 316.978,00 $ 437.667,00 $ $ $ $ $ 345.977,00 127.618,00 109.610,00 18.008,00 363.985,00 $ 144.943,00 $ 397.666,00 $ 542.609,00 2007 $ $ $ $ $ 429.992,00 152.124,00 127.766,00 24.358,00 454.350,00 $ 250.573,00 $ 448.179,00 $ 698.752,00 AMOUNTS IN THOUSANDTHS $ 201.725,00 $ 58.220,00 $ 55.705,00 $ 2.515,00 $ 204.240,00 2007 Current Assets Less: Current liabilities 2004 = Net working capital (Liquidity) $400.000,00 $300.000,00 $200.000,00 $100.000,00 $2005 2006 2007 $2.201,00 $500.000,00 $400.000,00 $300.000,00 $200.000,00 Current Assets Less: Current liabilities 2007 $100.000,00 $2004 2005 2006 YEARS YEAR Net Fixed Assets 2006 YEAR Shareholders' Funds (Total Equity) PANERA BREAD - SOURCE OF FUNDS $500.000,00 2004 2005 Loan Funds (Total Debt) PANERA BREAD - APPLICATION OF FUNDS Trend Analysis of Balance Sheet (reported in thousandths of dollars (000s) 2004 2005 2006 Application of Funds - Liquidity Net Fixed Assets Current Assets Less: Current liabilities = Net working capital (Liquidity) Total Application of Funds 2006 YEAR PANERA BREAD Year 2005 $250.573,00 $ $ $ $ $ $144.943,00 2.104,00 1.209,00 1.227,00 (18,00) 2.086,00 $1.424,00 $ $ $ $ $ $916,00 1.855,00 1.351,00 746,00 605,00 2.460,00 STARBUCKS - SOURCE OF FUNDS $3.500,00 $3.000,00 $2.500,00 $2.000,00 $1.500,00 $1.000,00 $500,00 $- $83.309,00 $ $ $ $ $ $3.500,00 $3.000,00 $2.500,00 $2.000,00 $1.500,00 $1.000,00 $500,00 $$(500,00) $(1.000,00) AMOUNTS IN MILLIONS Application of Funds - Liquidity Net Fixed Assets Current Assets Less: Current liabilities = Net working capital (Liquidity) Total Application of Funds 2007 AMOUNTS IN MILLIONS Trend Analysis of Balance Sheet (reported in millions of dollars (000,000s) 2004 2005 2006 AMOUNTS IN MILLIONS Year $120.689,00 STARBUCKS $3.059,00 APPENDIX C = Net working capital (Liquidity) Loan Funds (Total Debt) Shareholders' Funds (Total Equity) 2007 Below is Helpful for Analysis - automatically calculates for you. Use for Report explanation Graphs to Use for Written Project Report - FOR PART A. Common-size and Common-Base year Analysis - section APPENDIX D STARBUCKS Year Horizontal Common-Base Analysis (base year 2004) (Since 2004 Increase if >1 or Decrease if <1) 2004 2005 2006 2007 Assets Composition - Liquidity & Investments Cash Accounts Receivable Inventory Current Assets Net Fixed Assets Other Assets (including Intangibles) Total Assets 1,00 1,00 1,00 1,00 1,00 1,00 1,00 1,20 1,36 1,29 0,89 1,13 1,09 1,04 2,16 1,60 1,50 1,13 1,35 2,10 1,31 1,94 2,06 1,64 1,26 1,71 2,59 1,58 STARBUCKS - ASSETS HORIZONTAL ANALYSIS 600,00% 200,00% 500,00% 150,00% 400,00% 100,00% 300,00% 50,00% 200,00% 0,00% Cash Debt & Equity - Capital Structure Current Liabilities Long Term Debt Total Debt Total Equity 1,00 1,00 1,00 1,00 1,64 1,16 1,55 0,84 2,60 1,56 2,40 0,90 2,89 5,32 3,34 0,92 Sales & Net Income Sales/Revenue COGS (combine if more than one) Operating Expenses (combine all) Interest Expense (combine all) Taxes 1,00 1,00 1,00 1,00 1,00 1,20 1,19 1,19 1,25 1,30 1,47 1,47 1,58 1,71 1,40 1,78 1,81 1,61 2,59 1,66 STARBUCKS - DEBT & EQUITY HORIZONTAL ANALYSIS 250,00% Accounts Receivable 2004 Inventory 2005 Current Assets 2006 Net Fixed Assets Other Assets (including Intangibles) 100,00% 0,00% Current Liabilities 2007 Long Term Debt 2004 2005 Total Debt 2006 Total Equity 2007 PANERA BREAD Year Horizontal Common-Base Analysis (base year 2004) (Since 2004 Increase if >1 or Decrease if <1) 2004 2005 2006 2007 Assets Composition - Liquidity & Investments Cash Accounts Receivable Inventory Current Assets Net Fixed Assets Other Assets (including Intangibles) Total Assets 1,00 1,00 1,00 1,00 1,00 1,00 1,00 0,82 1,46 1,36 1,77 1,33 1,02 1,35 1,76 1,79 1,61 2,19 1,72 1,07 1,67 2,30 2,13 2,11 2,61 2,13 1,80 2,15 PANERA BREAD - ASSETS HORIZONTAL ANALYSIS PANERA BREAD - DEBT & EQUITY HORIZONTAL ANALYSIS 300,00% 500,00% 250,00% 400,00% 200,00% 150,00% 300,00% 100,00% 200,00% 50,00% Debt & Equity - Capital Structure Current Liabilities Long Term Debt Total Debt Total Equity 1,00 1,00 1,00 1,00 1,56 1,23 1,45 1,31 1,97 1,28 1,74 1,65 2,29 4,45 3,01 1,86 Sales & Net Income Sales/Revenue COGS (combine if more than one) Operating Expenses (combine all) Interest Expense (combine all) Taxes 1,00 1,00 1,00 1,00 1,00 1,34 1,37 1,37 (1,00) 1,35 1,73 1,80 1,83 (1,74) 1,53 2,23 2,37 2,47 0,75 1,42 100,00% 0,00% Cash Accounts Receivable 2004 Inventory 2005 Current Assets 2006 2007 Net Fixed Assets Other Assets (including Intangibles) 0,00% Current Liabilities Long Term Debt 2004 2005 Total Debt 2006 2007 Total Equity Need to Calculate Below Ratios on your own and describe if increase or decrease, and positive or negative trend. Increase Positive Decrease Negative APPENDIX E STARBUCKS Comparative - Ratios Calculation 2004 Liquidity Ratios: Current Ratio Quick Ratio Efficiency Ratios: Inventory Turnover Day's Sales In Inventory Accounts Receivable Turnover Day's Sales in Receivables Total Assets Turnover (TOA) Leverage ratios: Total Debt Ratio Debt-to-equity Ratio Equity Multiplier (EM) Profitability Ratios: Profit Margin (PM) Return on assets (ROA) Return on Equity (ROE) * *DuPont Identity = 2004 2005 2006 2007 2005 2006 2007 Input below -did this ratio measure Increase or Decrease since 2004? Input below - is the trend a positive (strength, good performer), or negative (weakness, area of concern)? 1,81 1,24 0,99 0,54 0,79 0,46 0,79 0,47 Decrease Decrease Negative Negative 9,83 37,11 37,81 9,65 1,56 9,09 40,16 33,35 10,95 1,81 9,62 37,93 34,76 10,50 1,76 10,85 33,64 32,68 11,17 1,76 Increase Decrease Decrease Increase Increase Positive Positive Negative Negative Positive 0,27 0,37 1,37 0,41 0,68 1,68 0,50 0,99 1,99 0,57 1,34 2,34 Increase Increase Increase Negative Negative Negative 7,42% # 11,59% # 15,89% # 7,76% # 14,06% # 23,64% # 7,26% # 12,76% # 25,36% # 7,14% 12,58% 29,42% Decrease Increase Increase Negative Positive Positive Profitability PM X 7,42% 7,76% 7,26% 7,14% Asset Efficiency/ Utilization TOA X 1,56 1,81 1,76 1,76 Debt / Leverage EM 1,37 1,68 1,99 2,34 Input below -did this ratio measure Increase or Decrease since 2004? Input below - is the trend a positive (strength, good performer), or negative (weakness, area of concern)? ROE = 15,89% 23,64% 25,36% 29,42% PANERA BREAD Comparative - Ratios Calculation 2004 Liquidity Ratios: Current Ratio Quick Ratio Efficiency Ratios: Inventory Turnover* Day's Sales In Inventory* Accounts Receivable Turnover Day's Sales in Receivables Total Assets Turnover (TOA) Leverage ratios: Total Debt Ratio Debt-to-equity Ratio Equity Multiplier (EM) Profitability Ratios: Profit Margin (PM) Return on assets (ROA) Return on Equity (ROE) * *DuPont Identity = 2004 2005 2006 2007 2005 2006 2007 1,05 0,95 1,18 1,10 1,16 1,08 1,19 1,10 Increase Increase Positive Positive 31,02 11,77 27,77 13,15 1,48 29,59 12,34 25,45 14,34 1,46 32,45 11,25 26,81 13,61 1,53 31,97 11,42 28,99 12,59 1,53 Increase Decrease Increase Decrease Increase Positive Positive Positive Positive Positive 0,26 0,35 1,35 0,28 0,38 1,38 0,27 0,36 1,36 0,36 0,56 1,56 Increase Increase Increase Negative Negative Negative 8,05% # 11,88% # 15,98% # 8,15% # 11,92% # 16,46% # 7,10% # 10,85% # 14,80% # 5,39% 8,22% 12,82% Decrease Decrease Decrease Negative Negative Negative Profitability PM X 8,05% 8,15% 7,10% 5,39% Asset Efficiency/ Utilization TOA X 1,48 1,46 1,53 1,53 Debt / Leverage EM 1,35 1,38 1,36 1,56 ROE = 15,98% 16,46% 14,80% 12,82% * NOTE: Panera Bread has two different COGS rows - bakery and franchise. Add both up for Inventory Turnover formula.

Tutor Answer

DrAlecks
School: University of Virginia

Hey there, kindly note that the final answer has already been uploaded.

Financial Statement Analysis Case Study

FISV 2000Finance

Starbucks vs. Panera Bread

Prepared by:

Presented to Professor Viviana Vilacha
Wednesday, January 31, 2018

P a g e 1 | 29

TABLE OF CONTENTS

Case Study Company Profile

2

Financial Statements Analysis
Financial Statement Analysis: Introduction
Financial Statement Analysis: Liquidity
Financial Statement Analysis: Efficiency
Financial Statement Analysis: Leverage
Financial Statement Analysis: Profitability

5
6
9
12
15

Overall Evaluation and Recommendations

18

Citation Page

20

Appendices
Appendix A:
Historical Balance Sheets- Common size for Starbucks and Panera

21

Appendix B:
Historical Income Statement-Common Size for Starbucks and Panera

23

Appendix C:
Common-Size Vertical Analysis for Starbucks and Panera

25

Appendix D:
Common-Base Year Horizontal Analysis for Starbucks and Panera

27

Appendix E:
Comparative Trend Ratio Analysis for Starbucks and Panera

28

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Case Profile
Shares of Starbucks Coffee Company dropped by almost 40% during the period between 2005
and 2007. This case is an encouragement to students to examine and evaluate the possible impact
that could have resulted from the impact of industry’s competition on the share price
performance of Starbucks. This is done through a comparative analysis of the company’s
financials to Panera Bread financials, which is one of the competitors in order to determine if
there was underperformance by Starbucks compared to its competitor. However, considering that
the two companies vary significantly in terms of size, comparative analysis of their financials
need to be done on basis of common-size financial statements. This will be done by explaining
area of Starbucks’s underperformance in comparison to its rival company, Panera Bread.
It is undoubtedly evident that over the past few years Starbucks has entered into business of
coffee-shop, which has heightened competition with rivals such as McDonalds’s and Dunkin’
Donuts for the coffee business top slot. In addition, there are also other smaller competitors such
as Panera Bread and Caribou Coffee. Competition in the coffee business took a twist when in
2006 Dunkin’ Donuts declared war against Starbucks, and while the latter has more upscale and
wealthy feel, the former approaches customers with traditional advertisements, which play an
imperative role of representing itself as an all Americans’ brand. For instance, in 2007 in for
Dunkin’ Donuts to place itself between Krispy Kreme and Starbucks, it introduced a totally new
and unique line of Espresso drinks. However, to health conscious consumers, products of
Dunkin’ Donuts, especially the donuts are not appealing, which means it is more of a
competition between itself and McDonalds instead of Starbucks.
Moreover, despite its small size Panera Bread has experienced significant growth over the period
between 2004 and 2007 and together with other small competitors poses a real threat to the

P a g e 3 | 29

market originally considered a preserve of the companies including Starbucks, Dunkin’ Donuts,
and McDonald’s. For instance, Panera Bread plays an imperative role of catering to the
consumers who are health conscious by offering bakery, sandwiches, soup, salad, and coffee.
Panera Bread also offers a selection of flavored iced coffee and tea. Furthermore, the company’s
dining atmosphere which is not only modern but also relaxing is somewhat comparable to that of
Starbucks. However, it size in terms of space and revenues it is undeniably a smaller firm whose
revenues represent less than 10% of Starbucks’s revenues. This means that Starbucks has been
successful in the process on ensuring quality of their services and products were maintained.
Therefore, this has made them to focus on geographical coverage expansion both domestically
and internationally.

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Financial Statements Analysis
Introduction
The project entailed a review and analysis of Starbucks and Panera Bread over a period of 4
years between 2004 and 2007 through a comparative analysis between Starbucks and Panera
Bread in order to determine where former has been underperforming in relation to the latter
which is one of its competitors. There was an increase of Starbucks balance sheet assets from
$3,390 Million in 2004 to $5,343 Million in 2007 over this period, which represents a percentage
increase of 57.61%. On the other hand, over the same period there was an increase of Panera
Bread balance sheet assets from $324,672 Thousand to $698,752 Thousand, which represents a
percentage increase of 115.22%.
However, despite the fact that Panera Bread's assets seem to have significantly increased in
percentage growth over the period from 2004 to 2007, while the assets of Starbucks seem to have
also increased but to a lesser extent, the total dollar amounts of the balance sheet assets provide
less meaningful insights.

Therefore, the description of Starbucks and Panera Bread

performances in relation to Liquidity, Investments, Capital Structure as well as Profitability are
provided in the following subheadings through a comparative interpretation of the results of the
Common Size Vertical analysis percentages and Composition of Assets analysis in Appending C
of this report.

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Financial Statements Analysis
Liquidity
To overview Starbucks’ liquidity and in comparison to Panera Bread’s liquidity, the
Composition of Assets for Starbucks in the Vertical Analysis performed from 2004 to 2007,
liquidity is negatively trending and not performing well based on Current Assets percentage of
total assets in 2004 as 39.85% decreasing to 31.74% in 2007. In comparison, Panera Bread's
liquidity looks like it is increasing and positively trending from 17.93% of 2004's total assets to
21.77% of 2007's total assets. The trend portrayed by Starbucks shows a business is which is at
risk of diminishing liquidity in terms of decreasing current assets, which implies it may have
challenges meeting its short-term liabilities. Alternatively, Panera Bread seems to be on the right
trajectory because there is a positive trend in terms of total current assets. These trends are
illustrated in the graphs shown below:

Also the overview of the liquidity of Starbucks and in comparison to that of Panera, the Common
Base Year trend of Assets for Starbucks in the Common Base Horizontal Analysis performed
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from 2004 to 2007, liquidity is at first negatively trending but subsequently make a considerable
positive trend on the last two years and not performing well since in 2004, 2005, 2006, and 2007
it was at 1.00, 0.89, 1.13, and 1.26 respectively. In comparison, Panera Bread's liquidity looks
like it is increasing and positively trending in 2004, 2005, 2006, and 2007 it was at 1.00, 1.77,
2.19, and 2.61 respectively. The trends are illustrated in the graphs shown below:

To overview Starbucks’ applications of funds and in comparison to Panera Bread’s application
of funds performance from 2004 to 2007, net working capital is negatively trending and not
performing well based on net working capital...

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