Homework 2

INCOME STATEMENT Starbucks Net sales Cost of sales

2008 10,383.0 4,645.3

2006 7,786.9 3,178.7

Gross income Operating expenses Operating income Net income

5,737.7 5,224.8

4,608.2

Rate of growth 33.33% 4.7% (cost/net sale) 24.5%

581.5

-45.7%

512.9 315.5

Adv antage 1. Between the year 20 06 and 200 8, Company Starbucks managed to increase sales by about 33.33%. This is a very good result in such an economic environment, this result is not easy. 2. At the same time, Starbuck’s cost of sales also raised. But it is under a strict control. 3. In 2008, Starbuck’s gross income has raised so much-----about 24.5%. It is almost inevita ble result for Starbuck. Because of that al l of comp onent which impact gross inc ome is rising . Weakness 1. We can’t see the operating expense from the income statement. But we have reason to believe that Starbuck’s operating expenses was not so high in 2006. In 2006, Starbucks gross income was lower than it in 2008, but it can achieve a better net income. This is unmoral. 2. Starbucks’s net income was reduced very much. I think this is be cause the management pr oblem of Starbucks. Starbucks has so ma ny br an ches which are not easy for it to contr ol with . Suggestion: Starbucks can reduce its branches and improve the quality of his business. 3. Starbucks’ profit margins reduced from 7.47% to 3.04%. If Starbucks cannot tak e ef fect iv e means to cont rol its costs, hi s in come wi ll be decl ining .

CASH FLOW STATEMENT Sep 08

Sep 06

Rate

Net Operating Cash Flow

1,258.7

1,131.6

11.23%

Net Investing Cash Flow

(1,086.6)

(841.0)

-29.20%

Net Financing Cash Flow

(184.5)

(155.3)

-18.80%

Advantage 1. Starbucks’ net operating cash flow has increased by about 11.23%. This is a good phenomenon. Weakness 1. From Sep 06 to Sep 08, we can see that the cash flow was (CFO+CFI+CFF) from$135.3 in 2006 to $-12.4 in2008. Which means that Starbucks didn’t has enough fund to operate the company effectively. 2. Starbucks’ net investing cash flow was always negative, and the amount was increased by about 29.20%. On one hand, it means that Starbucks made a good use of its fund. But on the other hand, the increasing amount of investment made Starbuck plunged into cr isis of the shortag e of funds. 3. The net financing cash flow was also reduced about 18.80%. Starbucks met some problem on collecting money. SUMMERY Starbucks was not so safe like its quiet surface. The problem of raising money; huge ex pendi ture…. Star bucks faced wi th man y prob lems. But I bel iev ed that Starbucks wil l find the right way. The only thing it has to do now w as to r edu ce its large s ystem whi ch it can’ t cont rol with. By this w ay, it can reduce its cost and at the same time, it wi ll in cr eased its prof it.