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fin516 week 2 mini case

Good Essays

Select a major industrial or commercial company based in the United States and listed on one of the major stock exchanges in the United States. Each student should select a different company. Avoid selecting an insurance company or a bank, because the financial ratios for these financial businesses are different. Write a seven-to-eight-page double-spaced paper answering and demonstrating with calculations and financial data the following questions.
1. What is the name of the company? What is the industry sector?
Starbucks Corporation is in the Food and Beverage industry
2. What are the operating risks of the company?
Economic conditions in the US and certain international markets could adversely affect Starbucks’ business and …show more content…

What is the price earnings multiple of the company?
Price to earnings ration. This ratio is used in conjunction with other metrics to give analyst and investors are quick initial impression of whether a company would make a good investment. (investopedia, 2014)
Starbucks P/E ratio is 385.05

15. How has the company’s stock been performing in the last 5 years?
Starbucks share price 282.32% in the last 5 yrs.

16. How would you assess the overall risk structure of the company in terms of its operating risks and financial risk (debt to capitalization ratio)?
Debt-to-equity ratio is a measure of a firm’s solvency calculated as total debt divided by shareholders equity.

2013
2012
2011 debt $1,299.40
$549.60
$549.50 shareholder equity
$4,480.20
$5,109.00
$4,384.90
d/e ratio calculation
0.29
0.11
0.13
Starbucks’ D/E ratio has seen an increase, almost doubling between 2012 and 2013. Years prior to that it was holding steady. Sbux appears to be utilizing more debt in their expansion.
17. Would you invest in this company? Why or why not?
I would invest in Starbucks. SBUX has the highest P/E ratio among its competitors. Their cost of debt is low compared to their cost of equity. That

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