Starbucks Financial Ratios

Investment in capital markets is a great business that involves the buying and selling of equity and debt instruments. It is a broad category that facilitates the transaction of financial instruments such as equity securities also known as stocks and bonds. Stocks are the most common form of investment for many people. Individuals interested in saving or generating some returns buys shares of a given company and sells when the price rises. A stock is a share of ownership or a claim on a firm’s assets and earnings. However, the stockholder does not own the company or the assets but the shares sold. In this case, the shareholder benefits from a company’s financial performance and management. For these reasons, investors consider some critical information before …show more content…
Analysts rely on three ratios to assess the financial fitness of a company. An investor should look at the debt and equity rates. The debt ratio tells more about the total liabilities over assets. One should invest when a company’s short-term debts are lower than short-term assets since that is an indication of financial fitness (Berk & DeMarzo, 2017). Lastly, an investor should consider information concerning the credit rating of a company. Some ventures have long-standing debts that put them at negative ratings by the credit-rating agencies. A firm’s ability to offset principal and interest on its liability obligations signifies a healthy company. A high-quality ranking on debt repayment information shows that the business is trustworthy and has strong financial management strategies. In that case, stock investors should be wary of corporations that have past blacklisting for failing to meet their liability obligations. The bottom line is that a company’s proportional management of debt and equity is a crucial indicator of a healthy balance sheet and a very positive sign of investment