2. Capital Structure and Solvency: Solvency refers to the company’s ability to meet its long-term obligations. The capital structure of a company details how the company is financed, that is, the proportion of debt to equity. Below are the ratios for Starbucks Corp. and the Dunkin’ Brands Group Inc. (Subramanyam, 2014). Table 6: Capital Structure & Solvency-Starbucks. & Dunkin’ Brands Group. Prepared by Kyria Aho
2.1. Total debt to equity: This ratio compares the debt capital of the company to its equity. Starbucks Corp. had a steady increase in its debt-to-equity ratio from 2014 to 2016. It went from 1.04 in 2014 to 1.43 in 2016. This means that Starbucks Corp’s total debt is 1.43 times its equity capital. Therefore Starbucks Corp’s …show more content…
Return on common equity: It measures the overall efficiency of a company in generating returns for its shareholders. In the computation, preferred stocks are excluded. The underlying assumption is that preferred stockholders have a fixed claim to the net assets and cash flows of the company just like the creditors and bondholders. Starbucks Corp. had a steady increase in its return on common equity. It went from 39.22% in 2014 to 47.83% in 2016. As for the Dunkin’ Brands Group Inc., its return on common equity decreased over time. It went from 47.03% in 2014 to -119.80% in 2016. The negative returns on common equity in 2015 and 2016 were caused by the excess liabilities in those years, which were also reflected in the debt-to-equity …show more content…
Gross profit margin: This measures the ability of the company to control its production costs and earn a higher margin on the sale of its products. Basically, it is the company’s ability to translate sales dollars into profit. Starbucks Corp. increased its gross profit margin from 58.30% in 2014 to 60.07% in 2016, which means that for every product that the company sold it made about $0.60 on the dollar. The gross profit margins for the Dunkin’ Brand Group Inc. were higher consistently higher than those of Starbucks Corp. The industry gross profit margin was 32.38% in 2016 and both companies were above the
2.1. Total debt to equity: This ratio compares the debt capital of the company to its equity. Starbucks Corp. had a steady increase in its debt-to-equity ratio from 2014 to 2016. It went from 1.04 in 2014 to 1.43 in 2016. This means that Starbucks Corp’s total debt is 1.43 times its equity capital. Therefore Starbucks Corp’s …show more content…
Return on common equity: It measures the overall efficiency of a company in generating returns for its shareholders. In the computation, preferred stocks are excluded. The underlying assumption is that preferred stockholders have a fixed claim to the net assets and cash flows of the company just like the creditors and bondholders. Starbucks Corp. had a steady increase in its return on common equity. It went from 39.22% in 2014 to 47.83% in 2016. As for the Dunkin’ Brands Group Inc., its return on common equity decreased over time. It went from 47.03% in 2014 to -119.80% in 2016. The negative returns on common equity in 2015 and 2016 were caused by the excess liabilities in those years, which were also reflected in the debt-to-equity …show more content…
Gross profit margin: This measures the ability of the company to control its production costs and earn a higher margin on the sale of its products. Basically, it is the company’s ability to translate sales dollars into profit. Starbucks Corp. increased its gross profit margin from 58.30% in 2014 to 60.07% in 2016, which means that for every product that the company sold it made about $0.60 on the dollar. The gross profit margins for the Dunkin’ Brand Group Inc. were higher consistently higher than those of Starbucks Corp. The industry gross profit margin was 32.38% in 2016 and both companies were above the