Starbucks 's Solvency Ratios Provide Valuable Insight Into Whether The Company Is Generating Sufficient Cash Flow

974 Words Nov 8th, 2015 4 Pages
Starbucks’s solvency ratios provide valuable insight into whether the company is generating sufficient cash flow to meet short-term and long-term obligations. At the end of 2014, Starbucks current assets of $4169 million and current liabilities of $3039 million produced a current ratio of 1.37. During this same period, Starbucks had a quick asset of $2474 million resulting in a quick ratio of 0.81. These ratios suggest that Starbucks was reasonably liquid at the end of 2014 with $1.37 in current assets and $0.81 in quick assets for every $1 in current liabilities. The data showed that Starbucks’s current ratio and quick ratio decreased considerably from 2012 to 2013 indicating a reduction in liquidity. Starbucks had $1.90 in current assets and 1.14 in quick assets for every $1 in current liabilities. Starbucks liabilities increased dramatically in 2013 because of an accrued indebtedness for a litigation charge, which ultimately had a negative impact on Starbucks’s liquidity. Despite this charge, Starbucks still had adequate liquidity and the financial flexibility to pay this accusation because the company had $2576 million in cash in addition to $658 million in short-term investments and healthy production of cash flow from operations. Starbucks current latest quarter assets are 36.99% and their current liabilities are 31.47%, while Dunkin Doughnuts, latest current assets are 18.34% and current liabilities are 10.31%. Starbucks latest current assets and liabilities…

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