The company provided all documents as per SEC requirements. In its submissions it stated the changes share ownership, the trading price of shares and all other information which is deemed to affect the price of company shares. The company’s market share prices have been rising steadily over the last three years (Starbucks Coffee Company, n.d).
Procures of ensuring ethical behavior
Starbucks has put several procedures in place to ensure ethical behavior is observed in all of its operations. First and foremost, it has put in place effective internal controls which ensure effective preparation and reporting of financial information. Secondly, the company has engaged the services of external independent registered audit firm to audit it financial statements before publishing them. This has helped to ensure the statements are prepared in accordance to requirements of the law and that they reflect true and fair view of company’s financial position. Thirdly, The Company has also a well outlined code of ethics for its employees and ex-employees. The organization organizes on job training to help the employees acquire these ethics. lastly, the directors have a clearly code of business conduct and ethics outlined to ensure their compliance with rules and regulations of the organization (Starbucks Coffee Company, n.d).
Process taken to comply with SEC
The company excises due diligence in delegation of responsibilities. In delegation of activities the management avoids delegation of sensitive information. However, the management has allowed activities to be delegated to junior employees with necessary skills and knowledge. To avoid instances of violation of rules of SEC the management ensures that new employees are offered on job training through seminars and workshops. In this training employees are made to understand their obligations in carrying out work delegated to them. The on job training is also offered as continues process to keep updating employees on changes which are introduced by SEC from time to time.
The company has also established effective internal audit to help in: detecting any violations of SEC rules, general internal investigations and surveillance. In addition, the internal audit department helps the management in indicating errors, preventing reoccurrence of errors and periodical risk evaluation to ensure compliance with SEC rules and regulations (Starbucks Coffee Company, n.d).
It is used to show how much the company has relied on external financiers to purchase its assets (Vance, 2009).
Debt ratio= total debt/total assets
Gross profit margin for year 2010, 2011 and 2012
This ratio is used to show the pricing strategy of a company by indicating how much profit is raised upon selling inventory (Petersen, 2003).
Gross profit margin = gross profit/revenue= (revenue- cost of revenue)/revenue
Net profit margin for year 2010, 2011 and 2012
It is used to show the trend in company’s earnings over a given period of time (Petersen, 2003).
Net profit margin= net income/revenue
Return on assets
It is used to show effectiveness of the management in using assets to generate income for the shareholders (Troy, 2007).
Return on assets (ROA) = net income/ total assets
Company’s day sales
It is used to show the length of time a company takes to collects its money from debtors (Troy, 2007). It is calculated using the formulae; account receivable/ (revenue/ 365).
Analysis of the above calculated ratios
The debt ratio of the company has constantly remained below 0.5. This is an indication that, most of the company assets are purchased using owners equity. Therefore, the management has opted for internal financing but not external finances. This means that the company cannot sever from solvency problems (Bragg, 2002).
The gross profit margin has neither dropped below 0.5 nor increased above 0.6. This means that the company pricing strategy has been to raise gross profit of around 40% to 50% out of sale of inventory. The pricing strategy seems to be okay because the company’s revenue has been increasing over the last three years reflecting increasing market share.
The net profit margin has remained constant for the three years considered. This means the management effectiveness in controlling expenses has been stable for the last three years. Therefore, it can be concluded that, the management has been able to control its expenses despite increasing sales (Bragg, 2002).
Return on assets improved from0.15 in2010 to 0.17 in 2011. This shows the management has increased its efficiency in utilizing assets to generate sales. Lastly, day sales of the company have remained around 12 to 14. The day sales were highest in 2012 meaning it took longer in 2012 for debtors to settle their accounts than in 2010 and 2011.
Starbucks Coffee Company. (n.d.). Investor Overview | Investor Relations | Starbucks Coffee Company. Retrieved May 6, 2013, from http://investor.starbucks.com/phoenix.zhtml?c=99518&p=irol-reportsannual
Bragg, S. M. (2002). Business ratios and formulas a comprehensive guide. Hoboken, N.J.: Wiley.
Petersen, M. A. (2003). Does the Source of Capital Affect Capital Structure?. Cambridge, Mass.: National Bureau of Economic Research.
Troy, L. (2007). Almanac of business and industrial financial ratios (2008 ed.). Chicago, IL: CCH.
Vance, D. E. (2009). Ratios and other tools for analysis, control and profit. Cranbrook, Kent: Global Professional Pub..