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Between about December 2007 and June 2009, the United States was considered to be in a recession. The U.S. Gross Domestic Product fell approximately 3% from the third quarter of 2008 to the third quarter of 2009. Also, during December 2007 and June 2009, the Standard and Poor’s 500 index dropped by 38% and the unemployment rate climbed from 5% to 9.5%. The macroeconomic situation affected almost all companies since higher unemployment affected personal consumption, which dropped from 10,140.3 Billion Dollars in Aug 2008 to 9,807 Billion Dollars in June 2009, a drop of 3.8 percent. Starbucks is one of the companies affected by the December 2007 recession. The following table shows several ratios for Starbucks corresponding to the years 2006, 2007, and 2008. Use a stock price of 10.9 dollars per share for the year 2009. Year 2006 2007 2008 2009 ROE 0.253 0.294 0.127 ROA 0.106 0.126 0.056 ROIC 0.207 0.250 0.121 Asset Turnover 1.758 1.761 1.830 Op. Profit Margin 0.115 0.746 0.048 Long Term Debt Ratio 0.0009 0.241 0.221 D/E Ratio 0.987 1.340 1.277 Current Ratio 0.970 0.787 0.798 Quick Ratio 0.462 0.466 0.482 Payout Ratio 0.000 0.000 0.000 Plowback Ratio 1.000 1.000 1.000 Market to Book Ratio 6.088 3.099 1.374 Stock Price Used for Mark/Book 17.71 9.450 4.68 By using the financial statements provided, calculate the ratios presented in the table for the year 2009 and answer the following questions: a- Were sales per dollar of assets impacted by the recession? b- which ratio shows the impact of the recession on sales per dollar of assets? c- Did the company operating profit margin increased, decreased, or was the same, between the years 2007 and 2009? d- Did the mix of debt and equity changed for Starbucks between the years 2007 and 2009? e- In what ratio can you see the change in the mix of debt and equity reflected? f- Did the value added by management, reflected in market to book ratio, increased or decreased between the years 2007 and 2009? g- Did the quick ratio increase or decrease between the years 2007 and 2009?

Financial Management, Finance

  • Category:- Financial Management
  • Reference No.:- M92786748

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