Annual Report Analyze: Star Bucks - Essay Example

[Saifullah Shahid] [Accounting and finance may 2006] ANNUAL REPORT ANALYSIS For interpreting the financial ments we have calculated the following financial ratios of 'star bucks.' Company's ratios for the last four years are as follows. Figures of Working capital from 2002-05 are as follows: 2003 315326 2004 606463 2005 -17662 Figures of current ratio of the given following years. 2002 1.51 2003 1.81 2004 0.98 Figures of acid test ratios of all the four years are as follows; 2002 1.24 2003 0.54 The overall condition of liquidity position of the company is looking quite suitable and stable. Firm is looking completely in situation to solve all of its problems in the form of any kind of crisis. All of these three ratios indicate generally if firm have to pay off its liabilities in any kind of contingency, then what would be its response to the demands of its shareholders. But the overall performance of the firm in year 2005 was much more unreliable, because the firm is not doing its job satisfactorily. If we look at all three ratios for the year 2005,.becauze current ratio and acid test ratio are are going down and in the year 2005 the current ratio is very unreliable as total current liabilities exceeds the total current assets Working capital ratio explains the strength of a company it has been evident that the company's strength is good in past years but now in 2005 the firm is in financial distress. Figures of profitability ratios are as follows Gross profit ratio 2002 58.9 2003 58.6 2004 58 2005 59 net profit ratio 2003 6.5 2004 7.3 2005 7.7 2006 After overall analysis of the firm, figures suggest that firm is doing well enough work in the form of its profitability area. The firm is not enough to eliminate its operating expenses and that is why all of its gross profit is eaten by operating expenses. Efficiency ratio: 2002 3.8 2003 4.4 2004 3.91 2005 5.2 after analyzing the company's efficiency ratio it has been evident the firm is quite good in its efficiency area and the assets of the firm are utilized in a good way. Return on equity ratio: 2002 12.45 2003 12.88 2004 15.78 2005 23.6 After analyzing the company's return on equity ratio we have analyzed that the firm has excellent profitability for its share holders . Asset statement analysis Stock turnover ratio: 2003 17 days 2004 13 2005 17 The stock turnover ratio implies that the firm is making good use of its stock. The asset statement shows the firm is efficient in managing its assets and all the ratio of the assets but in 2005 the situation is reversed that the current total assets exceeds the total current liabilities . the has to do much care about the assets Stock analysis As we have seen that the stock prices of the company is performing good in the market and in 2002 the stock price starts from 10$ and making growth in the profitability the stock price goes to 25$ in the year 2005. the stock price is performing well in the market but we have seen that in the year 2003 the volume of the stock are quite high which have some fall in the year 2004 and 2005 it shows that the interest of investors fall down which is not good for future transactions Share holder equity: If we analyzed that the company is performing good in its profitability area and have much profit for the share holder and we have analyzed that share holder equity is increasing from 2002 to 2004 but in the year 2005 the situation is not in the favor of share holder. Potential problems After over analysis of the liabilities it has been viewed that the company is performing good in the area of liabilities from year 2002-2004 but in 2005 the situation is reversed and the firm has much liability than the total assets of the firm. This potential problem should have been taken care so that in the future years the firm will manage its assets over its liabilities. Future growth: The over all performance of the company in the profitability area is good enough to make good income and to made its expenses and have much income for the share holders. The only problem is in the area of liabilities which should have been taken curiously . The firm has good potential and future growth. . WORK CITED MC.Shukla, TS.Grewal. Advanced Accounts: financial ratios: New Delhi, 1995 Read More