The company’s assets peaked in 2018, as did net income and revenue. However, the increase is mainly due to a change in the long-term debt indicator, which more than tripled (Starbucks Corporation, 2021). After 2018, the company’s current ratio became negative, which affects its liquidity and ability to pay off short-term liabilities. The company corrected the situation in 2020; however, there is no confident forecast for the future in this case for some reason. Firstly, Starbucks has already quite widely realized its potential, and therefore, huge investments, projects, or financial injections are not expected. Second, the significantly increased long-term debt in 2018 disrupted its relationship with the available capital quite noticeably, increasing it by several whole units.
The importance of determining such indicators in the dynamics of the ratio of short-term and long-term assets and liabilities determines the company’s attractiveness for investors. Moreover, high or at least close to one indicator demonstrates the effectiveness of the company’s internal processes that manage assets and finances. Ideally, the company should be able not only to deal with short-term obligations confidently but also to have a strategy for the future, which sooner or later will reduce all debt obligations.
Compared to competitors, Starbucks and McDonald’s have about the same picture: the company copes with short-term liabilities, which shows the current ratio is more than one, and the quick ratio is close to one. However, long-term liabilities will be more difficult for companies to cope with since both of them have significantly increased debt (McDonald’s Cash Flow Statement 2005-2021 | MCD, 2021). JM Smucker or Dunkin Donuts does better in the long run but much worse in the short run (J M Smucker Cash Flow Statement 2005-2021 | SJM, 2021). Although the debt to equity of this company is the only positive one among all competitors, the current and quick ratios are extremely low, which significantly reduces the company’s solvency. The results are presented in Table 2.
Table 2. Balance Sheet Analysis.
References
J M Smucker Cash Flow Statement 2005-2021 | SJM(2021). Web.
McDonald’s Cash Flow Statement 2005-2021 | MCD (2021). Web.
Starbucks Corporation. (2021). Web.