How Efficiebtly Has Starbucks Management Been?
How efficient has Starbucks management been in utilizing its assets to generate sales? The efficiency which Starbucks© utilizes its assets to generate sales is a very important measurement of their performance. Asset management efficiency ratios are commonly used to assess the ability of a company to use its assets efficiently and to generate sales. These assets include fixed assets like plants and equipment as well as inventory, accounts receivable as well as any other current assets. The lower the total asset turnover ratio, the lower the businesses total sales. If there is a problem with any component of the company’s assets, whether inventory, receivables or fixed assets, it will be indicated in this equation. In FY 2011 Starbucks© generated a total revenue of $11,700.4 million in sales and in FY 2012 Starbucks© generated a total revenue of $13,299.5 million in sales (costs of goods sold) in the US market. Their total assets, from the FY 2011 balance sheet are $7360.4 and FY 2012 is $8,219.2 million. The equation to assess management efficiency ratio is the total asset turnover ratio (TATO). This represents the amount of sales generated per dollar invested in Starbucks© assets. TATO is a measure of how well the company is managing the assets. The equation uses the sales from the income statement as the numerator and the total assets from the balance sheet as the denominator.
Below is the equation for the TATO for Starbucks FY2011: Total asset turnover=$11700.4million$7360.4 million=1.59 times
FY2012:
Total asset turnover = $13299.5 million$8219.2 million=1.62 times The next ratio used to determine how efficiently Starbucks© management utilized their investments. A company will look to the turnover ratios for each of their asset subcategories: accounts receivable, inventory and fixed assets. Based on the liquidity analysis that Starbucks© has analyzed the company computes the fixed asset turnover ratio. This gives the firm the
Below is the equation for the TATO for Starbucks FY2011: Total asset turnover=$11700.4million$7360.4 million=1.59 times
FY2012:
Total asset turnover = $13299.5 million$8219.2 million=1.62 times The next ratio used to determine how efficiently Starbucks© management utilized their investments. A company will look to the turnover ratios for each of their asset subcategories: accounts receivable, inventory and fixed assets. Based on the liquidity analysis that Starbucks© has analyzed the company computes the fixed asset turnover ratio. This gives the firm the