Neo-Confucianism Is a Philosophy Which Was Born TEST1

Accounting

Comparison of Starbucks and the Dunkin Brands - Revenue, Cost of Sales, Accounts Receivable and Payable and Inventory

Starbucks is a well-known coffee house which operates using both company owned outlets as well as utilizing a franchise model. The firm has been successful, but has also faced challenges. The firm has shown significant growth since the humble origins in 1971, when the firm had only a single store, to the position where in 2011 the firm has more than 17,000 outlets in 55 different countries (Starbucks, 2011). While the growth may be impressive, it is the financial performance that accompanies that growth which will be of interest to investors or potential investors. The investors may want to look at the firms' performance and assess the degree to which the investment is sound. This can include many ratios and measures, in this case the aspect of soundness may be considered by looking at ratios and trends concerning revenue, cot of goods sold, accounts receivable and payable and inventory. The investor will look at the firm, but may also compare the firm to another in the same industry. Therefore, when looking at Starbucks a comparison will be made with the Dunkin Group, a company with a similar profile, which also uses company owned stores and franchises and sells food and beverages.

The first consideration is the revenue and the pattern shown in growth or decline,

Table 1 Revenue growth 2009-2011

2009

2010

2011

Starbucks revenue

9,775

10,707

11,700

Starbucks revenue growth

-5.86%

9.53%

9.27%

Dunkin revenue

Dunkin revenue growth n/a

3.53%

12.93%

In 2009 Starbucks had a slow down in growth; unsurprising due to the global recession. However, there is ongoing growth in 2010 and 2011. At Dunkin there is also growth, this is slower in 2010 but accelerates 2011; both firms appear to be moving in the right direction.

To assess the firm consideration may also be given to the control and trends of the direct costs; these are referred to as the 'cost of goods sold'. This has a direct impact on the profit as the revenue less the cost of goods sold is the gross profit. To compare the firms in a similar way the cost of goods and the gross profit can be assessed as a percentage of the sales. This is shown in table 2.

Table 2 Cost of goods sold

Cost of goods sold

2009

2010

2011

Starbucks cost of goods

44.20%

41.60%

42.30%

Starbucks gross profit

55.80%

58.40%

57.70%

Dunkin cost of goods

18.40%

20.29%

19.71%

Dunkin gross profit

81.60%

79.71%

80.29%