STARBUCK COFFEE COMPANY INCOME STATEMENT REVIEW
INTRODUCTION
Starbuck is a coffee producing company; it deals with roasting beans and grounding tea, coffee, and spices. Today, the company connects with many customers globally, with eighty markets of more than thirty thousand retailers. The company started way back in 1971.
The company’s mission is to nurture and inspire the human spirit. Starbuck Company provides high-quality coffee and always serves the best standard possible. Most of the time, the company coffee buyers travel to farms in Africa, Asia, and Latin America to choose beans that are of high quality. The coffee is then roasted to bring out the best flavor by the Starbuck roast.
Starbuck Company treats partners with dignity and respect. Several programs, such as health cover, which is majorly comprehensive, are offered to partners.
The range of products that the company provides includes more than thirty blends of premium coffee, iced and hot beverages, Refreshers, and teas. It also includes tea and coffee brewing mugs, equipment, and accessories. Other goods provided by the company include; sandwiches, salads, fruit cups, oatmeal, and baked pastries.
REVENUE AND EXPENSES ANALYSIS
REVENUE
Revenue refers to the amount of money that is received from the company’s business activities. It is also referred to as price to sales ratio.
Revenue appears in the top line on the income statement of a company. It generates the net income as it equals to revenue fewer expenses (Kieso, 2015). When revenues are more than expenses, a company gets profits.
Company’s revenue can be divided into the following division;
- Operating revenue- proceeds from the sale of the organization’s products and services.
- Non-operating revenue- it is revenue obtained from secondary sources; these sources are usually nonrecurring and unpredictable. Examples include; income from the sale of a company’s assets, proceeds derived from litigation, and minor investments.
Examples of revenues in the case of government include; fines, taxation fees, proceeds from the sale of securities, court fines, intergovernmental transfers, and resource or mineral rights. In the case of non- profit making organization includes gross receipts, individual donations, foundations, company’s donations, government donations, and membership fees.
Review of Starbuck company revenue items
Total revenues increased by $ 441.4 million from the fiscal year 2018, and this shows that the company’s higher revenues were driven by the sale of products by the leading company and their stores generally. Stores sales are attributable to the favorable translation of currency.
Starbuck company income statement shows that in the year 2019, it did not get into joint venture acquisition; therefore, the gains reduced to zero from $1376.4 million in the fiscal year 2018. Profits from divesture of operations increased by $ 123.6 million. The benefit shows that the company increased efforts and mobilized resources towards divesture of operations.
Interest and other net incomes decreased by $ 94.9 million from the fiscal year 2018, and net proceeds from the sale of goods increased by $ 1789 million this depicts that the company had increased efforts from the sale of its products majorly through product renovation, increased marketing and increased number of stores.
EXPENSES
An expense is a cost that a business incurs from its operation that leads to the generation of revenue. Examples of expenses include employee salaries, leases, depreciation, payment made to suppliers, tax deductions or tax liabilities, and legal fees (Stubben, 2010).
Expenses are recorded through either accrual basis or cash basis by accountants. Categories of expenses include operating and non operating expenses. Capital expenses are treated differently than other costs by the IRS.
Operating expenses related to the company’s main activities include rent, administration fees, and the cost of goods sold. Non-operating expenses are expenses that are indirectly related to the business core activities such as finance costs and interest charges.
Stores operating expenses decreased by $ 84226.6 million. From the company information, the decrease is as a result of cost savings brought about by licensing of foodservice efficiency. Other operating expenses decreased by $ 183.9 million, and this change was also due to increased efficiency in operations.
Amortization and depreciation increased by $ 130.3 million, the company experienced this because of ownership changes in parts of the market in China. General and administrative expenses increased by $ 115.9. The increase is due to upfront salaries to employees plus retention and bonus costs. Higher compensation based on performance also contributed to the increase in general administrative expenses.
Generally, the total expenses decreased by $ 84482.6 million. Starbuck Company had increased efficiency in day to day activities with the provision of high-quality products and proper employee remuneration.
Interest expense increased by $ 160.7 million, majorly brought about by the company’s additional long-term debt issued in the year 2019.
Starbuck Company can be said to be doing great due to the general increase in revenues and a decrease in total expenses. The movement of expenses and revenues in different directions shows that the company is doing well.
EARNINGS PER SHARE
Earnings per share is a company’s earnings divided by the number of shares that are outstanding. A more profitable company is said to have high earnings per share. Earnings per share are used to show an organization’s profitability (Brouwer et al., 2014).
Earnings per share of Starbuck Company are calculated based on the average number of shares outstanding in a given period. Diluted earnings per share are based on the weighted average number of shares and the effect of dilutive in a given period. It is done when the performance criterion has been achieved.
Diluted earnings per share for the year 2018 were $3.24 million, and for the year 2019, the earning per share decreased to $ 2.92 million. The percentage decrease is 8%.
Basic earnings per share for the year 2018 were $3.27 million, and for the year 2019, it is reduced to $ 2.92 million. The percentage decrease is 10.7%.
Earnings per share are used to choose stocks. The best action is for an investor is to choose a broker that suits his/her style of investment. Investors will compare the share price with the earnings per share to check on the value of revenues and how the investor feels about a company’s future growth.
To illustrate the additional securities effects on earnings per share, companies provide a report on diluted earnings per share. The diluted earnings per share assume that all outstanding shares have been issued out.
EPS of the company is said to be relatively arbitrary. The value is analyzed and compared with other companies in the industry. It can also be compared to the organization’s price earning ratio. Earnings per share between two companies providing similar commodities with the same industry and the same outstanding number of shares are compared. The higher the earnings per share, the higher the profitability.
Earnings per share, together with the share price of a company, are used to show whether the price is high or cheap.
SUMMARY
Starbuck coffee company has many investments in the coffee industry, which has been shown in the expenses and revenue items in the income statement. The company has generated high revenues from increased stores globally, improved employees working conditions, increases employee bonuses, and proper remuneration plans. Profit maximization and increased investments have been the major activities carried out by the organization. The company has improved global supply, and it has indirectly allowed every shareholder to participate in the organizational activities. The profit maximization program should be set through the appropriate company’s action.
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