fin515 week 2

29. In fiscal year 2011, Starbucks Corporation (SBUX) had revenue of $11.70 billion, gross profit of $6.75 billion, and net income of $1.25 billion. Peet’s Coffee and Tea (PEET) had revenue of $372 million, gross profit of $72.7 million, and net income of $17.8 million.

a. Compare the gross margins for Starbucks and Peet’s.
Gross Marin = Gross Profit/Sales (Page 35)
Starbucks: ($6.75 gross profit / $11.70 sales) = 0.57692 x 100 = 58% GM
Peet’s: ($72.7 gross profit / $ 372 sales) = 0.19543 x 100 = 20% GM

b. Compare the net profit margins for Starbucks and Peet’s.
Net Profit Margin = Net Income / Sales (Page 36)
Starbucks: ($1.25 net income / $11.70 sales) = 0.10683 x 100 = 11% NPM
Peet’s: ($17.8 net income / $372 sales) = 0.04785 x 100 = 5% NPM

c. Which firm was more profitable in 2011
According to the results, Starbucks is more profitable by being at 58% GM and 11% NPM versus Peet’s at 20% GM and 5% NPM.

30. In mid-2012, Apple had cash and short-term investments of $27.65 billion, accounts receivable of $14.30 billion, current assets of $51.94 billion, and current liabilities of $33.06 billion.

a. What was Apple’s current ratio?
Current Ratio = Current Assets / Current Liabilities (Page 37)
Current Ratio = $51.94 current assets / $33.06 current liabilities = 1.571

b. What was Apple’s quick ratio?
A more stringent test of the firm’s liquidity is the quick ratio, which compares only cash and “near cash” assets, such as short-term investments and accounts receivable, to current liabilities (Page 37).
Quick Ratio = Short-term Investments + Accounts Receivable / Current Liabilities
Quick Ratio – 27.65 + 14.30 / 33.06 = 41.95 / 33.06 = 1.269

c. What was Apple’s cash ratio?
Cash Ratio = Cash / Current Liabilities (Page 37)
Cash Ratio = 27.65 / 33.06 = 0.836

d. In mid-2012, Dell had a cash ratio of 0.67, a quick ratio of 1.11 and a current ratio of 1.35. What can you say about the asset liquidity of Apple relative to Dell?
The asset