Refer to the financial statements for Starbucks, the coffee vendor, in Exercise E9.9 in Chapter 9. Be

Question:

Refer to the financial statements for Starbucks, the coffee vendor, in Exercise E9.9 in Chapter 9. Be sure to read the notes under the financial statements.

a. Prepare a reformulated income statement for fiscal year 2007 and reformulated balance sheets for 2007 and 2006 in a way that distinguishes operating and financing activities and identifies taxes applicable to various components of income.

b. For fiscal year 2007, calculate the following: return on common equity (ROCE), return on net operating assets (RNOA), and net borrowing cost (NBC). Use beginning-of-year balance sheet amounts in denominators.

c. Calculate the financing leverage ratio (FLEV) at the beginning of the year and show that the following leverage equation for 2007 is satisfied:

ROCE = RNOA + [FLEV x (RNOA - NBC)]

d. Calculate the operating profit margin ratio (PM) and the asset turnover (ATO). Also calculate the operating profit margin ratio from sales.

e. Calculate the operating liability leverage ratio at the beginning of 2007.

f. The firm's borrowing cost on its short-term commercial paper is 5.5 percent or 3.6 percent after tax. Show how operating liability leverage levers up the return of net operating assets.

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial... Asset Turnover
Asset turnover is sales divided by total assets. Important for comparison over time and to other companies of the same industry. This is a standard business ratio. Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...