Question 2.

Below is a hypothetical income statement, based on the income statement of Starbucks, Inc.[1] in 2019, 2018, and 2017

Item 8.

Financial Statements and Supplementary Data

STARBUCKS CORPORATION

CONSOLIDATED STATEMENTS OF EARNINGS (INCOME STATEMENT)

(in millions)

Fiscal Year Ended Sep 29, 2019Sep 30, 2018Oct 1, 2017

Revenue (Sales Volume) 22,386

Cost of Goods Sold (COGS) 7,065

Operating expenses 10,494 9,472 8,486

Depreciation and amortization expenses1,377 1,247 1,011

Interest expense 331 170 92

Income tax expense 871 1,262 1,432

Answer all the questions below.

Question 2a. Let's assume that the ratio (percentage) of the COGS to its Revenue (Sales Volume) of Starbucks hasn't changed in 2017, 2018, and 2019. If so, what is the COGS and Revenue in 2018 and 2019? Show your calculations below, and fill in the Summary Table. Note that the numbers above are in millions.

Calculations:

Summary Table

20192018

Revenue (Sales Volume)

Cost of Goods Sold (COGS)

Question 2b. Break-even point question. If there were 31,256 Starbucks stores world-wide in 2019, how many cups of coffee did a Starbuck store need to sell in a week to break even? Assume that Starbucks only product is a cup of coffee (one size), all stores are the same in size and sales, and the price of a cup of coffee is equally priced at $5 a cup in 2019. Note that the numbers above are in millions.

[1] https://investor.starbucks.com/financial-data/sec-filings/default.aspx

Question 2c. Based on the income statement above (Item 8), what is the gross profit, gross profit margin, net profit, net profit margin in 2019, 2018, and 2017? Show your calculations below, and then fill in the summary table below. Note that the numbers above are in millions.

Calculations:

Summary Table

201920182017

Gross profit

Gross profit margin

Net profit

Net profit margin

Question 2d: Based on your answers to Question 1, how is Starbucks doing in terms of their sales in 2019 and in terms of their operations in 2019? Make sure that your explanation includes what you have found in the Summary Table, and also make a comparison across the three years.

Question 2e: Based on your answers to Question 3, what should Starbucks be doing in the next 5 years? What would be a good strategy to achieve what they should be doing for the next 5 years?