Essay on Financial Strength & Weakness †Myassignmenthelp.com

Question: Write an essay onFinancial Strength Weakness. Answer: On the basis of the financial analysis of the Starbucks, it should be noted down that, the firm has a strong financial position that is the major strength of the Starbucks. Along with this, the income statement reveals that the net income of the firm is increasing day by day that is essential to survive in todays more competitive business era (Yahoo Finance. 2016). The below given data is helpful to know the financial growth of the firm: Net Income Profit After Tax 1.25B 1.38B 8.3M 2.07B 2.76B Along with this, it should also be noted down that, the firm has enough funds to accomplish its financial goals and objectives in an effective and a more comprehensive manner. This also points out the financial strength of the firm (Yahoo Finance. 2016). The below given data demonstrates that the firm has a large amount of cash in hand: Cash 1.15B 1.19B 2.58B 1.71B 1.53B Moreover, the firm has adequate assets that play a significant role in order to attract the investors. The data show that there is also an increase in the assets of the Starbucks on the regular basis (Yahoo Finance. 2016). Total Assets 7.36B 8.22B 11.52B 10.75B 12.45B In the way, on the basis of the financial statements of the firm, it can be said that, Starbucks has a strong financial position that indicates is the major strength of the firm over its competitors. Apart from this, on the basis of the financial analysis of the firm, it should also be noted down that there are some major financial weaknesses that the firm must take on priority. For case, the major weakness is that the liability of the firm is also increasing on the regular basis that is not good for the financial position of the firm (Yahoo Finance. 2016). The below given data is helpful to present the liability of the firm: Total Liabilities 7.36B 8.22B 11.52B 10.75B 12.45B On the basis of the financial analysis, it can be said that, this is the major financial weakness that the firm has. Non-Financial Strength Weakness Ratio analysis is considered as the non-financial indicators or measures of an organization. On the basis of the ratio analysis of the firm, it should be noted down that, the firm has some major non-financial strengths and weaknesses. For case, the major non-financial strength is that, Starbucks is earning profits on its equity and assets. For example, the profitability ratio of the firm indicates that in the last two years, the firm accomplished higher returns on its equity and assets (Wahlen, Jones Pagach, 2016). Along with this, the firm pays retained earnings to their investor that is also the other non-financial strength of the firm. It is because of it is helpful to attract and to provide opportunities to the investors and that is also beneficial for the financial growth of the organization (Starbucks. 2016). Moreover, the firm also proficient to reminisce the adequate capital in order to reinvest and grow the business to take advantage of on long term shareholder returns. Apart from this, the non-financial indicators or measures also points out the weaknesses of the firm. For example, the liquidity ratios of the firm demonstrate that the liquidity position of the firm is weak. Liquidity refers as the degree to which an asset/ security of the firm can be bought/ sold quickly in the market without affecting the price of asset. Along with this, liquidity of the firm also indicates the ability of the organization that it has to pay off its short-term debt obligations (NASDAQ. 2016). Moreover, the higher liquidity ratios reveal that the firm is able to pay its debts that are coming due in the near future and also can fund its ongoing operations in an effective and a more comprehensive manner. In this way, these are the non-financial strengths and weaknesses of the Starbucks. Companies Strategies for Solving Problems and Outlook In Future On the basis of the financial analysis, and financial non-financial strengths as well as weakness of the firm, it can be said that the firm should adopt and implement some useful strategies to improve the efficiency and to reduce the weaknesses of the firm. First of all, the firm should make strategies to pay its liabilities in a pre-determined time period. Moreover, the firm should make efforts to increase its liquidity (Fan Morck, 2012). The firm should reduce its overhead in order to increase liquidity in a more comprehensive manner. On the other hand, Starbucks should shed its unnecessary assets in order to enhance liquidity of the firm. Moreover, the firm should make strategies to manage accounts (accounts receivable and accounts payable) in an adequate way. Both; accounts receivable and accounts payable have an impact on the liquidity of the firm (Palepu, Healy, Bernard, Peek, 2007). In order to increase the liquidity, the firm should continuous review its accounts receivable in order to ensure that customers are receiving and also paying bills on time. Moreover, a delay in sending or receiving bills may reduce cash flow and damage liquidity of the organization. In this way, with the help of these strategies, the firm would be able to operate its businesses in the future in an effective manner (Preve Sarria-Allende, 2010). Conclusion On the basis of the overall discussion, it can be said that, the firm is doing well in todays more complex and competitive business era. Along with this, it should also be observed that, the financial position of the firm is strong. However, there are some financial and non-financial weaknesses that the firm should reduce to run its business in the long-term time period. The firm must focus on its liquidity in order to meet its financial obligations in a specific time period. The liquidity of the firm is helpful to make sure that the firm has proper cash flow levels for continued operations and growth of the company. Overall, the firm has a strong financial position and the Starbucks has bright future in upcoming years. References Fan, J.P.H., Morck, R. (2012). Capitalizing China. USA: University of Chicago Press. NASDAQ. (2016). SBUX Company Financials. Retrieved From: https://www.nasdaq.com/symbol/sbux/financials?query=ratios Palepu, K.G., Healy, P.M., Bernard, V.L., Peek, E. (2007). Business Analysis and Valuation: Text and Cases. USA: Cengage Learning EMEA. Preve, L. Sarria-Allende, V. (2010). Working Capital Management. USA: Oxford University Press. Starbucks. (2016). About US. Retrieved From: https://www.starbucks.in/ Wahlen, J.M., Jones, J.P., Pagach, D. (2016). Intermediate Accounting: Reporting and Analysis, Copyright Update (2nd ed.). USA: Cengage Learning. Yahoo Finance. (2016). Starbucks Corporation (SBUX). Retrieved From: https://in.finance.yahoo.com/q/is?s=SBUXannual Yahoo Finance. (2016). Starbucks Corporation (SBUX). Retrieved From: https://in.finance.yahoo.com/q/bs?s=SBUXannual