Case 1 is a comparison of financial statements for Dunkin Brands and Starbucks .

Objectives:

1.Examine commonly used financial ratios.

2.Identify the elements of working capital and calculate the associated ratios for each component.

3.Calculate the operating cash flows and free cash flows for each company.

Assignment:

Examine the last three-years financial statements for each company (attached) and answer the following questions:

1.What trends do you see in the industry?

2.For each company, consider the consolidated financial results and provide a margin analysis. Examine the ratios and cash flows for both companies. What themes are being played out for either or both companies? Please describe them.

3.Please describe any adjustments you would make when considering the data.

4.Has either, or both, company(s) been reinvesting in its business? Please provide your evidence.

5.Provide a set of DuPont ratios for each firm. What is each firm’s return from financial leverage and operating leverage? Assume the pre-tax cost of short-term borrowing is 2% and the marginal corporate tax rate is 40%.

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