Starbucks Case
Starbucks, a twenty-year old coffee shop, is continuing the disciplined expansion of the
global store base. Compared to Panera Bread, one of the potential competitors of the
company, it seems Starbucks is competitive in some way, yet could improve in some areas.
Firstly, the liquidity of Starbucks is not as good as Panera. Regardless of similar receivable
turnovers, the inventory turnover and accounts payable turnover are both much higher in
Starbucks, particular in accounts payable turnovers. There is a huge difference between the
norms of repayment to suppliers. Panera pays off to suppliers more quickly, which leads to
a significantly greater accounts payable turnover, whereas Starbucks repays to suppliers in
a normal term for an average payable days outstanding of around 25. The days in cash
operating cycle of Starbucks are around 40, and even reach to 53 in 2012, while the figure
of Panera is around 10 days (Exhibit 1). A short cycle allows a business to quickly acquire
cash that can be used for additional purchases or debt repayment (ReadyRatio.com). The
figures show that Starbucks has a relatively longer time for cash tied up within the
operations of businesses so to need more financing to business operation.
Furthermore, it is worth mentioning Starbucks’ times interest earned ratio. Before 2006,
Starbucks had relatively greater ratio. However, since 2007, the ratio has dropped
substantially. The decrease from 2007 is a result of sharply increased in net interest
expenses due to the issuance of the amount of $550 million long-term debt in 2007due in
