Income Statement Trend, Common-Size, and Profitability Analysis.The following condensed income statement and balance sheet are for Starbucks Corporation, a large retailer of specialty coffee with stores throughout the world.
a. Prepare a trend analysis of the income statements from 2010 to 2011. Use the format shown in as a guide. (Round computations to one decimal place.)
b. Identify all items that changed by more than 20 percent in the trend analysis prepared in requirement a, and briefly comment on the results.
c. Prepare a common-size analysis of the income statements for 2011 and 2010. Use the format shown in as a guide. (Round computations to one decimal place.)
d. What does the common-size analysis prepared in requirement c tell you about the company?
e. Compute the following profitability ratios for 2011, and provide a brief explanation after each ratio (round percentage computations to one decimal place and earnings per share to two decimal places):
1. Gross margin ratio
2. Profit margin ratio
3. Return on assets
4. Return on common shareholders’ equity
5. Earnings per share (assume weighted average shares outstanding totaled 748,300,000 shares)