Question

In this image I posted, What do these percentages mean? How is calculated? This is Coca Cola`s income statment. I am trying to do a similar thing for Starbucks. How do I do these percentages?

Coca-Cola Common-Size Statements of Income and Retained Earnings for December 2006 and 2016 All Amounts in Millions 2006 24,088 % | 100% 2016 $ 41,863 100% Revenue Cost and Expenses Cost of Sales 34% $8,164 $ 15,924 $16,465 $ 25,398 39% 61% Gross Profit S, G, and A $9,616 40% 40% 1% Interest Charges Other Income/Expenses (net) Total Cost and Expenses Income before Income Taxes $220 {$490) $17,510 $6,578 -2% 73% 27% $16,772 $ 733 {$243) $ 33,727 $ 8,136 2% --5% 81% 19.4% $1,498 6% $ 1,586 {$23) $ 6,527 21% Provision of Income Taxes Other Income Net Income Dividends% of NI} Adjustmentsto Retained Earnings Retained Earnings, Beginning Balance Retained Earnings, Ending Balance 5,080 57% -0.4% 15.6% 83.6% $0 $28,388 $33,468 $ $ 65,018 65,502

Answer 1

The percentages reflects vertical analysis of data. Under this analysis all the different items of the profit and loss statement are computed as a percentage of sales. for eg. Cost of sales/revenue in 2006= 8164/24088= 34% These percentages are mainly computed to analyse the profit margins that the company is earning. Lower margins depict that the company has not been able to increase its product prices but its cost of sales and other expenses have increased with time. As it can be seen in this case, the cost of sales has increased from 34% of sales to 39% of sales which means company has not been able to increase the sales prices in line with the cost of sales due to which its gross profit margin has reduced from 66% to 61% over the period of 10 years.

If you want to compute the same calculation for starbucks, you can visit the starbucks investor relation section and get the data from the yearly annual reports. Below is the spreadsheet you can prepare for the same which i have prepared for the data shared by you. Also refer the formulas used in it which will help you preparing the same:

A Particulars Revenue (A) Year 2006 %age of sales Year 2016 24,088 100% 41,863 %age of sales 100% Cost and expenses Cost of Sales(B) Gross Profit C= (A-B) 8,164 15,924 34% 66% 16,465 25,398 39% 61% S, G and A= (D) 9,616 40% 16,772 40% 10/ 220 -490 733 -233 2% -0.56% Interest charges = (E) Other Income/expense (net)= (F) total cost and expenses (B+D+E+F)= (G) 17,510 33,737 81% Income before Income taxes (A)- (G)= (0) 6,578 27% 8,136 19.4% 1,498 Provision of income taxes (5) Other income (K) 1,586 -23 -0.4% <<this is percentage of net income>> Net Income(1-J+K)= (L) 5,080 6,527 15.6% Dividends (%age of NI) =(M) 57% 83.60% 5,456.57 Amount of dividend (N)= (M*L) Shoot1 Shoot2 2,895.60 Shoot2 shoot

with show formulas

А U G Year 2006 24088 %age of sales =B2/B2 Year 2016 41863 %age of sales =D2/D2 1 Particulars 2 Revenue (A) 3 4 Cost and expenses 5 Cost of Sales(B) 6 Gross Profit C= (A-B) 8164 =B2-B5 =B5/B2 =B6/$B$2 16465 =D2-D5 =D5/$D$2 =D6/$D$2 8 S, G and A= (D) 9616 =B8/$B$2 16772 =D8/$D$2 9 10 Interest charges = (E) 11 Other Income/expense (net)= (F) 220 -490 =B10/$B$2 =B11/$B$2 733 -233 =D10/$D$2 =D11/$D$2 12 total cost and expenses (B+D+E+F)= (G) =B10+B8+B5+B11 =B12/$B$2 =D10+D8+D5+D11 =D12/$D$2 13 =B2-B12 =B14/$B$2 8136 =D14/$D$2 14 Income before Income taxes (A)- (G)= (1) 15 1498 =B16/$B$2 16 Provision of income taxes (J) 17 Other income (K) 1586 -23 =D16/$D$2 =D17/D19 <<this is percentage 18 =B14-B16 1 =B19/$B$2 =D14-D16+D17 =D19/$D$2 19 Net Income(1-J+K)= (L) 20 21 Dividends (%age of NI) =(M) 0.57 0.836 22 =D19*D21 23 Amount of dividend (N)= (M*L) 4 | Sheet1 | Sheet2 Sheet3 Sheet4 =B19*B21 (6)