Advanced Financial Reporting: Analyzing Yum, Starbucks & Panera Bread

This report provides a detailed analysis of the financial performance of three companies: Yum Brands, Starbucks, and Panera Bread. It examines key financial ratios such as the degree of financial leverage, dividend yield, percentage of earnings retained, market price per share, and price-earnings ratio for the years 2009 and 2010. The analysis reveals that while Starbucks has a higher degree of financial leverage, Panera Bread demonstrates higher diluted earnings per share and retains 100% of its income. Yum Brands and Starbucks offer dividend yields, unlike Panera Bread. Panera Bread exhibits a higher price-earnings ratio and market price per share, suggesting positive investor sentiment. The report concludes that Panera Bread outperformed the other brands based on these metrics, making it a potentially viable investment option. Desklib provides a platform to access such solved assignments for students.

Running head: ADVANCED AND FINANCIAL ACCOUNTING
Advanced and financial reporting
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ADVANCED AND FINANCIAL ACCOUNTING
Requirement a)
In this section, the data of each company regarding ratio and financial performance is
reviewed. There are three companies for which the data has to be analyzed which include
Yum brand, Starbuck and Panera bread.
The performance of the companies that is Yum brands, Panera bread and Starbucks
can be evaluated by computing the ratios such as degree of financial leverage, dividend yield,
percentage of earning retained, market per share and price earnings ratio. From the figures, it
can be seen that the degree of financial leverage of Starbucks is more than Panera Bread at
the value of 107, 100 and 102.28, 100.37 in year 2009 and 2010 respectively. This implies
that Panera has low proportion of debt in its capital structure. The diluted earnings per share
for Panera bread are higher than that of Yum brands and star bucks. It is observed that in year
2010, earning per share is $ 3.62 for Panera bread compared to $ 2.38 and $ 1.24 for Yum
brands and Starbucks respectively. Therefore, the amount of income received by each share
of Panera bread would be higher compared to other companies (Collier, 2015).
From the data, it can be observed that Panera bread is retaining all its income in the
business at 100% in both the financial years compared to Yum brands and Star bucks that is
retaining 64.42% and 81.97% respectively in year 2010. An increase in retained earnings is
considered as positive, though significantly higher retained earnings might be viewed
negatively by the shareholders as they would not be able to retrieve higher earnings from the
company. Therefore, 100% of retaining the earnings by Panera limited is not considered
favorable by investors. When looking at the figures of dividend yield, it is observed that
Panera limited is not yielding any dividend compared to Yum brands and Starbucks that is
yielding dividend of 1.85% and 1.39 respectively. Dividend yield is considered as an
important parameter that is used by the investors when considering investment in any
company (Robinson et al. 2015). A company making yielding higher dividend compensates

ADVANCED AND FINANCIAL ACCOUNTING
the investors in a better way as against the company paying lower dividend. Therefore, Yum
brand is highly compensating the investors and they are getting higher dividends for each
dollar of money that is invested followed by Starbucks.
From the analysis of data, it is inferred that price earnings ratio of Panera and Yum
brands have increased in year 2010 compared to 2009. When comparing the ratio for the
financial year 2010 in relation to the three brands, it is observed that Panera is generating
higher price earnings ratio of $ 28.21 in year 2010 as against 20.87 generated by Yum brand.
It is favorable to have higher price earnings ratio because it is indicative of the positive future
performance as the investors are willing to make investment in the company (Cohen &
Karatzimas, 2017).
Now, looking at the figures of market price per share, the share price of Panera bread
is highest compared to Yum brand and Starbucks. For the financial year 2010, the market
price per share of Panera brand is $ 102.11 compared to $ 49.66 and $ 25.94 for Yum brand
and Starbucks. Higher market price per share is considered favorable for investors when they
intend to sell the shares of company (Tassadaq & Malik, 2015). It also implies that the
company has higher value in the market and helps in generating a positive view about the
company. Therefore, Panera bread is more favorable compared to the other brand.
Requirement b)
From the analysis of the figures concerning several ratios, it has been ascertained that
Panera bread is outperforming other brands such as Starbucks and Yum brands. It is so
because the diluted earnings per share, market price per share and price earnings ratio is
higher than Yum brand and Starbucks. This has the implication that the investors and
shareholder of Panera bread is positive about the performance of firm and they seek to invest

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in the firms as the shares are expected to generate higher returns. Therefore, based on the
analysis of figures, it would be viable to make investment in shares of Panera bread.

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References list:
Cohen, S., & Karatzimas, S. (2017). Accounting information quality and decision-usefulness
of governmental financial reporting: Moving from cash to modified cash. Meditari
Accountancy Research, 25(1), 95-113.
Collier, P. M. (2015). Accounting for managers: Interpreting accounting information for
decision making. John Wiley & Sons.
Robinson, T. R., Henry, E., Pirie, W. L., & Broihahn, M. A. (2015). International financial
statement analysis. John Wiley & Sons.
Tassadaq, F., & Malik, Q. A. (2015). Creative Accounting & Financial Reporting: Model
Development & Empirical Testing. International Journal of Economics and Financial
Issues, 5(2), 544-551.