GBR Starbucks Corporation Financial Analysis
| ✓ Paper Type: Free Assignment | ✓ Study Level: University / Undergraduate |
| ✓ Wordcount: 5164 words | ✓ Published: 20th Oct 2020 |
Introduction
Starbucks, which began as a roaster and retailer of whole bean and ground coffee tea and spices, opened it’s first store in Seattle back in 1971. Today they have more than 24,000 stores globally. Starbucks can be found in most malls, Targets, even colleges, as well as stand alone shops.
Their goal is to server the best coffee possible, grown under the highest standards of quality. Offering products like coffee, handcrafted beverages, and fresh food. They strive for their stores to be looked at as a warm and inviting gathering place for everyone while providing exceptional customer service and products. Starbucks products such as coffee, tea, and ready to drink beverages can also be found in your local grocery store. (Starbucks Company Profile)
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Assignment Writing ServiceAccounts Receivable Analysis
Starbucks uses the equity method to report receivables that consist of receivables for product and equipment sales to and royalties from their licensees and receivables from consumer-packaged goods customers. They use historical experience, customer credit risk, and apply a specific identification method to calculate an allowance for doubtful accounts. The reported allowance for doubtful accounts was $8 million for September 30, 2018 and $9.8 million for October 1, 2017. (Starbucks 2018 10-K)
Table 1
The consolidated balance sheet above shows a decrease in accounts receivable of $177.3 million between the years 2017 and 2018.
Table 5
|
STARBUCKS CORP CONSOLIDATED BALANCE SHEETS (HORIZONTAL ANALYSIS) Sept 30, |
Oct 1, |
Oct 2, |
% Change |
% Change |
|
|
2018 |
2017 |
2016 |
2018-2017 |
2017-2016 |
|
|
ASSETS Current assets: Cash and cash equivalents |
$ 8,756.30 |
$ 2,462.30 |
$ 2,128.80 |
255.61% |
15.67% |
|
Short-term investments |
181.50 |
228.60 |
134.40 |
-20.60% |
70.09% |
|
Accounts receivable, net |
693.10 |
870.40 |
768.80 |
-20.37% |
13.22% |
|
Inventories |
1,400.50 |
1,364.00 |
1,378.50 |
2.68% |
-1.05% |
|
Prepaid expenses and other current assets |
1,462.80 |
358.10 |
347.40 |
308.49% |
3.08% |
|
Total current assets |
12,494.20 |
5,283.40 |
4,757.90 |
136.48% |
11.04% |
|
Long-term investments |
267.70 |
542.30 |
1,141.70 |
-50.64% |
-52.50% |
|
Equity and cost investments |
334.70 |
481.60 |
354.50 |
-30.50% |
35.85% |
|
Property, plant and equipment, net |
5,929.10 |
4,919.50 |
4,533.80 |
20.52% |
8.51% |
|
Deferred income taxes, net |
134.70 |
795.40 |
885.40 |
-83.07% |
-10.16% |
|
Other long-term assets |
412.20 |
362.80 |
403.30 |
13.62% |
-10.04% |
|
Other intangible assets |
1,042.20 |
441.40 |
516.30 |
136.11% |
-14.51% |
|
Goodwill |
3,541.60 |
1,539.20 |
1,719.60 |
130.09% |
-10.49% |
|
TOTAL ASSETS |
$ 24,156.40 |
$ 14,365.60 |
$ 14,312.50 |
68.15% |
0.37% |
|
LIABILITIES AND EQUITY Current liabilities: Accounts payable |
$ 1,179.30 |
$ 782.50 |
$ 730.60 |
50.71% |
7.10% |
|
Accrued liabilities |
2,298.40 |
1,934.50 |
1,999.10 |
18.81% |
-3.23% |
|
Insurance reserves |
213.70 |
215.20 |
246.00 |
-0.70% |
-12.52% |
|
Stored value card liability and current portion of deferred revenue |
1,642.90 |
1,288.50 |
1,171.20 |
27.50% |
10.02% |
|
Current portion of long-term debt |
349.90 |
- |
399.90 |
100.00% |
-100.00% |
|
Total current liabilities |
5,684.20 |
4,220.70 |
4,546.80 |
34.67% |
-7.17% |
|
Long-term debt |
9,090.20 |
3,932.60 |
3,185.30 |
131.15% |
23.46% |
|
Deferred revenue |
6,775.70 |
4.40 |
- |
153893.18% |
100.00% |
|
Other long-term liabilities |
1,430.50 |
750.90 |
689.70 |
90.50% |
8.87% |
|
Total liabilities |
22,980.60 |
8,908.60 |
8,421.80 |
157.96% |
5.78% |
|
Shareholders equity: Common stock ($0.001 par value) authorized, |
1.30 |
1.40 |
1.50 |
-7.14% |
-6.67% |
|
2,400.0 shares; issued and outstanding, 1,309.1 and 1,431.6 shares, respectively Additional paid-in capital |
41.10 |
41.10 |
41.10 |
0.00% |
0.00% |
|
Retained earnings |
1,457.40 |
5,563.20 |
5,949.80 |
-73.80% |
-6.50% |
|
Accumulated other comprehensive income loss |
(330.30) |
(155.60) |
(108.40) |
112.28% |
43.54% |
|
Total shareholders equity |
1,169.50 |
5,450.10 |
5,884.00 |
-78.54% |
-7.37% |
|
Noncontrolling interests |
6.30 |
6.90 |
6.70 |
-8.70% |
2.99% |
|
Total equity |
1,175.80 |
5,457.00 |
5,890.70 |
-78.45% |
-7.36% |
|
TOTAL LIABILITIES AND EQUITY |
$ 24,156.40 |
$ 14,365.60 |
$ 14,312.50 |
68.15% |
0.37% |
A horizontal analysis (shown in Table 5) of the consolidated balance sheets was done for Starbucks Corporation using the years 2018, 2017, and 2016. Looking at accounts receivable you see that the company reported accounts receivable at $768.80 million in 2016, $870.40 million 2017, and $693.10 million in 2018. The percentage change showed that the company had an increase of 13.22% in accounts receivable for the 2017-2016 reporting period and was down 20.37% during the 2018-2017 period.
Table 6
|
STARBUCKS CORP CONSOLIDATED BALANCE SHEETS (VERTICAL ANALYSIS) |
Sept 30, |
Oct 1, |
|||
|
2018 % |
2017 |
% |
|||
|
ASSETS Current assets: Cash and cash equivalents |
$8,756.30 36.25% |
$2,462.30 |
17.14% |
||
|
Short-term investments |
181.50 0.75% |
228.60 |
1.59% |
|
|
|
Accounts receivable, net |
693.10 2.87% |
870.40 |
6.06% |
||
|
Inventories |
1,400.50 5.80% |
1,364.00 |
9.49% |
||
|
Prepaid expenses and other current assets |
1,462.80 6.06% |
358.10 |
2.49% |
||
|
Total current assets |
12,494.20 51.72% |
5,283.40 |
36.78% |
||
|
Long-term investments |
267.70 1.11% |
542.30 |
3.77% |
||
|
Equity and cost investments |
334.70 1.39% |
481.60 |
3.35% |
|
|
|
Property, plant and equipment, net |
5,929.10 24.54% |
4,919.50 |
34.25% |
||
|
Deferred income taxes, net |
134.70 0.56% |
795.40 |
5.54% |
||
|
Other long-term assets |
412.20 1.71% |
362.80 |
2.53% |
||
|
Other intangible assets |
1,042.20 4.31% |
441.40 |
3.07% |
||
|
Goodwill |
3,541.60 14.66% |
1,539.20 |
10.71% |
||
|
TOTAL ASSETS |
$24,156.40 100.00% |
$14,365.60 |
100.00% |
||
|
LIABILITIES AND EQUITY Current liabilities: Accounts payable |
$1,179.30 4.88% |
$782.50 |
5.45% |
||
|
Accrued liabilities |
2,298.40 |
9.51% |
1,934.50 |
13.47% |
|
|
Insurance reserves |
213.70 |
0.88% |
215.20 |
1.50% |
|
|
Stored value card liability and current portion of deferred revenue |
1,642.90 |
6.80% |
1,288.50 |
8.97% |
|
|
Current portion of long-term debt |
349.90 |
1.45% |
0.00 |
0.00% |
|
|
Total current liabilities |
5,684.20 |
23.53% |
4,220.70 |
29.38% |
|
|
Long-term debt |
9,090.20 |
37.63% |
3,932.60 |
27.38% |
|
|
Deferred revenue |
6,775.70 |
28.05% |
4.40 |
0.03% |
|
|
Other long-term liabilities |
1,430.50 |
5.92% |
750.90 |
5.23% |
|
|
Total liabilities |
22,980.60 |
95.13% |
8,908.60 |
62.01% |
|
|
Shareholders equity: Common stock ($0.001 par value) authorized, |
1.30 |
0.01% |
1.40 |
0.01% |
|
|
2,400.0 shares; issued and outstanding, 1,309.1 and 1,431.6 shares, respectively Additional paid-in capital |
41.10 |
0.17% |
41.10 |
0.29% |
|
|
Retained earnings |
1,457.40 |
6.03% |
5,563.20 |
38.73% |
|
|
Accumulated other comprehensive income/(loss) |
(330.30) |
-1.37% |
(155.60) |
-1.08% |
|
|
Total shareholders equity |
1,169.50 |
4.84% |
5,450.10 |
37.94% |
|
|
Noncontrolling interests |
6.30 |
0.03% |
6.90 |
0.05% |
|
|
Total equity |
1,175.80 |
4.87% |
5,457.00 |
37.99% |
|
|
TOTAL LIABILITIES AND EQUITY |
$24,156.40 100.00% |
$14,365.60 |
100.00% |
||
A vertical analysis of the consolidated balance sheets was done (shown in table 6) for Starbucks Corporation comparing for years 2018 and 2017. Accounts receivable reported $870.40 million an increase of 6.06% for 2017 and $693.10 million a 2.87% increase 2018.
Property, plant, and equipment Analysis
Property, plant, and equipment are carried at cost minus accumulated depreciation. The cost includes all costs necessary to acquire and prepared assets for use. Starbucks uses the straight-line method to compute the depreciation. (Starbucks 2018 10-K)
|
Property, plant and equipment, net |
5,929.10 |
4,919.50 |
4,533.80 |
20.52% |
8.51% |
A horizontal analysis of the consolidated balance sheets looked at property, plant, and equipment it reported $4,533.80 million in 2016, $4,919.50 million in 2017, and $5,929.10 million in 2018. With a percentage change of 8.51% 2017-2016 reporting period and 20.52% for 2018-2017.
|
Property, plant and equipment, net |
5,929.10 24.54% |
4,919.50 |
34.25% |
The vertical analysis of the consolidated balance sheets was done for property, plant, and equipment and showed $4,919.50 million a 34.25% increase in 2017 and $5,929.10 million a 24.54% increase in 2018.
Other Intangible Assets Analysis
Intangible assets consist of acquired and reacquired rights, trade secrets, licensing agreements, contract-based patents, and copyrights. These assets are amortized over their estimated useful lives and are tested for impairment using a straight-line methods (Starbucks 2018 10-K)
|
Other intangible assets |
1,042.20 |
441.40 |
516.30 |
136.11% |
-14.51% |
The horizontal analysis of the consolidated balance sheets showed that other intangible assets repoted $516.30 million in 2016, $441.40 million in 2017, and $1,042.20 million in 2018. That works out to a 14.51% decrease for 2017-2016 but then a 136.11% increase in the 2018-2017 period.
|
Other intangible assets |
1,042.20 4.31% |
441.40 |
3.07% |
A vertical analysis of the consolidated balance sheets showed that other intangible assets reported a $441.40 million in 2017 a 3.07% increase and $1,042.20 million in 2018 a 4.31% increase.
Long-term Debt Analysis
|
Long-term debt |
9,090.20 |
3,932.60 |
3,185.30 |
131.15% |
23.46% |
A horizontal analysis was done for the consolidated balance sheets and looked at long term debt reporting $3,185.30 million in 2016, $3,932.60 million for 2017, and $9,090.20 million for 2018. That would mean there was a 23.46% increase for 2017-2016 and a 131.15% increase during 2018-2017.
|
Long-term debt |
9,090.20 |
37.63% |
3,932.60 |
27.38% |
A vertical analysis was done for the consolidated balance sheets looking at long-term debt it showed $3,932.60 million a 27.38% increase in 2017 and $9,090.20 million a 37.63% increase in 2018.
Depreciation and Amortization Expenses Analysis
The consolidated statements of earnings below (table 3) shows that depreciation and amortization expenses were reported as $980.8 million in 2016, $1,011.4 million in 2017, and $1,247 million in 2018. That’s an increase of $266.2 million in three years.
Table 3
Starbucks Corporation 2018 Form 10-K
Table 7
|
STARBUCKS CORP CONSOLIDATED STATEMENTS OF EARNINGS (HORIZONTAL ANALYSIS) Sept 30, Oct 1, |
Oct 2, |
% Change |
% Change |
||
|
2018 |
2017 |
2016 |
2018-2017 |
2017-2016 |
|
|
Net revenues: Company-operated stores |
$ 19,690.30 |
$ 17,650.70 |
$ 16,844.10 |
11.56% |
4.79% |
|
Licensed stores |
2,652.20 |
2,355.00 |
2,154.20 |
12.62% |
9.32% |
|
Other |
2,377.00 |
2,381.10 |
2,317.60 |
-0.17% |
2.74% |
|
Total net revenues |
24,719.50 |
22,386.80 |
21,315.90 |
10.42% |
5.02% |
|
Cost of sales including occupancy costs |
10,174.50 |
9,034.30 |
8,509.00 |
12.62% |
6.17% |
|
Store operating expenses |
7,193.20 |
6,493.30 |
6,064.30 |
10.78% |
7.07% |
|
Other operating expenses |
539.30 |
500.30 |
499.20 |
7.80% |
0.22% |
|
Depreciation and amortization expenses |
1,247.00 |
1,011.40 |
980.80 |
23.29% | |
