Financial Information and Trend Analysis
Prompt: For this assignment, place yourself in the role of a controller as you review the Starbucks case study and apply your knowledge and understanding of accounting principles to resolve issues and formulate recommendations. You will present this milestone in the form of a report. You will receive feedback on each milestone, with the expectation that you will make any necessary revisions and then compile the milestones together for your final project submission.
For Milestone One analyze financial statements for Starbucks Corporation for fiscal 2010 through 2012 for financial analysis calcul ation and interpretation. You will then address linkages between financial results and operating strategy. As part of Critical Element I: Financial Indicators and Trend Analysis, you will begin by reviewing the financial statements and footnotes that are part of Starbucks' annual report. Once you complete your review of the financial statements, you will focus on the gross profit ratio and return on assets and address the tasks in parts B and C of Critical Element I. Finally, you will perform a horizontal trend analysis to create a pro-forma financial statement.
This assessment addresses the following course outcomes:
• Analyze financial accounting information from transactions through financial statement preparation for reporting results to internal and external users of information
• Interpret financial information in relation to a company's mission and vision for aligning recommendations to attain strategi c goals
Specifically,the following critical elementsmust be addressed in your milestone submission:
I. Financial Indicators and Trend Analysis
A. Analyze various ratio analyses and compare them to the financial statements and footnotes. Note any similarities or differences.
B. In reviewing the gross profit ratio, 2010 and 2011 were consistent versus a slight decrease in 2012. If management is looking to increase the gross profit ratio by 4%, what changes would need to be made in the components of gross profit (i.e., how much would sales increase if prices remained the same?)? Defend your response.
C. Analyze the return on assets (ROA) and discuss the advantages or disadvantages if Starbucks should expand assets by 5% but remain stable with sales.
D. Perform a horizontal trend analysis on the revenue components of Starbucks's consolidated statements of earning and develop a pro form a financial statement for the next year, noting that coffee inventory will increase by 20% and same-store sales will remain flat. Ensure all information is entered accurately.
III. Interpret Financial Information
Based on the case and researching Starbucks corporate philosophy:
a. Summarize how Starbucks meets its mission of "creating a reservoir of trust with their customers, partners, and communities that is deeper than at any time in their history."
b. What considerationswould need to be identified in the financial statements if Starbucks carries out its commitment to hiring veterans and military spouses? Why?
c. As controller, what are three challengesrelated to meeting this goal?
d. Starbucks is planning to open 1,500 new stores within the next 10years. Evaluate the feasibility of opening stores in China, Brazil, and the Czech Republic.
e. Rate each of the three locations with regard to prior sales history.