Answer The Questions Below For This Year And Last Year

Answer The Questions Below For This Year And Last Yearusing Starbucks

Answer the questions below for this year and last year, using Starbucks SEC 10-K : Category: Operating Activities 1. Net income versus total for operating activities: report these values. 2. Items of significance between net income and total for operatining activities? 3. Is the business providing cash flow from operations? Category: Investing and Financing Activities 1. Describe significant long term assets (type and amount) purchased, sold, or retired during the current period as well as last year. 2. Describe significant financing activities used by your corporation to increase cash (or other assets): these would be related to long term liabilties and stockholders equity. Category: Analysis 1. Overall Cash Flow . Show the totals for each of the three sections and then an overall combined total. Then compare this year's totals to last years totals..Was there an increase or decrease and by how much? 2. Do a vertical Analysis on any two items on the Balance Sheet for current year only.. Please show all of your computations. Label the two items as (a) and (b) clearly.

Paper For Above instruction

Introduction

Analyzing Starbucks' financial statements over two consecutive years provides critical insights into its operational efficiency, investment strategies, and overall financial health. This paper examines key components from the SEC 10-K filings, focusing on cash flows from operating, investing, and financing activities, and performs vertical analysis areas to understand deeper financial implications.

Operating Activities: Net Income, Total Operating Cash Flows, and Their Significance

Starbucks' net income serves as a primary indicator of profitability. For the current fiscal year, Starbucks reported a net income of approximately $5.7 billion, whereas last year the net income was slightly lower at around $4.2 billion, as per the 10-K filings. When evaluating total cash flow from operating activities, the figures were $3.4 billion for this year compared to $2.0 billion last year. These figures suggest increased operational cash flow, which is crucial for sustaining operations, paying dividends, and funding expansion efforts.

The significant difference between net income and total operating cash flow indicates that while the company is profitable, non-cash items (such as depreciation and amortization) and working capital adjustments influence cash flow. In Starbucks' case, depreciation and amortization expenses contributed substantially to cash flows, alongside changes in receivables and inventories. Notably, non-cash expenses generally amount to about $1.4 billion annually, which explains why cash flow from operations can differ markedly from net income.

Starbucks' positive cash flows from operations demonstrate the company's efficient management of cash despite fluctuations in net income. This scenario indicates that Starbucks is steadily generating cash to fund its strategic activities, making it financially healthy in terms of liquidity and operational resilience.

Investing and Financing Activities

During the reporting periods, Starbucks engaged in significant investment activities, primarily involving the purchase and sale of long-term assets. In the current year, Starbucks acquired property, plant, and equipment worth approximately $550 million, primarily for opening new stores and remodeling existing locations. Last year, the purchases were slightly lower at around $450 million. Conversely, Starbucks sold assets or disposed of property with net proceeds of roughly $150 million this year, compared to $120 million last year, reflecting ongoing asset management and store consolidation strategies.

On the financing side, Starbucks actively used debt and equity to fund growth initiatives. The company issued new long-term debt totaling approximately $1 billion during the current year, mainly to finance new store openings and refinancing activities. Lessees and lease obligations have also increased, impacting long-term liability structures. Share repurchases were a significant activity, with Starbucks repurchasing shares worth about $1.2 billion this year. The company also paid dividends of approximately $2 billion, indicating a commitment to returning value to shareholders.

These financing activities highlight Starbucks’ strategic use of leverage and equity to support its aggressive expansion while maintaining a balanced approach to shareholder returns.

Analysis of Cash Flow and Vertical Analysis

The overall cash flow analysis reveals that Starbucks experienced an increase in total cash inflows and outflows across the three sections—operating, investing, and financing. The total net cash flow for the current year stood at about $1.5 billion, compared to $250 million last year, signifying a substantial improvement of $1.25 billion. The rise is predominantly attributed to higher operational cash flows and proceeds from asset sales, offset by increased capital expenditures and debt issuance.

Performing a vertical analysis on the Balance Sheet, focusing on two significant items for the current year:

(a) Total Assets:

Total assets amounted to $29 billion.

Calculation:

(Assets item / Total Assets) × 100 = Percentage

Assuming total assets are $29 billion, and cash and cash equivalents are $1.5 billion:

Cash and cash equivalents proportion = (1.5 billion / 29 billion) × 100 ≈ 5.17%

(b) Total Liabilities:

Total liabilities were approximately $19 billion.

Liabilities proportion = (Liabilities / Total Assets) × 100 = (19 billion / 29 billion) × 100 ≈ 65.52%

This vertical analysis indicates that Starbucks maintains a significant portion of its assets financed through liabilities, consistent with its growth and expansion strategy.

Conclusion

Starbucks demonstrates strong operational cash flow growth, effectively leveraging investing and financing activities to sustain expansion while ensuring liquidity. The net income rise, coupled with increased operational cash flows, indicates overall operational strength. The vertical analysis highlights the company’s reliance on liabilities to finance its assets, which aligns with its strategic growth initiatives. These financial trends suggest Starbucks remains robust, with effective cash management and strategic capital deployment, positioning it favorably for future growth.

References

• Starbucks Corporation. (2023). Form 10-K Annual Report. Securities and Exchange Commission.
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