Milestone One Guidelines Due Date Is 12/19/2015 5:00 PM East

Milestone One Guidelines due Date Is 12192015 500 Pm Eastern Stan

Analyze Starbucks’ financial statements by conducting horizontal and vertical analyses of specific accounts over a two-year period, focusing on accounts receivable, fixed assets, and debt financing. Discuss how Starbucks’ methods for accounting for receivables, evaluating uncollectible receivables, acquiring fixed assets, and financing debt impact the recording process and financial statement presentation. Your analysis should include detailed calculations (to be included in an Excel document) and address the following areas:

• Accounts Receivable: Examine horizontal and vertical changes over time, and analyze how Starbucks’ accounting methods affect financial reporting.
• Asset Acquisition, Depreciation, and Amortization: Analyze horizontal and vertical changes in fixed and intangible assets, depreciation, and amortization, and discuss how Starbucks’ asset handling methods influence financial statements and cash flows.
• Debt Financing: Examine horizontal and vertical shifts in short- and long-term debt, and analyze Starbucks’ approach to debt financing, including implications for liabilities and financial presentation.

Your report should be 2-3 pages long, double-spaced, in 12-point Times New Roman font, adhering to current APA formatting guidelines. Include all calculations in an Excel file, and ensure your analysis addresses how accounting choices impact the company's financial statements.

Paper For Above instruction

In this analysis, I will examine Starbucks’ financial position over a two-year period by conducting both horizontal and vertical analyses of key financial statement accounts: accounts receivable, fixed assets, and debt financing. These evaluations will illustrate not only the changes in dollar amounts over time but also the proportion of each account relative to total assets or liabilities, providing insight into the company's financial health and strategic decision-making.

Accounts Receivable Analysis

Starbucks’ accounts receivable represent the amount owed by customers that has not yet been collected. Horizontal analysis compares the dollar change in receivables from one year to the next, highlighting growth or contraction trends. For example, if receivables increased by 10% from 2014 to 2015, this indicates an expansion in credit sales or possible collection issues. Vertical analysis examines receivables as a percentage of total assets or sales, showing their relative significance within Starbucks’ financial structure. A rising proportion could signal increased credit risk or strategic shifts towards credit sales.

Starbucks’ accounting approach to receivables involves recognizing revenue upon sale and using allowance methods to account for uncollectible accounts. The company estimates uncollectible receivables based on historical data, which impacts the net value recorded on the balance sheet and the expenses reported on the income statement. This estimation influences how stakeholders interpret liquidity and asset quality, as aggressive allowances can understate receivables, while conservative estimates may overstate assets.

Asset Acquisition, Depreciation, and Amortization

Examining fixed and intangible assets reveals trends in capital investments and resource utilization. Horizontal analysis might show whether Starbucks increased its asset base through new stores or technology investments, reflected in growth in property, plant, and equipment. Vertical analysis places these assets in context by expressing them as a percentage of total assets, clarifying the company’s asset composition.

Starbucks capitalizes costs related to store development, equipment, and branding as fixed or intangible assets. Depreciation methods—such as straight-line or declining-balance—affect the pattern of expense recognition and net income. Similarly, amortization of intangible assets like trademarks influences profit figures and asset valuation on the balance sheet. These methods impact reported cash flows, with depreciation being a non-cash expense that affects operating cash flow, and influence the overall financial picture presented to investors.

Debt Financing Analysis

Northward or downward trends in Starbucks’ short-term and long-term debt indicate shifts in financing strategies. Horizontal analysis assesses how debt levels have changed year-over-year, revealing whether the company is leveraging debt for expansion or reducing liabilities to strengthen financial stability. Vertical analysis compares debt levels relative to total liabilities or assets, highlighting the company's leverage at a given time.

Starbucks typically finances its growth through a combination of debt and equity. The company issues bonds or takes on bank loans, often favoring long-term debt for capital projects. The methods used for debt issuance—fixed-rate bonds, variable-rate loans, or other instruments—impact financial statement presentation, with debt obligations recorded as liabilities and interest expense affecting net income. These strategies influence liquidity ratios and solvency metrics, which are critical for stakeholder assessments.

Implications of Accounting Methods

Starbucks’ accounting strategies for receivables, fixed assets, and debt influence the transparency and comparability of its financial statements. For instance, aggressive estimates for uncollectible receivables may minimize expenses and inflate asset values temporarily, while conservative estimates ensure transparency but may understate assets. Likewise, depreciation methods affect profit margins and asset book value, and debt financing choices determine the extent of leverage and solvency ratios disclosed.

Understanding these methods is crucial for accurate financial analysis, as they shape the perceptions of profitability, liquidity, and financial stability. Stakeholders should consider the company's accounting policies and estimations to interpret financial data effectively.

Conclusion

Through detailed analysis of Starbucks’ accounts receivable, fixed assets, and debt financing, it becomes clear how accounting methods influence the presentation and interpretation of financial statements. Horizontal and vertical analyses reveal trends and relative significance, while the company's strategies for asset acquisition and debt management impact liquidity, profitability, and solvency indicators. Recognizing these factors provides a comprehensive understanding of Starbucks’ financial health and strategic orientation.

References

• Brigham, E. F., & Houston, J. F. (2019). Fundamentals of Financial Management (15th ed.). Cengage Learning.
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• Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2019). Financial Accounting (11th ed.). Wiley.
• Financial Statements of Starbucks Corporation. (2014–2015). Annual Reports. Starbucks Corporation.
• Investopedia. (2023). Accounts receivable. Retrieved from https://www.investopedia.com/terms/a/accountsreceivable.asp
• FASB. (2020). Accounting standards updates. Financial Accounting Standards Board.
• Petersen, D. K. (2018). Asset Management and Depreciation Strategies. Journal of Accountancy, 226(4).
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