How would you characterize the strategy of starbucks

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Reference no: EM132432139

Week 1

Please go to the "Resources" tab and download the Excel template labeled "Starbucks_Student" to complete the case

INTEGRATIVE CASE 1.1 - Starbucks

Respond to the following questions relating to Starbucks.

Industry and Strategy Analysis

a. Apply Porter's five forces framework to the specialty coffee retail industry.

b. How would you characterize the strategy of Starbucks? How does Starbucks create value for its customers? What critical risk and success factors must Starbucks manage?

Balance Sheet

c. Describe how ''cash'' differs from ''cash equivalents.''

d. Why do investments appear on the balance sheet under both current and noncurrent assets?

e. Accounts receivable are reported net of allowance for uncollectible accounts. Why? Identify the events or transactions that cause accounts receivable to increases and decrease. Also identify the events or transactions that cause the allowance account to increase and decrease.

f. How does accumulated depreciation on the balance sheet differ from depreciation expense on the income statement?

g. Deferred income taxes appear as a current asset on the balance sheet. Under what circumstances will deferred income taxes give rise to an asset?

h. Accumulated other comprehensive income includes unrealized gains and losses from marketable securities and investments in securities as well as unrealized gains and losses from translating the financial statements of foreign subsidiaries into U.S. dollars. Why are these gains and losses not included in net income on the income statement? When, if ever, will these gains and losses appear in net income?

Income Statement

i. Starbucks reports three principal sources of revenues: (1) company-operated stores, (2) licensing, and (3) foodservice and other consumer products.

Using the narrative information provided in this case, describe the nature of each of these three sources of revenue.

j. What types of expenses does Starbucks likely include in (1) cost of sales, (2) occupancy costs, and (3) store operating expenses?

k. Starbucks reports income from equity investees on its income statement. Using the narrative information provided in this case, describe the nature of this type of income.

Statement of Cash Flows

l. Why does net income differ from the amount of cash flow from operating activities? m. Why does Starbucks add the amount of depreciation and amortization expense to net income when computing cash flow from operating activities?

m. Why does Starbucks show an increase in inventory as a subtraction when computing cash flow from operations?

o. Why does Starbucks show a decrease in accounts payable as a subtraction when computing cash flow from operations?

p. Starbucks includes short-term investments in current assets on the balance sheet, yet it reports purchases and sales of investment securities as investing activities on the statement of cash flows.

Explain why changes in investment securities are investing activities while changes in most other current assets (such as accounts receivable and inventories) are operating activities

q. Starbucks includes changes in short-term borrowings as a financing activity on the statement of cash flows. Explain why changes in short-term borrowings are a financing activity when most other changes in current liabilities (such as accounts payable and other current liabilities) are operating activities.

Textbook - Financial Reporting, Financial Statement Analysis and Valuation by James Wahlen

Reference no: EM132432139

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