Financial Statement Analysis & Valuation, 6e

Through the Mays Center for Executive Development, she works with corporate clients. She has also taught at University of Alberta, University of Calgary, IMADEC and at the Indian School of Business at the Hyderabad and Mohali campuses. She has received numerous faculty-determined and student-initiated teaching awards at the MBA and executive levels. The revenue from operating retail stores is more or less similar from year 2 to year 4. Company S has increased its revenue from licensing agreement which is in line of its business strategy. The revenue from foodservice and others have decline from year 2 to year 4.

The series of cases applies the concepts and analytical tools discussed in each chapter to the financial statements and notes of Starbucks. The preparation of responses to the questions in these cases results in an integrated illustration of the six sequential steps in financial statement analysis discussed in this chapter. Financial information provides users with information that is useful in assessing the financial performance of companies and, therefore, in setting stock and bond prices. To the extent that these prices are accurate, the costs of the funds that companies raise will accurately reflect their relative efficiency and risk of operations. Companies that can utilize capital more effectively will be able to obtain that capital at a reasonable cost and society’s financial resources will be effectively allocated. Creditors are an important group of external stakeholders.

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Why do accounts receivable appear net of allowance for uncollectible accounts? Identify the events or transactions that cause the allowance account to increase and decrease. Coupons are deducted from the total price. If Direct Textbook price listed does not match the bookstores page please check to see if there is a coupon. It is possible that between the time you initially viewed a book on our site and you decided to buy it, it was sold to another customer. Managers can influence cash flow but it is more challenging that influencing GAAP-based because the latter are rife with estimates and professional judgment.

During November and December of 2019, Bloomington sold products to a customer and warranted them against product failure for 90 days. Estimated costs of honoring this 90-day warranty during 2020 are $3,100. Bloomington provides a profit-sharing bonus for its executives equal to 5% of reported pretax annual income. The estimated pretax income for 2019 is $800,000. Bonuses are not paid until January of the following year. The deferred income taxes would give rise to liabilities when the actual amount of income tax paid as per tax reporting is lower than under financial reporting indicating future payable.

Peter D. Easton

Starbucks includes marketable securities in current assets on the balance sheet, yet it reports purchases and sales of marketable securities as investing activities on the statement of cash flows. Explain why changes in marketable securities are investing activities when changes in most other current assets are operating activities. The statement of cash flows reports on the cash inflows and outflows relating to a company’s operating, Financial Statement Analysis & Valuation, 6e investing, and financing activities over a period of time. The sum of these three activities yields the net change in cash for the period. This statement is a useful complement to the income statement, which reports on revenues and expenses, but which conveys relatively little information about cash flows. The cash flow generated from the main business operation of the company are classified as cash flow from operating activities.

• In addition, Professor Easton has taught managerial accounting at the graduate level.
• Assets and liabilities are usually recorded at original acquisition or insurance costs.
• Set up a price alert and we will notify you when this book reaches what you want to get paid.
• She has received numerous faculty-determined and student-initiated teaching awards at the MBA and executive levels.
• The balance sheet provides information that helps users understand a company’s resources and claims to those resources (liabilities and stockholders’ equity) as of a given point in time.

This section will expose students to a variety of cases and lectures to illustrate how students should analyze accounting and earnings quality, and assess the likelihood of earnings management. ______ Reports the change in a company’s cash balance over a period of time. Company operated stores is where company S has set-up its own café and providing coffee and other beverages to its customer. Licensing is where company has provided license to other firm to operate its store by which company S receives licensing fees.

CUSTOMER SERVICE

Ironically, Starbucks now stands poised to attempt to export its brand and style of cafe to the European continent. On January 16, Year 4, Starbucks opened its first coffeehouse in France, in the heart of Paris, at 26 Avenue de 1’Opera. The majority of Starbucks’ retail stores at the end of fiscal Year 4 are located in the United States, amounting to one Starbucks retail location for approximately every 45,000 U.S. residents! However, Starbucks is clearly not content to simply focus on the U.S. market, as is it extending the reach of its stores globally, with 2,437 stores outside the United States. At the end of fiscal Year 4, Starbucks had 422 company-operated stores in the United Kingdom and another 372 in Canada.

• The increase in its demand for coffee and increase its market share in countries and led to establishment of its brand.
• A common issue is the confusion of certain characters.
• Gauge how your entire class or individual students are performing.
• Further, Starbucks sells whole bean and ground coffee through institutional foodservice companies that service business, education, office, hotel, restaurant, airline and other foodservice accounts.
• All things equal, this will increase the number of customers or perhaps increase revenue per customer.

Integrates with numerous learning management systems. Ensure your students are getting the additional reinforcement and direction they need between class meetings. https://kelleysbookkeeping.com/ Are incorporated throughout the text and illustrate adjustments analysts make to accounting information to make a more useful assessment of a firm.

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However, these firms tended to be much smaller than Starbucks, the largest among them being Panera, with 602 bakery-cafés systemwide (515 franchised and 226 company-owned) and total revenues of $479 million for fiscal Year 4. The growth in the number of its retail stores is one of the primary drivers of Starbucks’ remarkable rate of growth in revenues. In fiscal Year 4, total revenues exceeded $5.3 billion, representing a 30 percent growth rate over fiscal Year 3 revenues of $4.1 billion. But Starbucks’ revenue growth is not driven only by opening new stores. Comparable store sales growth reflects the increase in sales from stores opened at least two full years. First, the preparation of financial statements involves an understanding of complex accounting rules and significant assumptions and considerable estimation.

Importantly, the income statement lists the types and amounts of revenues and expenses making up net income or net loss. Economic Consequences of Financial Accounting Information – Students will be introduced to the role of accounting information in key economic decision contexts, such as valuation, credit and management compensation. Students will be introduced to and will apply the accounting earnings-based valuation techniques popular on Wall Street, including price-earnings ratios, market-to-book ratios, and the residual income valuation model. J M Smucker Co Statement of Cash Flow ($ millions) For the year ended April 30, 2018Cash from operating activities $1,218. Cash from investing activities Cash from financing activities Net increase in cash 25.