Introduction
The horizontal and vertical analyses of Starbuck’s financial statement were carried out to evaluate the company’s performance. Data for the year 2014 and 2015 was obtained to help in the analysis. The following is the analysis.
1. Use basic financial analysis to examine any horizontal changes in Starbucks’ accounts receivable balances over time.
As can be shown from the above analysis, the company’s net receivable increased from by $152 million from 2014 to 2015. This is represented a positive change of 16.1% . Consequently, this means that the company improved in its operations and was able to collect more money from its customers.
2. Use basic financial analysis to examine any vertical changes in Starbucks’ accounts receivable balances over time.
For the vertical analysis, the accounts receivables was calculated as a percentage of the total current assets. This analysis was done for the year 2014 and 2015. From the analysis, it comes out that the percentage of total current assets represented by account receivables is 25.3% for 2015, while for 2014, the percentage is 26.2%. This shows that the proportion of the company’s total current assets made up of account receivables decreased from the year 2014 to 2015.
2. Use basic financial analysis to examine any vertical changes in Starbucks’ fixed assets, intangible assets, depreciation, and amortization over time.
The company’s fixed asset, intangible assets, depreciation and amortization were categorized under non-current assets. From this, a vertical change was examined by summing them up then dividing by the amount for total assets. The results shows that the percentage of non-current assets making up the total assets is 65% for the year 2015 and 61% for 2014. This indicates that the company’s increased total non-current assets in their operation over the 1 year.
3. Analyze Starbucks’ methods for fixed asset and intangible asset acquisitions as well as depreciation and amortization, including asset categorization. How do these methods affect the balance sheet, income statement, and statement of cash flows?
When evaluated in terms of their representation of the company’s total assets, it comes out that the company invests more on property, plant and equipment than on any other non-current assets. This is because it represents 32.8% of the total assets.
C. Debt Financing 1. Use basic financial analysis to examine any horizontal changes in Starbucks’ short- and long-term debt over time.
There are no short term debt reported for the company. As the result, the long term debt was analyzed based on the horizontal changes. It comes out that the company’s long term debt increased by $299 million from 2014 to 2015, representing a percentage change of 14.6%. This indicates that the company increased their dependence on debt financing especially for those debts due in more than one year.
2. Use basic financial analysis to examine any vertical changes in Starbucks’ short- and long-term debt over time.
For vertical analysis, the long-term debt was analyzed as a proportion of the company’s total liabilities. The fraction of total liabilities represented by long-term debt was 37% in 2014, which then decreased to 35%. This means that the company reduced the proportion of long term debt in the category of total liabilities over the one year.
3. Analyze Starbucks’ method of debt financing. In your analysis, you should address both current and long-term liabilities, including the issuance of bonds.
