Solved: CASE STUDY-3 Budgeting and Performance Analysis

Assessment Instrument	Case Study 3 (Individual)
Course Name	Managerial Accounting	Course code	FIA 6001
Semester	Fall	Year	2019
Maximum Marks	15 Marks
Instructor
Case Study Due Date	30^th November, 2019
Case Study Submission Instructions	i) Case study should be submitted by electronically through Turnitin ii) Academic dishonesty of any kind is strictly prohibited iii) Case Study should be submitted by its due date as scheduled by the Course Instructor
Word or Page Limit	Theory question 500 words and for Problem all steps, answer and decision.
Presentation Format	Use the following format: •Introduction •Progress of the company • Horizontal analysis of income statement •Vertical analysis of income statement • Horizontal analysis of balance sheer • Vertical analysis of balance sheet •Performance evaluation and Conclusion •MS Word document, Times new roman , front size 12 and 1.5 line space •Referencing Use APA or MLA format (minimum 2) (Instructor provides additional guidelines and directions in class)
Resources and Support Available	College Library, Internet, Newspapers, Journals, Magazines, or other Reference Sources.
Scope of Case study Task	Budgeting and Performances Analysis
Course Learning Outcomes Assessed	Course Learning Outcomes	Marks
1.Demonstrate the knowledge of concepts, tools, practices and ethical issues in Management Accounting	2
2. Research and analyze the role of accounting information in strategy formulation and decision making	2
3. Apply Financial and non-financial techniques to make managerial decisions	6
4.Evaluate the performance of various departments of an organization and prepare performance report	5

CASE STUDY-3

Budgeting and Performance Analysis

Two recent years analytical income statements and balance sheets of Starbucks are given below.

Horizontal analysis of Starbuck's income statement:

Income Statement
All numbers in thousands			Increase (Decrease)
Revenue	10/1/2017	10/2/2016	Amount	%
Total Revenue	22,386,800	21,315,900	1,070,900.00	5.02
Cost of Revenue	9,038,200	8,511,100	527,100.00	6.19
Gross Profit	13,348,600	12,804,800	543,800.00	4.25
Operating Expenses
Research Development	-	-
Selling General and Administrative	8,440,400	7,970,300	470,100.00	5.90
Non Recurring	153,500	153,500	0.00	0.00
Others	1,011,400	980,800	30,600.00	3.12
Total Operating Expenses	-	-
Operating Income or Loss	4,134,700	4,171,900	(37,200.00)	(0.89)
Income from Continuing Operations
Total Other Income/Expenses Net	275,300	108,000	167,300.00	154.91
Earnings Before Interest and Taxes	4,410,000	4,279,900	130,100.00	3.04
Interest Expense	92,500	81,300	11,200.00	13.78
Income Before Tax	4,317,500	4,198,600	118,900.00	2.83
Income Tax Expense	1,432,600	1,379,700	52,900.00	3.83
Minority Interest	6,900	6,700	200.00	2.99
Net Income From Continuing Ops	3,276,100	3,135,900	140,200.00	4.47
Non-recurring Events
Discontinued Operations	-	-
Extraordinary Items	-	-
Effect Of Accounting Changes	-	-
Other Items	-	-
Net Income
Net Income	2,884,700	2,817,700	67,000.00	2.38
Preferred Stock And Other Adjustments	-	-
Net Income Applicable To Common Shares	2,884,700	2,817,700	67,000.00	2.38

Vertical analysis of income statement:

Income Statement
All numbers in thousands
Revenue	10/1/2017	%	10/2/2016	%
Total Revenue	22,386,800	100.00	21,315,900	100.00
Cost of Revenue	9,038,200	40.37	8,511,100	39.93
Gross Profit	13,348,600	59.63	12,804,800	60.07
Operating Expenses
Research Development	-		-
Selling General and Administrative	8,440,400	37.70	7,970,300	37.39
Non Recurring	153,500	0.69	153,500	0.72
Others	1,011,400	4.52	980,800	4.60
Total Operating Expenses	-		-
Operating Income or Loss	4,134,700	18.47	4,171,900	19.57
Income from Continuing Operations
Total Other Income/Expenses Net	275,300	1.23	108,000	0.51
Earnings Before Interest and Taxes	4,410,000	19.70	4,279,900	20.08
Interest Expense	92,500	0.41	81,300	0.38
Income Before Tax	4,317,500	19.29	4,198,600	19.70
Income Tax Expense	1,432,600	6.40	1,379,700	6.47
Minority Interest	6,900	0.03	6,700	0.03
Net Income From Continuing Ops	3,276,100	14.63	3,135,900	14.71
Non-recurring Events
Discontinued Operations	-		-
Extraordinary Items	-		-
Effect Of Accounting Changes	-		-
Other Items	-		-
Net Income
Net Income	2,884,700	12.89	2,817,700	13.22
Preferred Stock And Other Adjustments	-		-
Net Income Applicable To Common Shares	2,884,700	12.89	2,817,700	13.22

Horizontal analysis of balance sheet:

All numbers in thousands			Increase (Decrease)
Period Ending	10/1/2017	10/2/2016	Amount	%
Current Assets
Cash And Cash Equivalents	2,462,300	2,128,800	333,500.00	15.67
Short Term Investments	228,600	134,400	94,200.00	70.09
Net Receivables	870,400	768,800	101,600.00	13.22
Inventory	1,364,000	1,378,500	(14,500.00)	(1.05)
Other Current Assets	358,100	347,400	10,700.00	3.08
Total Current Assets	5,283,400	4,757,900	525,500.00	11.04
Long Term Investments	1,023,900	1,496,200	(472,300.00)	(31.57)
Property Plant and Equipment	4,919,500	4,533,800	385,700.00	8.51
Goodwill	1,539,200	1,719,600	(180,400.00)	(10.49)
Intangible Assets	441,400	516,300	(74,900.00)	(14.51)
Accumulated Amortization	-	-
Other Assets	362,800	403,300	(40,500.00)	(10.04)
Deferred Long Term Asset Charges	795,400	885,400	(90,000.00)	(10.16)
Total Assets	14,365,600	14,312,500	53,100.00	0.37
Current Liabilities
Accounts Payable	2,932,200	2,975,700	(43,500.00)	(1.46)
Short/Current Long Term Debt	-	399,900	(399,900.00)	(100.00)
Other Current Liabilities	1,288,500	1,171,200	(1,171,200.00)	(100.00)
Total Current Liabilities	4,220,700	4,546,800	(326,100.00)	(7.17)
Long Term Debt	3,932,600	3,185,300	747,300.00	23.46
Other Liabilities	755,300	689,700	65,600.00	9.51
Deferred Long Term Liability Charges	-	-
Minority Interest	6,900	6,700	200.00	2.99
Negative Goodwill	-	-
Total Liabilities	8,915,500	8,428,500	487,000.00	5.78
Stockholders' Equity
Misc. Stocks Options Warrants	-	-
Redeemable Preferred Stock	-	-
Preferred Stock	-	-
Common Stock	1,400	1,500	(100.00)	(6.67)
Retained Earnings	5,563,200	5,949,800	(386,600.00)	(6.50)
Treasury Stock	-	-
Capital Surplus	41,100	41,100	0.00	0.00
Other Stockholder Equity	-155,600	-108,400	(47,200.00)	43.54
Total Stockholder Equity	5,450,100	5,884,000	(433,900.00)	(7.37)
Net Tangible Assets	3,469,500	3,648,100	(178,600.00)	(4.90)

Vertical analysis of balance sheet:

All numbers in thousands
Period Ending	10/1/2017	%	10/2/2016	%
Current Assets
Cash And Cash Equivalents	2,462,300	17.14	2,128,800	14.87
Short Term Investments	228,600	1.59	134,400	0.94
Net Receivables	870,400	6.06	768,800	5.37
Inventory	1,364,000	9.49	1,378,500	9.63
Other Current Assets	358,100	2.49	347,400	2.43
Total Current Assets	5,283,400	36.78	4,757,900	33.24
Long Term Investments	1,023,900	7.13	1,496,200	10.45
Property Plant and Equipment	4,919,500	34.25	4,533,800	31.68
Goodwill	1,539,200	10.71	1,719,600	12.01
Intangible Assets	441,400	3.07	516,300	3.61
Accumulated Amortization	-		-
Other Assets	362,800	2.53	403,300	2.82
Deferred Long Term Asset Charges	795,400	5.54	885,400	6.19
Total Assets	14,365,600	100.00	14,312,500	100.00
Current Liabilities
Accounts Payable	2,932,200	20.41	2,975,700	20.79
Short/Current Long Term Debt	-		399,900	2.79
Other Current Liabilities	1,288,500	8.97	1,171,200	8.18
Total Current Liabilities	4,220,700	29.38	4,546,800	31.77
Long Term Debt	3,932,600	27.38	3,185,300	22.26
Other Liabilities	755,300	5.26	689,700	4.82
Deferred Long Term Liability Charges	-		-
Minority Interest	6,900	0.05	6,700	0.05
Negative Goodwill	-		-
Total Liabilities	8,915,500	62.06	8,428,500	58.89
Stockholders' Equity
Misc. Stocks Options Warrants	-		-
Redeemable Preferred Stock	-		-
Preferred Stock	-		-
Common Stock	1,400	0.01	1,500	0.01
Retained Earnings	5,563,200	38.73	5,949,800	41.57
Treasury Stock	-		-
Capital Surplus	41,100	0.29	41,100	0.29
Other Stockholder Equity	-155,600	-1.08	-108,400	-0.76
Total Stockholder Equity	5,450,100	37.94	5,884,000	41.11
Net Tangible Assets	3,469,500	24.15	3,648,100	25.49

You are required to prepare:

a) A brief introduction of Starbucks Company

b) The progress of the company in the recent years

c) Horizontal analysis of income statement of the company

d) Vertical analyses of the income statement of the company

e) Horizontal analysis of the balance sheet

f) Vertical analysis of the balance sheet

f) Performance of the company in approximately 250-500 words, summarize the findings from your horizontal and vertical analyses.

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