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 | 30th 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 |
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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) |
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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.