Solved: CASE STUDY-3 Budgeting and Performance Analysis

Assessment InstrumentCase Study 3 (Individual)
Course NameManagerial AccountingCourse codeFIA 6001
SemesterFall Year2019
Maximum Marks15 Marks
Instructor 
Case Study Due Date30th November, 2019
Case Study Submission Instructionsi) 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 LimitTheory question 500 words   and for Problem all steps, answer and decision.
        Presentation FormatUse 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 AvailableCollege Library, Internet, Newspapers, Journals, Magazines, or other Reference Sources.
Scope of Case study  TaskBudgeting and Performances Analysis
        Course Learning Outcomes AssessedCourse Learning OutcomesMarks
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 decisions6
4.Evaluate the performance of various departments of an organization and prepare performance report5
     

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)
Revenue10/1/201710/2/2016Amount%
Total Revenue22,386,80021,315,9001,070,900.005.02
Cost of Revenue9,038,2008,511,100527,100.006.19
Gross Profit13,348,60012,804,800543,800.004.25
Operating Expenses    
Research Development  
Selling General and Administrative8,440,4007,970,300470,100.005.90
Non Recurring153,500153,5000.000.00
Others1,011,400980,80030,600.003.12
Total Operating Expenses  
Operating Income or Loss4,134,7004,171,900(37,200.00)(0.89)
Income from Continuing Operations  
Total Other Income/Expenses Net275,300108,000167,300.00154.91
Earnings Before Interest and Taxes4,410,0004,279,900130,100.003.04
Interest Expense92,50081,30011,200.0013.78
Income Before Tax4,317,5004,198,600118,900.002.83
Income Tax Expense1,432,6001,379,70052,900.003.83
Minority Interest6,9006,700200.002.99
Net Income From Continuing Ops3,276,1003,135,900140,200.004.47
Non-recurring Events  
Discontinued Operations  
Extraordinary Items  
Effect Of Accounting Changes  
Other Items  
Net Income  
Net Income2,884,7002,817,70067,000.002.38
Preferred Stock And Other Adjustments  
Net Income Applicable To Common Shares2,884,7002,817,70067,000.002.38

Vertical analysis of income statement:

Income Statement    
All numbers in thousands    
Revenue10/1/2017%10/2/2016%
Total Revenue22,386,800100.0021,315,900100.00
Cost of Revenue9,038,20040.378,511,10039.93
Gross Profit13,348,60059.6312,804,80060.07
Operating Expenses    
Research Development  
Selling General and Administrative8,440,40037.707,970,30037.39
Non Recurring153,5000.69153,5000.72
Others1,011,4004.52980,8004.60
Total Operating Expenses  
Operating Income or Loss4,134,70018.474,171,90019.57
Income from Continuing Operations 
Total Other Income/Expenses Net275,3001.23108,0000.51
Earnings Before Interest and Taxes4,410,00019.704,279,90020.08
Interest Expense92,5000.4181,3000.38
Income Before Tax4,317,50019.294,198,60019.70
Income Tax Expense1,432,6006.401,379,7006.47
Minority Interest6,9000.036,7000.03
Net Income From Continuing Ops3,276,10014.633,135,90014.71
Non-recurring Events 
Discontinued Operations  
Extraordinary Items  
Effect Of Accounting Changes  
Other Items  
Net Income 
Net Income2,884,70012.892,817,70013.22
Preferred Stock And Other Adjustments  
Net Income Applicable To Common Shares2,884,70012.892,817,70013.22

Horizontal analysis of balance sheet:

All numbers in thousands  Increase (Decrease) 
Period Ending10/1/201710/2/2016Amount%
Current Assets  
Cash And Cash Equivalents2,462,3002,128,800333,500.0015.67
Short Term Investments228,600134,40094,200.0070.09
Net Receivables870,400768,800101,600.0013.22
Inventory1,364,0001,378,500(14,500.00)(1.05)
Other Current Assets358,100347,40010,700.003.08
Total Current Assets5,283,4004,757,900525,500.0011.04
Long Term Investments1,023,9001,496,200(472,300.00)(31.57)
Property Plant and Equipment4,919,5004,533,800385,700.008.51
Goodwill1,539,2001,719,600(180,400.00)(10.49)
Intangible Assets441,400516,300(74,900.00)(14.51)
Accumulated Amortization  
Other Assets362,800403,300(40,500.00)(10.04)
Deferred Long Term Asset Charges795,400885,400(90,000.00)(10.16)
Total Assets14,365,60014,312,50053,100.000.37
Current Liabilities  
Accounts Payable2,932,2002,975,700(43,500.00)(1.46)
Short/Current Long Term Debt399,900(399,900.00)(100.00)
Other Current Liabilities1,288,5001,171,200(1,171,200.00)(100.00)
Total Current Liabilities4,220,7004,546,800(326,100.00)(7.17)
Long Term Debt3,932,6003,185,300747,300.0023.46
Other Liabilities755,300689,70065,600.009.51
Deferred Long Term Liability Charges  
Minority Interest6,9006,700200.002.99
Negative Goodwill  
Total Liabilities8,915,5008,428,500487,000.005.78
Stockholders’ Equity  
Misc. Stocks Options Warrants  
Redeemable Preferred Stock  
Preferred Stock  
Common Stock1,4001,500(100.00)(6.67)
Retained Earnings5,563,2005,949,800(386,600.00)(6.50)
Treasury Stock  
Capital Surplus41,10041,1000.000.00
Other Stockholder Equity-155,600-108,400(47,200.00)43.54
Total Stockholder Equity5,450,1005,884,000(433,900.00)(7.37)
Net Tangible Assets3,469,5003,648,100(178,600.00)(4.90)

Vertical analysis of balance sheet:

All numbers in thousands    
Period Ending10/1/2017%10/2/2016%
Current Assets 
Cash And Cash Equivalents2,462,30017.142,128,80014.87
Short Term Investments228,6001.59134,4000.94
Net Receivables870,4006.06768,8005.37
Inventory1,364,0009.491,378,5009.63
Other Current Assets358,1002.49347,4002.43
Total Current Assets5,283,40036.784,757,90033.24
Long Term Investments1,023,9007.131,496,20010.45
Property Plant and Equipment4,919,50034.254,533,80031.68
Goodwill1,539,20010.711,719,60012.01
Intangible Assets441,4003.07516,3003.61
Accumulated Amortization  
Other Assets362,8002.53403,3002.82
Deferred Long Term Asset Charges795,4005.54885,4006.19
Total Assets14,365,600100.0014,312,500100.00
Current Liabilities 
Accounts Payable2,932,20020.412,975,70020.79
Short/Current Long Term Debt 399,9002.79
Other Current Liabilities1,288,5008.971,171,2008.18
Total Current Liabilities4,220,70029.384,546,80031.77
Long Term Debt3,932,60027.383,185,30022.26
Other Liabilities755,3005.26689,7004.82
Deferred Long Term Liability Charges  
Minority Interest6,9000.056,7000.05
Negative Goodwill  
Total Liabilities8,915,50062.068,428,50058.89
Stockholders’ Equity 
Misc. Stocks Options Warrants  
Redeemable Preferred Stock  
Preferred Stock  
Common Stock1,4000.011,5000.01
Retained Earnings5,563,20038.735,949,80041.57
Treasury Stock  
Capital Surplus41,1000.2941,1000.29
Other Stockholder Equity-155,600-1.08-108,400-0.76
Total Stockholder Equity5,450,10037.945,884,00041.11
Net Tangible Assets3,469,50024.153,648,10025.49

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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