MBA530 Southern New Starbucks 2017 & 2018 Financial Statement Analysis
There are two summative assessments for this course. For your first assessment, you will be objectively assessed by your completion of a series ofMyAccountingLab homework assignments throughout the course. These will measure your understanding of how to communicate the financial performance ofcompanies and how to prepare basic financial statements.For your final project, you will complete a financial analysis of a particular company’s financial statements. You will assume the role of an analyst in a fictionalcompany that is looking to glean what it can from the methods and business decisions used at this company. In determining the overall financial health of thecompany, you will demonstrate an understanding of both the financial calculations that go into financial statements as well as the meaning behind the numbers.Basic accounting skills and knowledge are critical to effective management in today’s business environment. Future business leaders need an understanding ofthe process and rules related to creating financial accounting statements and the meanings behind their individual components in order to make informedbusiness decisions. To demonstrate these skills, you will need to analyze this accounting information in terms of a company’s performance and financial healthwithin its industry. This will ultimately help develop your skills as a business leader who is better prepared to manage effectively and make informedmanagement decisions.This final project addresses the following course outcomes: Analyze the financial condition of companies by accurately interpreting basic financial information used for informing business decisions Determine the importance of accounting regulations and reporting requirements in the preparation of financial reports Conduct basic financial analysis that accurately utilizes horizontal, vertical, and ratio techniques to determine the overall financial health of companiesThe project is divided into three milestones, which will be submitted at various points throughout the course to scaffold learning and ensure quality finalsubmissions. These milestones will be submitted in Modules Four, Six, and Eight. Your final submission, the financial analysis, will be submitted in Module Ten.PromptYou are an analyst for Coffee Connection, a coffee shop located in the Midwest. You have been marginally successful as a company. You are now tasked withanalyzing the competition and developing benchmarks for the purpose of both improving profitability and expanding operations. You have identified Starbucks asyour most similar competitor. Your job now is to use multiple tools to analyze Starbucks’ performance and offer well-researched observations concerning thesuccess and challenges faced by Starbucks. You should include an Excel spreadsheet with all calculations.Specifically the following critical elements must be addressed:I. Introduction: Provide a concise, professional introduction explaining the purpose of your analysis to your executive.II. Horizontal and Vertical Analysis: In this section, you will conduct horizontal and vertical analyses for the balance sheet and income statement accountsand report any significant observations for a two-year period. You should include a table of your calculations as an appendix to your analysis. Include allcalculations in an Excel document. Specifically discuss the following categories:A. Accounts Receivable:1. Use basic financial analysis to examine any horizontal changes in Starbucks’ accounts receivable balances over time.2. Use basic financial analysis to examine any vertical changes in Starbucks’ accounts receivable balances over time.3. Analyze how Starbucks’ methods for accounting for receivables and evaluating uncollectible receivables impact the recording process andpresentation of financial statements. In other words, what are this company’s methods for accounting for receivables and evaluatinguncollectible receivables, and how do those affect how financial information is communicated?B. Asset Acquisition, Depreciation, and Amortization:1. Use basic financial analysis to examine any horizontal changes in Starbucks’ fixed assets, intangible assets, depreciation, and amortizationover time.2. Use basic financial analysis to examine any vertical changes in Starbucks’ fixed assets, intangible assets, depreciation, and amortizationover time.3. Analyze Starbucks’ methods for fixed asset and intangible asset acquisitions as well as depreciation and amortization, including assetcategorization. How do these methods affect the balance sheet, income statement, and statement of cash flows?C. Debt Financing1. Use basic financial analysis to examine any horizontal changes in Starbucks’ short- and long-term debt over time.2. Use basic financial analysis to examine any vertical changes in Starbucks’ short- and long-term debt over time.3. Analyze Starbucks’ method of debt financing. In your analysis, you should address both current and long-term liabilities, including theissuance of bonds.III. Ratio Analysis: Analyze and discuss the financial performance of Starbucks using financial ratios. Include your calculations and amounts in a table in theappendix of your paper. Be sure to show your calculation for each ratio.A. Liquidity Ratios1. Accurately present and calculate two liquidity ratios for Starbucks.2. Discuss what the liquidity ratios reveal about Starbucks, including any description of benchmarks, standard measurements, or other typesof analysis used once the ratio amount is known.B. Solvency Ratios1. Accurately present and calculate two solvency ratios for Starbucks.2. Discuss what the solvency ratios reveal about the company, including any description of benchmarks, standard measurements, or othertypes of analysis used once the ratio amounts are known.C. Profitability Ratios1. Accurately present and calculate two profitability ratios for Starbucks.2. Discuss what the profitability ratios reveal about the company, including any description of benchmarks, standard measurements, orother types of analysis used once the ratio amounts are known.IV. Rules of Financial Reporting: Consider the following governmental and GAAP reporting requirements for what is mandated that Starbucks include in itsfinancial statements:A. Why is the reporting of control procedures required, and what information is disclosed about Starbucks’ control procedures? Justify your response.B. Why is the reporting of segment information required, and what information is disclosed about Starbucks’ segment information? Justify yourresponse.C. Why is the reporting of estimates and assumptions required, and what information is disclosed about Starbucks’ reporting of estimates andassumptions? Justify your response.D. Why is the reporting of investments and fair value required, and what information is disclosed about Starbucks’ investments and fair valuereporting? Justify your response.E. Why is the reporting of leases required, and what information is disclosed about Starbucks’ lease structure? Justify your response.V. Conclusion: Provide a concise, professional conclusion to your executive detailing the findings of your analysis. What can you learn from Starbucks’financial statements and performance about determining the overall health of companies? Include general suggestions for financial improvements.MilestonesMilestone One: Horizontal and Vertical Analysis: Accounts Receivable, Fixed Assets, and Debt FinancingIn Module Four, you will submit both a horizontal and vertical analysis of Starbucks’ accounts receivable, fixed assets, and debt financing. Use basic financialanalysis to examine any horizontal and any vertical changes in Starbucks’ accounts receivable, fixed assets, and debt financing balances over time. Be sure also todiscuss how Starbucks’ methods for accounting for receivables and evaluating uncollectible receivables, purchase of fixed assets, and methods of debt financingimpact the recording process and presentation of financial statements (Critical Element II). In other words, what are this company’s methods for accounting forreceivables and evaluating uncollectible receivables? What types of fixed assets are acquired, and what methods are preferred for debt financing? How do thoseaffect how financial information is communicated? Your analysis should be in the form of a 2–3-page paper. Include all calculations in an Excel document. Thismilestone is graded with the Milestone One Rubric.Milestone Two: Ratio AnalysisIn Module Six, you will submit the Ratio Analysis portion of the final project. For this milestone, you will be analyzing the financial performance of Starbucksusing the financial ratios of liquidity, solvency, and profitability (Critical Element III). Include your calculations and amounts in a table in the appendix of yourpaper. Be sure to show your calculations for each ratio. You will also discuss what each ratio and ratio category tells the user about the financial health of thecompany, including stating appropriate methods for comparison such as benchmarking and trend analysis. Your analysis should be in the form of a 2–3-pagepaper. Include all calculations in an Excel document. Note: To calculate the ratio amounts you may use the document Key Financial Ratios Explained and Set Up inExcel. This Excel document may also be used for your final project. This milestone is graded with the Milestone Two Rubric.Milestone Three: Rules of Financial ReportingIn Module Eight, you will submit the Rules of Financial Reporting component of your financial analysis (Critical Element IV). In this milestone, you will considerthe following governmental and GAAP reporting requirements for what is mandated that Starbucks include in its financial statements: Why is the reporting ofcontrol procedures required, and what information is disclosed about Starbucks’ control procedures? Why is the reporting of segment information required, andwhat information is disclosed about Starbucks’ segment information? Why is the reporting of estimates and assumptions required, and what information isdisclosed about Starbucks’ reporting of estimates and assumptions? Why is the reporting of investments and fair value required, and what information isdisclosed about Starbucks’ investments and fair value reporting? And last: Why is the reporting of leases required, and what information is disclosed aboutStarbucks’ lease structure? Justify your response to each question. This milestone should be submitted as a 2–3-page paper. This milestone is graded with theMilestone Three Rubric.Final Submission: Financial AnalysisIn Module Ten, you will submit your 10–12-page final financial analysis. It should be a complete, polished artifact containing all of the critical elements of thefinal project, including the Introduction (Critical Element I), which will be a concise, professional introduction explaining the purpose of your analysis to yourexecutive, and the Conclusion (Critical Element V), which will be a concise, professional conclusion to your executive detailing the findings of your analysis. Yourconclusion should also answer the following question: What can you learn from Starbucks’ financial statements and performance about determining the overallhealth of companies? Include general suggestions for financial improvements. Your financial analysis should reflect the incorporation of feedback gainedthroughout the course. This final submission will be graded using the Final Project Rubric.