1 111 ANNUAL REPORT ANALYSIS PROJECT (100 PTS.) DUE DATE: Thursday, June 17 (by 11:59 P.M.) PURPOSE: Working within a team, analyze the financial condition and performance of a corporation using several financial analysis techniques. This project will enable you to make a judgement about the liquidity, profitability, solvency and investment worthiness of the Starbucks Corporation. You can access your team's "Group Home Page" in Canvas by clicking on the following menu items in Canvas: . People . Starbucks Analysis Teams The icon (3 vertical dots) to the right of your Team # . Visit Group Home Page . Discussions TASKS: STEP #1: Print out the "Consolidated Balance Sheets", the "Consolidated Statements of Earnings and the "Consolidated Statements of Cash Flows" of the Starbucks Corporation for the years of 2019 and 2020. The annual reports for 2019 and 2020 can be found at this website. The financial statements for 2020 can be found on pgs. 47-50 of the 2020 annual report and the financial statements for 2019 can be found on pgs. 44 - 47 of the 2019 annual report. STEP #2: (15 pts.) Complete a "Horizontal Analysis of the Starbucks Corporation's Consolidated Balance Sheets and Consolidated Statements of Earnings. Use 2020 as the "Analysis Period" and 2019 as the "Base Period" (the terms "analysis period" and "base period" are explained in Chapter 13 of your textbook). Use Word or Excel to complete this horizontal analysis. Provide an analysis of what your horizontal analysis reveals about the Starbucks Corporation's financial position and profitability. EXAMPLE (See pg. 500 of your textbook) APPLE INC. Comparative Year End Balance Sheet Current Prior $ millions Dollar Change Percent Change Assets Cash and cash equivalents $ 20,484 $ (195) (1.07% $ 20,289 53,892 Short-term marketable securities 46,671 7,221 15.5 17,874 15,754 2,120 13.5 Accounts receivable, net Inventories ... 4,855 2,132 2,723 127.7 Vendor non-trade receivables 17.799 13,545 4.254 31.4 Other current assets 13,936 8,283 68.2 5,653 21,776 128,645 106,869 20.4 24,284 14.2 194,714 33,783 170,430 27,010 6,773 25.1 Total current assets Long-term marketable securities Property, plant and equipment, net Goodwill.. Acquired intangible assets, net Other non-current assets Total assets 5,717 5,414 303 5.6 2,298 3.206 (28.3) 10.162 (908) 1.405 $53,633 8,757 $321,686 16.0 $375,319 16.7 $ 49.049 $ 37,294 $11.755 31.5% = = ! 25,744 22,027 3,717 Liabilities Accounts payable Accrued expenses Deferred revenue Commercial paper Current portion of long term debt 16.9 7,548 8,080 (532) (6.6) 11,977 8,105 3,872 47.8 3,500 85.6 6.496 100,814 2,996 21,808 Total current liabilities 79,006 27.6 Deferred revenue-non-current. 2,836 2,930 (94) (3.2) 97,207 75,427 28.9 21,780 4,341 40,415 12.0 36,074 193,437 241,272 47,835 24.7 Long term debt Other non-current liabilities Total Liabilities...... Stockholders' Equity Common stock Retained earnings Accumulated other comprehensive income Total stockholders' equity... Total liabilities and stockholders' equity 35,867 31,251 4,616 14.8 98,330 96,364 1,966 2.0 634 (150 134,047 $375,319 (784) 5,798 $53,633 128,249 $321,686 4.5 16.7 APPLE INC. Comparative Income Statements Current Yr Prior Yr $ millions, except per share Dollar Change Percent Change $13,595 6.3% $215.639 131,376 9,672 7.4 84.263 3,923 4.7 10.045 1,536 15.3 7.5 $229,234 141,048 88,186 11,581 15,261 26,842 61,344 2.745 64,089 15,738 Net sales Cost of sales Gross margin Research and development Selling, general and administrative Total operating expenses Operating income. Other income, net Income before provision for income taxes Provision for income taxes Net income Basic earnings por share Diluted earnings per share. 14,194 24,239 60,024 1,067 2,603 1,320 10.7 2.2 103 1,397 2,717 4.4 0.3 1,348 61,372 15,685 $ 45,687 $ 8.35 $ 8.31 53 2.664 5.8 $ 48,351 $ 9.27 $ 9.21 11.0 0.92 $ 0.90 10.8 "POOR/FAIR ANALYSIS EXAMPLE Cash decreased by $195 from 2019 to 2020. Total Assets were 16.7% higher in 2020 than 2019. Liabilities increased by 24.7% from 2019 to 2020. Net income increased by 5.8% from 2019 to 2020. "GOOD/EXCELLENT" ANALYSIS EXAMPLE Cash decreased by $195 from 2019 to 2020 due to the company's increased investment in short-term marketable securities and their buildup of inventory. The buildup of inventory seemed necessary as Net Sales increased by 6.3%. Operating Income increased by only 2.2% as the company seemed to have trouble controlling its operating expenses which increased by 10.7%. Further expansion may not be advisable until the operating expenses can be controlled. Long-term Debt increased by 28.9% and Long-Term Marketable Securities increased by 14.2%. A favorable stock market and low interest rates on long-term debt may have the company adopting the strategy of borrowing capital and then investing that capital in stock. STEP #3: (15 pts.) Complete a "Vertical Analysis" of the Starbucks Corporation's Consolidated Balance Sheets and Consolidated Statements of Earnings for both 2019 and 2020. Provide an analysis of what your vertical analysis reveals about Starbucks Corporation's financial position and profitability. EXAMPLE (See pgs. 503-504 in your textbook) APPLE INC Common-Sire Comparative Year-End Balance Sheets Common-Size Percents S millions Current Prior Current Y Prior Assets $ 20,289 $ 20.484 5.4% 6.4% 53,892 46,671 14.4 14.5 Cash and cash equivalents Short term marketable securities Accounts receivable, net. Inventories... Vendor non-trade receivables 17,874 15,754 4.8 4.9 4,855 2,132 1.3 0.7 17.799 13,545 4.7 42 Other current assets 13,936 8,283 3.7 34.3 2.6 33.2 Total current assets 128,615 106,869 194,714 170,430 51.9 53.0 Long-term marketable securities Property, plant and equipment, net 33,783 27,010 9.0 8.4 Goodwill 5,717 5,414 1.5 1.7 Acquired intangible assets, net. 2.298 3,206 0.6 1.0 Other non-current assets. 10,162 8,757 2.7 2.7 Total assets $375,319 $321.686 100.0% 100.0% Liabilities 9926733 SSA3994333 23 ago Ji $9239 |B2:29 || 1 5 1 21:33 93 a 3 ay all Accounts payable. $ 49,049 $ 37.294 11.6% Accrued expenses 25,744 22,027 6.9 6.B 7,548 8,080 2.0 2.5 11,977 8,105 3.2 2.5 6,496 3,500 1.7 1.1 100,814 79,006 26.9 24.6 Deferred revenue..... Commercial paper Current portion of long-term debt Total current liabilities Deferred revenuenonkurrent Long-term debt........ Other non-current liabilties Total Liabilities... 2,836 2,930 0.8 0.9 97,207 75,427 25.9 23.4 40,415 36,074 10.8 11.2 241,272 193,437 64.3 60.1 35,867 31,251 9.6 9.7 98.330 96,364 26.2 30.0 Stockholders' Equity Common stock Retained earings. Accumulated other comprehensive income Total stockholders' equity Total abilities and stockholders' equity...... 634 (150) 134,047 $375,319 0.0 35.7 0.2 39.9 128,249 $321,686 100.0% 100.0% *Percents are rounded to lenthes and thus may not exactly sum to totals and subtotals APPLE INC. Common-Size Comparative Income Statements Common-Size Percents $ millions Current Yr Prior Yr Current YT Prior Yr Net sales $229,234 100.0% 100.0% 141,048 $215,639 131,376 84,263 61.5 Cost of sales Gross margin. 60.9 88,186 38.5 39.1 10,045 5.1 4.7 11,581 15,261 26,842 6.7 6.6 14,194 24,239 60,024 Research and development Selling, general and administrative Total operating expenses Operating income Other income, net..... Income before provision for income taxes 11.2 11.7 26.8 61,344 27.8 2,745 1.2 0.6 64,089 1,348 61,372 15,685 28.0 28.5 Provision for income taxes. 15,738 6.9 7.3 21.2% Net income 48,351 45,687 21.1% *Percents are rounded to tenths and thus may not exactly sum to totals and subtotals. STEP #4: (10 pts.) Calculate the following Liquidity and Efficiency ratios for the Starbucks Corporation for both 2019 and 2020. Provide an analysis of what these ratios reveal about the Starbucks Corporaton's liquidity and efficiency. (See pgs. 506 - 508 of your textbook) Current Ratio Acid-Test Ratio Accounts Receivable Turnover Inventory Turnover Days' Sales Uncollected Total Asset Turnover "POOR/FAIR" ANALYSIS EXAMPLE TIE LUITEn lalu was rhyrEI II ZUZU ular 2019. THE ALCULINIS KELEIVavie IUITUVEI was lower in 2020 than 2019. The company sold its inventory at a faster pace in 2020 than 2019. "GOOD/EXCELLENT" ANALYSIS EXAMPLE The current ratio was higher in 2020 than 2019 due to increases in cash and accounts receivable. These increases were directly related to the increased net income generated by the company. The "cash flow from operations" on the Statement of Cash Flows increased from 2019 to 2020 accounting for the increase in the cash account The increase in accounts receivable is directly related to the increase in revenues on the Income Statement. Revenues increased by 10% with the Accounts Receivable account increasing by 8% from 2019 to 2020. This increase in liquidity enabled the company to pay off a large portion of its long-term debt which is reflected in the Statement of Cash Flows in the Financing Section STEP #5: (10 pts.) Calculate the following Solvency ratios for the Starbucks Corporation for both 2019 and 2020. Provide an analysis of what these ratios reveal about the Starbucks Corporation's ability to meet its long-term obligations. (See pgs. 508-509 in your textbook). Debt to Equity Ratio Times Interest Earned STEP #6: (10 pts.) Calculate the following Profitability ratios for the Starbucks Corporation for both 2019 and 2020. Provide an analysis of what these ratios reveal about the Starbucks Corporation's ability to earn profit. (See pgs. 509-510 in your textbook) Profit Margin Return on Total Assets Return on Common Stockholder's Equity Step #7: (10 pts.) Calculate the following Market Prospect ratios for the Starbucks Corporation for both 2019 and 2020. Provide an analysis of what these ratios reveal about the Starbucks Corporation's market performance. Comment on whether or not you would recommend that investors purchase Starbucks stock. Why? Why not? (See pg. 510 of your textbook) Price-Earnings Ratio (You can find the stock prices here) Dividend Yield PARTICIPATION: (30 pts.) I'll assign these points by looking at the activity on each team's discussion board and in the "comment history" on each team's GoogleDoc. If you use another means of communication (facebook messenger, etc...) please leave me a note on your team's homepage detailing who participated. 1 111 ANNUAL REPORT ANALYSIS PROJECT (100 PTS.) DUE DATE: Thursday, June 17 (by 11:59 P.M.) PURPOSE: Working within a team, analyze the financial condition and performance of a corporation using several financial analysis techniques. This project will enable you to make a judgement about the liquidity, profitability, solvency and investment worthiness of the Starbucks Corporation. You can access your team's "Group Home Page" in Canvas by clicking on the following menu items in Canvas: . People . Starbucks Analysis Teams The icon (3 vertical dots) to the right of your Team # . Visit Group Home Page . Discussions TASKS: STEP #1: Print out the "Consolidated Balance Sheets", the "Consolidated Statements of Earnings and the "Consolidated Statements of Cash Flows" of the Starbucks Corporation for the years of 2019 and 2020. The annual reports for 2019 and 2020 can be found at this website. The financial statements for 2020 can be found on pgs. 47-50 of the 2020 annual report and the financial statements for 2019 can be found on pgs. 44 - 47 of the 2019 annual report. STEP #2: (15 pts.) Complete a "Horizontal Analysis of the Starbucks Corporation's Consolidated Balance Sheets and Consolidated Statements of Earnings. Use 2020 as the "Analysis Period" and 2019 as the "Base Period" (the terms "analysis period" and "base period" are explained in Chapter 13 of your textbook). Use Word or Excel to complete this horizontal analysis. Provide an analysis of what your horizontal analysis reveals about the Starbucks Corporation's financial position and profitability. EXAMPLE (See pg. 500 of your textbook) APPLE INC. Comparative Year End Balance Sheet Current Prior $ millions Dollar Change Percent Change Assets Cash and cash equivalents $ 20,484 $ (195) (1.07% $ 20,289 53,892 Short-term marketable securities 46,671 7,221 15.5 17,874 15,754 2,120 13.5 Accounts receivable, net Inventories ... 4,855 2,132 2,723 127.7 Vendor non-trade receivables 17.799 13,545 4.254 31.4 Other current assets 13,936 8,283 68.2 5,653 21,776 128,645 106,869 20.4 24,284 14.2 194,714 33,783 170,430 27,010 6,773 25.1 Total current assets Long-term marketable securities Property, plant and equipment, net Goodwill.. Acquired intangible assets, net Other non-current assets Total assets 5,717 5,414 303 5.6 2,298 3.206 (28.3) 10.162 (908) 1.405 $53,633 8,757 $321,686 16.0 $375,319 16.7 $ 49.049 $ 37,294 $11.755 31.5% = = ! 25,744 22,027 3,717 Liabilities Accounts payable Accrued expenses Deferred revenue Commercial paper Current portion of long term debt 16.9 7,548 8,080 (532) (6.6) 11,977 8,105 3,872 47.8 3,500 85.6 6.496 100,814 2,996 21,808 Total current liabilities 79,006 27.6 Deferred revenue-non-current. 2,836 2,930 (94) (3.2) 97,207 75,427 28.9 21,780 4,341 40,415 12.0 36,074 193,437 241,272 47,835 24.7 Long term debt Other non-current liabilities Total Liabilities...... Stockholders' Equity Common stock Retained earnings Accumulated other comprehensive income Total stockholders' equity... Total liabilities and stockholders' equity 35,867 31,251 4,616 14.8 98,330 96,364 1,966 2.0 634 (150 134,047 $375,319 (784) 5,798 $53,633 128,249 $321,686 4.5 16.7 APPLE INC. Comparative Income Statements Current Yr Prior Yr $ millions, except per share Dollar Change Percent Change $13,595 6.3% $215.639 131,376 9,672 7.4 84.263 3,923 4.7 10.045 1,536 15.3 7.5 $229,234 141,048 88,186 11,581 15,261 26,842 61,344 2.745 64,089 15,738 Net sales Cost of sales Gross margin Research and development Selling, general and administrative Total operating expenses Operating income. Other income, net Income before provision for income taxes Provision for income taxes Net income Basic earnings por share Diluted earnings per share. 14,194 24,239 60,024 1,067 2,603 1,320 10.7 2.2 103 1,397 2,717 4.4 0.3 1,348 61,372 15,685 $ 45,687 $ 8.35 $ 8.31 53 2.664 5.8 $ 48,351 $ 9.27 $ 9.21 11.0 0.92 $ 0.90 10.8 "POOR/FAIR ANALYSIS EXAMPLE Cash decreased by $195 from 2019 to 2020. Total Assets were 16.7% higher in 2020 than 2019. Liabilities increased by 24.7% from 2019 to 2020. Net income increased by 5.8% from 2019 to 2020. "GOOD/EXCELLENT" ANALYSIS EXAMPLE Cash decreased by $195 from 2019 to 2020 due to the company's increased investment in short-term marketable securities and their buildup of inventory. The buildup of inventory seemed necessary as Net Sales increased by 6.3%. Operating Income increased by only 2.2% as the company seemed to have trouble controlling its operating expenses which increased by 10.7%. Further expansion may not be advisable until the operating expenses can be controlled. Long-term Debt increased by 28.9% and Long-Term Marketable Securities increased by 14.2%. A favorable stock market and low interest rates on long-term debt may have the company adopting the strategy of borrowing capital and then investing that capital in stock. STEP #3: (15 pts.) Complete a "Vertical Analysis" of the Starbucks Corporation's Consolidated Balance Sheets and Consolidated Statements of Earnings for both 2019 and 2020. Provide an analysis of what your vertical analysis reveals about Starbucks Corporation's financial position and profitability. EXAMPLE (See pgs. 503-504 in your textbook) APPLE INC Common-Sire Comparative Year-End Balance Sheets Common-Size Percents S millions Current Prior Current Y Prior Assets $ 20,289 $ 20.484 5.4% 6.4% 53,892 46,671 14.4 14.5 Cash and cash equivalents Short term marketable securities Accounts receivable, net. Inventories... Vendor non-trade receivables 17,874 15,754 4.8 4.9 4,855 2,132 1.3 0.7 17.799 13,545 4.7 42 Other current assets 13,936 8,283 3.7 34.3 2.6 33.2 Total current assets 128,615 106,869 194,714 170,430 51.9 53.0 Long-term marketable securities Property, plant and equipment, net 33,783 27,010 9.0 8.4 Goodwill 5,717 5,414 1.5 1.7 Acquired intangible assets, net. 2.298 3,206 0.6 1.0 Other non-current assets. 10,162 8,757 2.7 2.7 Total assets $375,319 $321.686 100.0% 100.0% Liabilities 9926733 SSA3994333 23 ago Ji $9239 |B2:29 || 1 5 1 21:33 93 a 3 ay all Accounts payable. $ 49,049 $ 37.294 11.6% Accrued expenses 25,744 22,027 6.9 6.B 7,548 8,080 2.0 2.5 11,977 8,105 3.2 2.5 6,496 3,500 1.7 1.1 100,814 79,006 26.9 24.6 Deferred revenue..... Commercial paper Current portion of long-term debt Total current liabilities Deferred revenuenonkurrent Long-term debt........ Other non-current liabilties Total Liabilities... 2,836 2,930 0.8 0.9 97,207 75,427 25.9 23.4 40,415 36,074 10.8 11.2 241,272 193,437 64.3 60.1 35,867 31,251 9.6 9.7 98.330 96,364 26.2 30.0 Stockholders' Equity Common stock Retained earings. Accumulated other comprehensive income Total stockholders' equity Total abilities and stockholders' equity...... 634 (150) 134,047 $375,319 0.0 35.7 0.2 39.9 128,249 $321,686 100.0% 100.0% *Percents are rounded to lenthes and thus may not exactly sum to totals and subtotals APPLE INC. Common-Size Comparative Income Statements Common-Size Percents $ millions Current Yr Prior Yr Current YT Prior Yr Net sales $229,234 100.0% 100.0% 141,048 $215,639 131,376 84,263 61.5 Cost of sales Gross margin. 60.9 88,186 38.5 39.1 10,045 5.1 4.7 11,581 15,261 26,842 6.7 6.6 14,194 24,239 60,024 Research and development Selling, general and administrative Total operating expenses Operating income Other income, net..... Income before provision for income taxes 11.2 11.7 26.8 61,344 27.8 2,745 1.2 0.6 64,089 1,348 61,372 15,685 28.0 28.5 Provision for income taxes. 15,738 6.9 7.3 21.2% Net income 48,351 45,687 21.1% *Percents are rounded to tenths and thus may not exactly sum to totals and subtotals. STEP #4: (10 pts.) Calculate the following Liquidity and Efficiency ratios for the Starbucks Corporation for both 2019 and 2020. Provide an analysis of what these ratios reveal about the Starbucks Corporaton's liquidity and efficiency. (See pgs. 506 - 508 of your textbook) Current Ratio Acid-Test Ratio Accounts Receivable Turnover Inventory Turnover Days' Sales Uncollected Total Asset Turnover "POOR/FAIR" ANALYSIS EXAMPLE TIE LUITEn lalu was rhyrEI II ZUZU ular 2019. THE ALCULINIS KELEIVavie IUITUVEI was lower in 2020 than 2019. The company sold its inventory at a faster pace in 2020 than 2019. "GOOD/EXCELLENT" ANALYSIS EXAMPLE The current ratio was higher in 2020 than 2019 due to increases in cash and accounts receivable. These increases were directly related to the increased net income generated by the company. The "cash flow from operations" on the Statement of Cash Flows increased from 2019 to 2020 accounting for the increase in the cash account The increase in accounts receivable is directly related to the increase in revenues on the Income Statement. Revenues increased by 10% with the Accounts Receivable account increasing by 8% from 2019 to 2020. This increase in liquidity enabled the company to pay off a large portion of its long-term debt which is reflected in the Statement of Cash Flows in the Financing Section STEP #5: (10 pts.) Calculate the following Solvency ratios for the Starbucks Corporation for both 2019 and 2020. Provide an analysis of what these ratios reveal about the Starbucks Corporation's ability to meet its long-term obligations. (See pgs. 508-509 in your textbook). Debt to Equity Ratio Times Interest Earned STEP #6: (10 pts.) Calculate the following Profitability ratios for the Starbucks Corporation for both 2019 and 2020. Provide an analysis of what these ratios reveal about the Starbucks Corporation's ability to earn profit. (See pgs. 509-510 in your textbook) Profit Margin Return on Total Assets Return on Common Stockholder's Equity Step #7: (10 pts.) Calculate the following Market Prospect ratios for the Starbucks Corporation for both 2019 and 2020. Provide an analysis of what these ratios reveal about the Starbucks Corporation's market performance. Comment on whether or not you would recommend that investors purchase Starbucks stock. Why? Why not? (See pg. 510 of your textbook) Price-Earnings Ratio (You can find the stock prices here) Dividend Yield PARTICIPATION: (30 pts.) I'll assign these points by looking at the activity on each team's discussion board and in the "comment history" on each team's GoogleDoc. If you use another means of communication (facebook messenger, etc...) please leave me a note on your team's homepage detailing who participated