A friend is very interested in Starbucks as an investment.Your friend is not a business or accounting major and has asked you for help to learn more about Starbucks.Please refer to the Starbucks financial statements and supplementary data for Starbucksin Appendix A of your textbook.

REQUIRED:Briefly discuss two (2) interesting items you identified after your review of the Starbucks financial statements.

STARBUCKS CORPORATION

CONSOLIDATED STATEMENTS OF EARNINGS

(in millions, except per share data)

Fiscal Year Ended

Oct 1,

2017

Oct 2,

2016

Sep 27,

2015

Net revenues:

Company-operated stores $ 17,650.7 $ 16,844.1 $ 15,197.3

Licensed stores 2,355.0 2,154.2 1,861.9

CPG, foodservice and other 2,381.1 2,317.6 2,103.5

Total net revenues 22,386.8 21,315.9 19,162.7

Cost of sales including occupancy costs 9,038.2 8,511.1 7,787.5

Store operating expenses 6,493.3 6,064.3 5,411.1

Other operating expenses 553.8 545.4 522.4

Depreciation and amortization expenses 1,011.4 980.8 893.9

General and administrative expenses 1,393.3 1,360.6 1,196.7

Restructuring and impairments 153.5

Total operating expenses 18,643.5 17,462.2 15,811.6

Income from equity investees 391.4 318.2 249.9

Operating income 4,134.7 4,171.9 3,601.0

Gain resulting from acquisition of joint venture 390.6

Loss on extinguishment of debt (61.1)

Interest income and other, net 275.3 108.0 43.0

Interest expense (92.5) (81.3) (70.5)

Earnings before income taxes 4,317.5 4,198.6 3,903.0

Income tax expense 1,432.6 1,379.7 1,143.7

Net earnings including noncontrolling interests 2,884.9 2,818.9 2,759.3

Net earnings attributable to noncontrolling interests 0.2 1.2 1.9

Net earnings attributable to Starbucks $ 2,884.7 $ 2,817.7 $ 2,757.4

Earnings per share basic $ 1.99 $ 1.91 $ 1.84

Earnings per share diluted $ 1.97 $ 1.90 $ 1.82

Weighted average shares outstanding:

Basic 1,449.5 1,471.6 1,495.9

Diluted 1,461.5 1,486.7 1,513.4

STARBUCKS CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions)

Fiscal Year Ended

Oct 1,

2017

Oct 2,

2016

Sep 27,

2015

Net earnings including noncontrolling interests $ 2,884.9 $ 2,818.9 $ 2,759.3

Other comprehensive income/(loss), net of tax:

Unrealized holding gains/(losses) on available-for-sale securities (9.5) 3.5 1.4

Tax (expense)/benefit 2.9 (1.3) (0.5)

Unrealized gains/(losses) on cash flow hedging instruments 53.2 (109.6) 47.6

Tax (expense)/benefit (12.6) 27.5 (16.8)

Unrealized gains/(losses) on net investment hedging instruments 20.1 4.3

Tax (expense)/benefit (7.4) (1.6)

Translation adjustment and other (38.3) 85.5 (222.7)

Tax (expense)/benefit (2.4) 19.0 6.0

Reclassification adjustment for net (gains)/losses realized in net

earnings for available-for-sale securities, hedging instruments, and

translation adjustment (67.2) 78.2 (65.9)

Tax expense/(benefit) 14.0 (11.8) 23.5

Other comprehensive income/(loss) (47.2) 91.0 (224.7)

Comprehensive income including noncontrolling interests 2,837.7 2,909.9 2,534.6

Comprehensive income/(loss) attributable to noncontrolling interests 0.2 1.2 (29.2)

Comprehensive income attributable to Starbucks $ 2,837.5 $ 2,908.7 $ 2,563.8

STARBUCKS CORPORATION

CONSOLIDATED BALANCE SHEETS

(in millions, except per share data)

Oct 1,

2017

Oct 2,

2016

ASSETS

Current assets:

Cash and cash equivalents $ 2,462.3 $ 2,128.8

Short-term investments 228.6 134.4

Accounts receivable, net 870.4 768.8

Inventories 1,364.0 1,378.5

Prepaid expenses and other current assets 358.1 347.4

Total current assets 5,283.4 4,757.9

Long-term investments 542.3 1,141.7

Equity and cost investments 481.6 354.5

Property, plant and equipment, net 4,919.5 4,533.8

Deferred income taxes, net 795.4 885.4

Other long-term assets 362.8 403.3

Other intangible assets 441.4 516.3

Goodwill 1,539.2 1,719.6

TOTAL ASSETS $ 14,365.6 $ 14,312.5

LIABILITIES AND EQUITY

Current liabilities:

Accounts payable $ 782.5 $ 730.6

Accrued liabilities 1,934.5 1,999.1

Insurance reserves 215.2 246.0

Stored value card liability 1,288.5 1,171.2

Current portion of long-term debt 399.9

Total current liabilities 4,220.7 4,546.8

Long-term debt 3,932.6 3,185.3

Other long-term liabilities 755.3 689.7

Total liabilities 8,908.6 8,421.8

Shareholders' equity:

Common stock ($0.001 par value) authorized, 2,400.0 shares; issued and

outstanding, 1,431.6 and 1,460.5 shares, respectively 1.4 1.5

Additional paid-in capital 41.1 41.1

Retained earnings 5,563.2 5,949.8

Accumulated other comprehensive loss (155.6) (108.4)

Total shareholders' equity 5,450.1 5,884.0

Noncontrolling interests 6.9 6.7

Total equity 5,457.0 5,890.7

TOTAL LIABILITIES AND EQUITY $ 14,365.6 $ 14,312.5