(Stock price this week)
Name of company chosen: _________Starbucks______________________
Refer to the financial statements and notes to the financial statements. The first note, “Summary of Significant Accounting Policies,” provides information about the company’s ac-counting methods. You will also need to refer to the other notes to the financial statements and to the financial statements themselves in order to answer the following questions.
IMPORTANT: Indicate the page number on which the information was found.
1.What is the amount of the company’s current liabilities?Page 44
This year $2075.8 MilLast year $177.91 Mil
2.What is the amount of the company’s long-term liabilities?Page 44
This year $897.3 Mil Last year $924.5 mil
3. Refer to the notes to the financial statements. Does the company report any other commitments or contingent liabilities? __Yes___ If yes, provide a description of any con-
tingencies discussed.Page 42, 53
Starbucks has AROs that are associated with leasehold improvements that are required to be removed at the end of the lease. The liability is estimated based on number of assumptions requiring management’s judgment, including store closing costs, cost inflation rates and discount rates, and is accreted to its projected future value over time. Gains or losses are recognized when there is a discrepancy between the recorded ARO liability and actual amount.
4.Refer to the notes to the financial statements. Does the company disclose any off-balance-
sheet financing arrangements? __Yes_If yes, describe.Page _72____
Guarantees: Starbucks has guaranteed to repay certain Japanese yen-denominated bank loans and related interest and fees of an unconsolidated equity investee, Starbucks Japan. The guarantees will continue until the loan and the accrued interest are paid in full. These guarantees expire on 2014. The maximum exposure under the commitment as of October 2, 2011 was $1 million and is limited to the sum of unpaid principal and interest, as well as other related expenses.
5.(a) Examine the financial statements and the notes. Does the company report any capital leases? ____Yes______Page __49___
What is the amount of the capital lease obligation (liability)?Page _64____
This year _____$1.4 Mil______________Last year _______$2.6 Mil____________
(b) Refer to the notes to the financial statements. Does the company report any operat-
ing leases? __Yes______Page _52____
If yes, are these leases noncancellable? ___Yes______
What is the amount of total cash flow commitment under these operating leases? $4057.9 Mil Page_63____
What is the definition of a liability? Use complete sentences
“Probable Future Sacrifices of Economic Benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events.”
Even though they are not recorded as liabilities, do these operating leases seem to meet the defini-tion of a liability? Explain. Use complete sentences.
These operating leases result in a future obligation for Starbucks to transfer cash to another entity. Therefore, an operating lease meets the requirements of a liability.
6. Calculate the following ratios for both years presented in the balance sheet:
Show your computations.
(a)Current ratio=____3794.9__= 1.83(current year)
=Current assets 2075.8
Current liabilities= ___2756.4__ = 1.55(prior year)
1779.1 (b)Quick or Acid-Test ratio= (3794.9-965.8) = 1.36(current year)