Starbucks Working Capital Strategies

Topics: Balance sheet, Asset, Generally Accepted Accounting Principles Pages: 5 (1595 words) Published: May 23, 2010
Starbucks Working Capital Strategies
Starbucks is one of the largest most recognizable names in the coffee industry known worldwide. Starbucks has been able to hold onto their business making revenue in these current rough economic times. Even though they have had to shut down some stores it is nothing new than what any other company does when stores are not brining in the revenue that is expected to cover expenses of the business. To see what kind of impact the decisions that Starbucks has made and to see if they have helped the company at all, there will be several financial statements that will be looked over as well as policies to determine if Starbucks is doing good with their financials. Current Assets affect Cash Management Strategies

There are different ways of managing cash; there are strategies that manage cash. Businesses uses cash management strategies to bring in cash as quickly as possible. With cash management strategy help accurately assess your current cash position and make reliable predictions of how much cash you may need in the future. Because cash management helps a business get more details of their cash position for the future, any calculations of cash is important to the business (Hakala, 2010).

The cash management strategies help manages the cash that is being brought into the business. The cash is managed off of the financial statements and the cash flow reports. The current asset would change the details of the financial statements and the cash flow reports. The strategy would then change and give a different prediction. Starbucks current assets are changing every statement which would affect their cash management strategies. If their current assets were decreasing then it would mean that their cash coming into their business was slowing down. With that prediction, Starbucks would have to manage their assets as well as their cash and cash equivalents differently than what they were doing before they decreased in current assets. Cash and cash equivalents receivable net are the assets of the business that is converted into cash. The total amount of cash equivalent would determine the prediction; in which cash and cash equivalent would be like current assets. They are both counted as cash coming into Starbucks.

According to the Starbucks website; for example, (also shown in Figure 1) in Sep 28, 2008 their cash and cash equivalents were $269.8 and in March 29, 2009 it was $253.2. There was a slight decrease in cash and cash equivalents. This would change the cash management strategies of Starbucks for the year 2009. Their inventory has also decreased, from $692.8 to $627.8 in 2008 to 2009. Also the prepaid expenses and other current assets decreased as well. The affect here would change the current assets; it caused the current assets to decrease from $1, 748.00 to $1,604.10 (Starbucks Newsroom, 2010). The new current assets have now changed the prediction of the strategies on the cash of Starbucks. New strategies would take affect. [pic]

Figure 1: Starbucks Corp. Balance Sheet (Starbucks Newsroom, 2010) The inventory of Starbucks is what helps the current assets of the business increased. The inventory that is being sold would increase the current assets which would bring back to a positive increase in the prediction of the cash management. The inventory would affect the cash management strategy when the inventory is decrease or increase. When the inventory is sold, that would mean that the current assets would increase and the cash flow would increase as well. Starbucks inventory has increase through out the year and would change the cash management strategy if the inventory for Starbucks were to not sell steady like they have been.

Prepaid expense is also a type of asset. The results of business making payment for goods and services to be received in the near future are prepaid expenses. The prepaid expenses are recorded as assets and the value turns out to be the...

References: 2009. Starbucks Newsroom. Retrieved from
(2010). Prepaid Expense. Retrieved from
Gilbert, Sarah (2008). Starbucks: Will store closings lift company’s fortunes? Retrieved from
Hakala, David (2009). 4 Effective Cash Management Strategies. Retrieved from management/cash-management-strategies/
Starbucks. (2008). Annual Report. Retrieved from
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