Assume the role of a senior financial analyst who has been assigned to complete a thorough and detailed review of Starbucks. Access the company quarterly financial statements (10-Q) for the past two quarters on EDGAR, which is available on the web page, EDGAR Company Filings (https://www.sec.gov/edgar/searchedgar/companysearch.html).
In your thorough and detailed review, analyze the company’s quarterly financial statements (10-Q) for the past two most current quarters and perform the following:
• Prepare a balance sheet and income statement horizontal analysis for the last two quarters.
• Prepare a balance sheet and income statement vertical analysis for the last two quarters.
• Prepare a liquidity analysis by computing and using the appropriate ratios to assess liquidity.
o Compute a minimum of three ratios and show your supporting calculations.
• Prepare a solvency analysis by computing and using the appropriate ratios to assess solvency.
o Compute a minimum of three ratios and show your supporting calculations.
• Prepare a profitability analysis by computing and using the appropriate ratios to assess profitability.
o Compute a minimum of three ratios and show your supporting calculations.
• Analyze the methods and tips provided in the textbook, Warren Buffet Accounting, to address the following questions:
o What is your company’s primary revenue, secondary revenue, and gains?
o What is your company’s primary expenses, secondary expenses, financial activity generated expenses, and losses?
o What is the revenue trend? Does the 10-K or 10-Q discuss primary revenues, as well as other revenue types?
o What do the accounting policies say in the annual report (footnotes) regarding the cost of revenue? What are the drivers to the cost of revenue and the trends?
o Are there any trends in sales and marketing expenses or research and development? Are these amounts reasonable for the type of business?
o Compare general and administrative expenses to similar companies. Are they reasonable?
o What is the ratio of net interest income (expense) to income from operations? Is this a safe ratio for the company? Why or why not?
o What is the income taxes trend? Is the effective tax rate reasonable over time?
Sample Solution
