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Prior to beginning work on this assignment, read Chapter 4, “Financial Forecasting,” in the textbook and review the current financial statements of Starbucks through Yahoo! Finance (Links to an external site.) or the EDGAR | Company Filings  (Links to an external site.)database in the Filings and Forms page. You can access the financial statements by going to the Yahoo! Finance web page, typing in the stock symbol of Starbucks, and then clicking on the “Financials” tab. Watch the Week 1 Assignment video above with Dr. Kevin Kuznia, Academic Department Chair.

Reviewing the previous quarter’s financial statements will provide you with data to construct pro forma financial statements for Starbucks and make some basic projections. This week, you will be charged with constructing two pro forma financial statements and addressing some questions about your projections. The two financial statements will include an Income Statement and Balance Sheet.

To begin your assignment, download the Financial Forecasting Template.

Part 1

Use Yahoo! Finance (Links to an external site.) or the EDGAR | Company Filings  (Links to an external site.)database to download the last 10Q from Starbucks into excel. Use the downloaded data to complete the Income Statement and Balance Sheet on the appropriate tabs in the Financial Forecasting Template. Assume the following:

  • Sales will increase for the next quarter by the same percentage increase from the previous quarter to the last reported quarter. For example, if sales increased 8% from the last quarter to the current reported quarter, you will use 8% as the sales increase for your pro formas.

Calculate the expenses to determine what will change and what will remain the same.

Note: Not all costs are associated with the cost of sales. It will be up to you to determine which line items need to be increased and which ones need to be left alone. This will require you to distinguish between fixed and variable costs. For a reminder of the difference between fixed and variable costs, please watch the video Business Costs (Fixed Costs and Variable Costs) Explained (Links to an external site.).

Within each line item expense explain your rationale, as well as provide a brief summary.

Part 2

Then, calculate a quarterly variance analysis using the Variance Analysis tab of the Financial Forecasting Template (the same template you used for Part 1). Complete the following in your variance analysis:

  • In the Excel template, insert the line items.
  • In Column C, (Q4, 20NN) enter the previous quarter’s numbers as the budget.
  • In Column D, (Q1, 20NN) enter the current quarter’s actual numbers.
  • In Column E, the spreadsheet will calculate the dollar difference between the budget and actual numbers.
  • In Column F, the spreadsheet will calculate the percentage change.
  • In Column G, analyze and speculate the rationale for the variances.

Sheet1

namettm6/30/203/31/2012/31/199/30/196/30/193/31/1912/31/189/30/186/30/183/31/18
TotalRevenue544,101,00096,415,000173,461,000128,888,000145,338,00098,468,000106,802,000140,166,000122,141,000171,571,000364,245,000
OperatingRevenue482,941,00086,123,000153,093,000116,658,000127,068,00088,418,00091,989,000121,775,00094,333,000150,748,000348,925,000
CostOfRevenue439,478,00072,513,000142,949,000106,207,000117,810,00075,026,00086,966,000113,257,00091,620,000163,576,000304,769,000
GrossProfit104,623,00023,902,00030,512,00022,681,00027,528,00023,442,00019,836,00026,909,00030,521,0007,995,00059,476,000
OperatingExpense175,501,00035,899,00054,052,00051,044,00034,504,00041,131,00036,670,00034,022,00041,792,00052,887,00039,069,000
SellingGeneralAndAdministration103,477,00018,998,00034,271,00026,097,00024,110,00027,303,00021,099,00018,480,00021,613,00023,228,00028,814,000
GeneralAndAdministrativeExpense103,477,00018,998,00034,271,00026,097,00024,110,00027,303,00021,099,00018,480,00021,613,00023,228,00028,814,000
SalariesAndWages
OtherGandA103,477,00018,998,00034,271,00026,097,00024,110,00027,303,00021,099,00018,480,00021,613,00023,228,00028,814,000
DepreciationAmortizationDepletionIncomeStatement57,659,00014,300,00014,486,00014,673,00014,199,00013,718,00015,668,00016,842,00019,979,00010,767,00011,110,000
DepreciationAndAmortizationInIncomeStatement57,659,00014,300,00014,486,00014,673,00014,199,00013,718,00015,668,00016,842,00019,979,00010,767,00011,110,000
OtherOperatingExpenses14,365,0002,601,0005,295,00010,274,000-3,805,000110,000-97,000-1,300,000200,00018,892,000-855,000
OperatingIncome-70,878,000-11,997,000-23,540,000-28,363,000-6,976,000-17,689,000-16,834,000-7,113,000-11,271,000-44,892,00020,407,000
OtherIncomeExpense11,519,000-2,338,00010,715,000-7,544,00010,686,000391,594,0009,889,000-18,133,000-2,833,00048,631,000-2,306,000
GainOnSaleOfSecurity6,755,00062,000-1,292,0003,217,0003,476,000400,939,0009,407,000
EarningsFromEquityInterest52,098,0002,586,00016,612,00025,283,0007,617,0003,640,0005,309,000-426,000-635,00060,599,0003,332,000
SpecialIncomeCharges-46,328,000-4,783,000-5,823,000-35,722,0000-1,102,000-4,319,000-142,851,000-1,900,000-8,252,000-4,472,000
ImpairmentOfCapitalAssets8,466,00001,102,0003,851,000135,931,000989,0006,088,0004,100,000
WriteOff14,957,0004,783,0001,708,0008,466,00001,102,0003,851,000135,931,000989,0006,088,0004,100,000
OtherSpecialCharges31,371,0004,115,00027,256,000468,0006,920,000911,0002,164,000372,000
GainOnSaleOfBusiness
OtherNonOperatingIncomeExpenses-1,006,000-203,000-74,000-322,000-407,000-11,883,000-508,000-860,000-298,000-3,716,000-1,166,000
PretaxIncome-59,359,000-14,335,000-12,825,000-35,907,0003,710,000373,905,000-6,945,000-25,246,000-14,104,0003,739,00018,101,000
TaxProvision286,00028,00060,000115,00084,000214,00025,000429,000137,000128,000121,000
EarningsFromEquityInterestNetOfTax
NetIncomeCommonStockholders-98,389,000-23,335,000-21,450,000-46,260,000-7,343,000362,715,000-17,565,000-115,455,000-18,984,00042,873,00026,809,000
NetIncome-70,394,000-17,461,000-15,576,000-38,137,000781,000370,839,000-9,441,000-107,332,000-10,860,00050,997,00034,933,000
NetIncomeIncludingNoncontrollingInterests-59,645,000-14,363,000-12,885,000-36,022,0003,626,000373,691,000-6,970,000-105,028,000-8,832,00060,506,00035,028,000
NetIncomeContinuousOperations-59,645,000-14,363,000-12,885,000-36,022,0003,626,000373,691,000-6,970,000-25,675,000-14,241,0003,611,00017,980,000
NetIncomeDiscontinuousOperations-79,353,0005,409,00056,895,00017,048,000
NetIncomeExtraordinary
NetIncomeFromTaxLossCarryforward
MinorityInterests-10,749,000-3,098,000-2,691,000-2,115,000-2,845,000-2,852,000-2,471,000-2,304,000-2,028,000-9,509,000-95,000
PreferredStockDividends27,995,0005,874,0005,874,0008,123,0008,124,0008,124,0008,124,0008,123,0008,124,0008,124,0008,124,000
OtherunderPreferredStockDividend
AverageDilutionEarnings2,250,0002,250,0000-6,750,0002,250,0002,250,000
DilutedNIAvailtoComStockholders-93,889,000-23,335,000-21,450,000-44,010,000-7,343,000364,965,000-17,565,000-122,205,000-18,984,00045,123,00029,059,000
BasicEPS-0.31-0.28-0.125.67-0.26-0.280.630.39
DilutedEPS-0.31-0.28-0.124.55-0.26-0.280.540.35
BasicAverageShares76,232,00077,444,00062,168,00064,019,00067,747,00067,975,00067,932,00067,913,000
DilutedAverageShares76,232,00077,444,00062,168,00080,259,00067,747,00067,975,00083,694,00083,670,000
TotalExpenses614,979,000108,412,000197,001,000157,251,000152,314,000116,157,000123,636,000147,279,000133,412,000216,463,000343,838,000
NetIncomeFromContinuingAndDiscontinuedOperation-70,394,000-17,461,000-15,576,000-38,137,000781,000370,839,000-9,441,000-107,332,000-10,860,00050,997,00034,933,000
NormalizedIncome-41,505,710-14,014,670-11,325,210-14,408,350