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Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615

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BuyFindarrow_forward

Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615
Textbook Problem
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Segment revenue horizontal analysis

Starbucks Corporation reported the following geographical segment revenues for a recent and a prior fiscal year:

Chapter 5, Problem 5.25EX, Segment revenue horizontal analysis Starbucks Corporation reported the following geographical

* Europe, Middle East, and Africa

** Sells packaged coffee and teas globally

a. Prepare a horizontal analysis of the segment data using the prior year as the base year. Round whole percents to one decimal place.

b. Prepare a vertical analysis of the segment data. Round whole percents to one decimal place.

c. What conclusions can be drawn from your analyses?

(a)

To determine

Segment Analysis

Business can be classified by regions, products or services, types of customers and more; each classification is treated as one segment of the business. Revenues earn from different segments individually, are called segment revenue. Segment revenues are determined from the invoiced data entered in the accounting system. Segment analysis is done to analyze the contribution of different segments to the total operating performance of the company. It is done with the help of horizontal and vertical comparisons.

Horizontal Analysis

This analysis is done to show the trend of various components in financial statements over a period of time. The earliest period is used as the base period and components of financial statements of later periods are compared with the components of the base period.

Vertical analysis

Vertical analysis is the method of financial statement analysis, and it is useful to evaluating a company’s performance and financial condition. Vertical analysis is helpful for analyzing the changes in the financial statements over the time, and comparing the each item on a financial statement with a total amount from the same statement.

To prepare:  Horizontal analysis of the revenue earned from different geographical segments.

Explanation

The Horizontal analysis of the revenue earned from different geographical segments is as follows:

S Company
Horizontal Analysis
Recent Year (in millions) Prior Year (in millions) Increase/Decrease
Amount Percent (%)
A $9,936 $9,065 $871 9.6
EMEA $1,141 $1,047 $94 9...

(b)

To determine

To prepare:  Vertical analysis of the revenue earned from different geographical segments.

(c)

To determine

To draw: The conclusion from the analysis.

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