Horngren's Accounting (11th Edition)
Horngren's Accounting (11th Edition)
11th Edition
ISBN: 9780133856781
Author: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura
Publisher: PEARSON
Question
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Chapter 8, Problem 8.1FSC
To determine

1)

Introduction:

Annual Report analysis:

  • Annual Report analysis enables the comprehension and analysis of highlights and important points of the performance of an entity during the previous reporting period.
  • The annual report comprises of the results of the financial operations of the company and comprises of the following:

1. Income statement

2. Balance Sheet

3. Cash flow Statements

4. Audit Reports

5. Forecast and Management Opinion

  • An executive summary comprises of the key points and highlights of the report and helps in summarization of the facts and findings of a report.
  • Annual reports aid and assist in analysis of financial statements and are widely used by key stakeholders such as shareholders, governments, banks etc.

a) Name of the Auditing firm of Starbucks Corporation

b) Key signatory from the Auditing firm of Starbucks corporation

c) Date of signing and issuance of Audit report

To determine

2)

Introduction:

Annual Report analysis:

  • Annual Report analysis enables the comprehension and analysis of highlights and important points of the performance of an entity during the previous reporting period.
  • The annual report comprises of the results of the financial operations of the company and comprises of the following:

1. Income statement

2. Balance Sheet

3. Cash flow Statements

4. Audit Reports

5. Forecast and Management Opinion

  • An executive summary comprises of the key points and highlights of the report and helps in summarization of the facts and findings of a report.
  • Annual reports aid and assist in analysis of financial statements and are widely used by key stakeholders such as shareholders, governments, banks etc.

Internal Control

  • Internal controls refer to the systems and processes implemented by an organization to reduce errors and frauds that can occur in the course of the business on a day to day basis.
  • Internal controls are primarily implemented to mitigate the risks of errors and frauds as well as ensure chain of authority and responsibility and business systems are functioning the way they are intended to.
  • Formulation and Implementation is primarily the responsibility of the management and along with reviewing and monitoring the internal controls and analyzing the variances and deviations if any from expected results.

Primary responsibility for internal controls over financial reporting

To determine

3)

Introduction:

Annual Report analysis:

  • Annual Report analysis enables the comprehension and analysis of highlights and important points of the performance of an entity during the previous reporting period.
  • The annual report comprises of the results of the financial operations of the company and comprises of the following:

1. Income statement

2. Balance Sheet

3. Cash flow Statements

4. Audit Reports

5. Forecast and Management Opinion

  • An executive summary comprises of the key points and highlights of the report and helps in summarization of the facts and findings of a report.
  • Annual reports aid and assist in analysis of financial statements and are widely used by key stakeholders such as shareholders, governments, banks etc.

Internal Control

  • Internal controls refer to the systems and processes implemented by an organization to reduce errors and frauds that can occur in the course of the business on a day to day basis.
  • Internal controls are primarily implemented to mitigate the risks of errors and frauds as well as ensure chain of authority and responsibility and business systems are functioning the way they are intended to.
  • Formulation and Implementation is primarily the responsibility of the management and along with reviewing and monitoring the internal controls and analyzing the variances and deviations if any from expected results.

If internal controls are adequate

To determine

4)

Introduction:

Annual Report analysis:

  • Annual Report analysis enables the comprehension and analysis of highlights and important points of the performance of an entity during the previous reporting period.
  • The annual report comprises of the results of the financial operations of the company and comprises of the following:

1. Income statement

2. Balance Sheet

3. Cash flow Statements

4. Audit Reports

5. Forecast and Management Opinion

  • An executive summary comprises of the key points and highlights of the report and helps in summarization of the facts and findings of a report.
  • Annual reports aid and assist in analysis of financial statements and are widely used by key stakeholders such as shareholders, governments, banks etc.

Standard of Auditing followed to evaluate Financial statements of Starbucks Corporation

To determine

5)

Introduction:

Annual Report analysis:

  • Annual Report analysis enables the comprehension and analysis of highlights and important points of the performance of an entity during the previous reporting period.
  • The annual report comprises of the results of the financial operations of the company and comprises of the following:

1. Income statement

2. Balance Sheet

3. Cash flow Statements

4. Audit Reports

5. Forecast and Management Opinion

  • An executive summary comprises of the key points and highlights of the report and helps in summarization of the facts and findings of a report.
  • Annual reports aid and assist in analysis of financial statements and are widely used by key stakeholders such as shareholders, governments, banks etc.

Cash and Cash Equivalents

  • Cash and Cash equivalents are current assets that form part of the balance sheets and represent the liquid assets of the business. Liquid assets are assets that are readily convertible to cash.
  • Cash and Cash Equivalents comprise of Cash and Bank Balances, Short term investments, Treasury Bills etc. Current Assets are assets that are convertible to cash in a period of one year or less.
  • The cash flow statements explain the change in cash and cash equivalents of the business for the reporting period by tracking the changes in cash flows from Operating Activities, Investing Activities and Financing Activities for the reporting period.

a) Change in Cash and Cash equivalents during the year

b) Closing and Opening balance of Cash and Cash equivalents

To determine

6)

Introduction:

Annual Report analysis:

  • Annual Report analysis enables the comprehension and analysis of highlights and important points of the performance of an entity during the previous reporting period.
  • The annual report comprises of the results of the financial operations of the company and comprises of the following:

1. Income statement

2. Balance Sheet

3. Cash flow Statements

4. Audit Reports

5. Forecast and Management Opinion

  • An executive summary comprises of the key points and highlights of the report and helps in summarization of the facts and findings of a report.
  • Annual reports aid and assist in analysis of financial statements and are widely used by key stakeholders such as shareholders, governments, banks etc.

Cash and Cash Equivalents

  • Cash and Cash equivalents are current assets that form part of the balance sheets and represent the liquid assets of the business. Liquid assets are assets that are readily convertible to cash.
  • Cash and Cash Equivalents comprise of Cash and Bank Balances, Short term investments, Treasury Bills etc. Current Assets are assets that are convertible to cash in a period of one year or less.
  • The cash flow statements explain the change in cash and cash equivalents of the business for the reporting period by tracking the changes in cash flows from Operating Activities, Investing Activities and Financing Activities for the reporting period.

Criteria to classify Cash and Cash equivalents

To determine

7)

Introduction:

Analysis of Financial Statements

  • Analysis of Financial Statements is a study of several key metrics of a company based on the data presented in its’ financial statements with an objective to evaluate the financial health of a company.
  • It is essential for investors, stakeholders, government bodies etc. to evaluate the key metrics of an entity in order to ensure that the company fulfills the going concern principle and displays financial stability.

The key metrics mentioned above include the following:

  • Cash Ratio – A measure of the cash and cash equivalents to Current liabilities, it seeks to measure the liquidity position of the Business.
  • It seeks to measure the short term liquidity position of the business by comparing the liquid assets i.e. current assets that are readily convertible to cash / liquid instruments and current liabilities.

Cash Ratio = Cash and Cash Equivalents / Current Liabilities

Cash and Cash Equivalents

  • Cash and Cash equivalents are current assets that form part of the balance sheets and represent the liquid assets of the business. Liquid assets are assets that are readily convertible to cash.
  • Cash and Cash Equivalents comprise of Cash and Bank Balances, Short term investments, Treasury Bills etc. Current Assets are assets that are convertible to cash in a period of one year or less.

• The cash flow statements explain the change in cash and cash equivalents of the business for the reporting period by tracking the changes in cash flows from Operating Activities, Investing Activities and Financing Activities for the reporting period

Cash ratio for the years 2012, 2013

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