Question

Go to EDGAR (Links to an external site.) and download the Starbucks financial statements for fiscal year 2017 (year ended September 29, 2017).

Then, answer the following questions with at least a few sentences each:

• How does Starbucks make money? What’s the industry and nature of the business? Apply Porter's five forces framework to the specialty coffee retail industry.

• Does Starbucks report consolidated financial statements? What does this mean?

• How often are financial statements prepared by publicly traded companies for external reporting purposes?

• Who are the potential users of the Starbucks financial statements? What are they looking for? Who is responsible for the Starbucks financial statements?

• What company audited Starbucks that year? What was their opinion and, in your words, what does it mean? Why are there two opinion letters, and why are the dates after the Starbucks year-end date?

Answer 1

The Starbucks makes money through the business of roasting, marketing and retailing of coffee around the world in around 75 countries. The business is in the beverages industry. The Starbucks is the leader in the coffee and tea business who has been expanding its business in new countries and markets every year. It has created many franchises and company operated stores around the world, through it has been increasing its customer and clienteles every year. As per the Starbuck experience, it has been expanding its products offerings to the other complementary food and snacks apart main products of coffee and tea.

The financials of the year 2017 are consolidated one, which means the results includes the other subsidiaries and other incomes along with standalone company results.

The company has to release the financials five times in a year in public domain: four quarterly results and one annual audited result.

The potential users of the Starbucks financial statements are

1) the Stockholders ie. the shareholders, the bankers, the creditors, the financial institutions : They are looking for the profitability of the company, financial positions, the growth pattern and distribution of income to the various stakeholders.

2) the government departments like Tax authorities and various ministry of US Government: The revenues, growth pattern and tax incidence to the government by the company.

3) the potential investors: Looking for the future prospects of the company, return of income and financial position of the company towards the investment in the company.

The Starbucks’ growth pattern has been achieved through the devoted management and the employees, who are continuous striving towards expanding to new markets through maintenance of traditional pattern of product offering and extending the product tale.

The Deloitte & Touche LLP, Auditing company has audited the financials of the year 2017. The auditors are well satisfied with the company’s performance and maintenance of accounts and expressed their unqualified opinion on the financial statements. This means that company has employed goods means to record and consolidate the accounts as per the prevailing laws, rules and regulations prevailing on the land.

There are two letters from the Independent registered public accounting firm, first one towards the earnings and financial statements certification and second one towards the observations towards the internal controls maintained in the company.

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