Using the following SEC 10-K: http://www.sec.gov/Archives/edgar/data/829224/0000
ID: 2422014 • Letter: U
Question
Using the following SEC 10-K:
http://www.sec.gov/Archives/edgar/data/829224/000082922415000038/sbux-9272015x10k.htm#sA91D478DC68C3B2F186CDB056B81AD49
Respond to one or more question(s) from each of the three categories below.
Category: Operating Activities
1. State whether your corporation uses the direct or indirect method of preparing the Statement of Cash Flows and describe how the Statement would be different under these two methods.
2. What are the largest increases and decreases in the operating activities section of your corporation's Statement of Cash Flows?
3. Given the industry your corporation operates in and the current economic environment, explain any unexpected operating activities that caused cash flow to decrease.
Category: Investing and Financing Activities
1. Explain similarities and or differences in preparing the Statement of Cash Flows using International Financial Reporting Standards (IFRS).
2. Describe investments reported on your corporation's Statement of Cash Flows in the current and most recent past year.
3. Review your corporation's Statement of Cash Flows over the past 3 years and explain any financing trends.
Category: Analysis
1. Calculate the following ratio for the most recent two years and comment on the results of your ratio analysis. How does the result for your corporation compare to the industry average?
a. Cash Debt Coverage = Not cash provided by operating activities/average total liabilities
Explanation / Answer
1. The corporation used indirect method of cash flows:
In direct method and indirect methods the difference will be in the prepration of cash flows from operating activities.
In Indirect Method we start with net profit before tax and make adjustment for non cah non operating items to arrive at cah profit and tax paid is also shown seperatly
In direct method we are showing directly the cash collections and payment related to operating activities
2.In operating activity section : Largest increase and decrease
Net earnings for the period is the largest item that increase cash flows in operating section
The largest decreasing item is increase in inventory value
3. The huge investment in Inventory is one item that cause to decrease the cash flow from operating activities
1. Direct and indirect methods of cash flow presentations are allowed under US GAAP and IFRS
The US GAAP is more rigid and providing industry specific guidelines for cashflow prepration whereus IFRS is more flexible in presentation and classification
Under IFRS last two years comparison is required but no such comparison required in USGAAP
The cashflow per share presentation is prohibitted under USGAAP but no such prohibition under IFRS
2. Investment reported in cash flows are:
Purchase of investment
Acquisition of property and equipment
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