You are a banker at Bank of America (BOA) and \"Starbucks\" Corporation is looki

Question

You are a banker at Bank of America (BOA) and "Starbucks" Corporation is looking to borrow money to expand their business by opening new stores around the world - Europe, China, South America and Russia. Research the most recent statement and cash flows on the web.

1- Comment on how the information contained within the statement of cash flows will help you determine whether to lend money to Starbucks. Use specific reference to information in cash flow categories and define the data located within the type of these following Cash Flow categories and how you would use this data in your evaluation:

a- Operations

b- Investing

c- Financing

2- Define what types of items (Classes of Accounts, Assets, Liabilities, Shareholder's Equity, Revenue, Expenses, etc.) are reported in a Statement of Cash Flows for:

a- Operations

b- Investing

c- Financing

Please utilize the Starbucks Internet website for your research.

3- Separately discuss how you can help analyze:

a- Cash From Operations

b- Cash used and generated from investing activities

c- Cash used and generated from financing activities

Explanation / Answer

1.

a) Cash flow from Operations: will provide the information on how the operations of the company have been carried out, we can check is there any negative operational cash flow or the company is getting positive operational cashflow. Basically we will check the cash flow from operations is Positive or not. Also the existing interest burden on the debt used for operations can be checked.

b) Cash flow from Investing activities: will provide the company's growth historically and can be checked this head for whether the amount is invested or divested, normally for any growing company the cash flow from investing activities shall be negative.

c) Cash flow from financing activities: will provide how the company is financially moving and we can check for any fresh finances have been taken, debt issued or equity issued or any repayments have been made during the year.

2.

a) Operations:

Net profit/Loss

Depreciation adjustment

Profit/loss on sale of assets/investments adjustment

Taxes paid

Changes in working capital

b) Investing:

Purchase/sale of PPE

Investments/divestments

c) Financing:

Issue of share capital :common/preference

Issue/redemption of bonds

Loans availed/repaid

Dividends paid

3)

a) Cash from Operations : We can check the operational cash flow whether positive or negative, also can be checked whether the cash flow positive because of what head movement in the current assets.

b) CAsh used and generated from investing activities: How the cash is being utilised in the business or the cash flow is generated by selling the existing investments and assets. If the latter is there then there is a chance that the company is not hoping for any growth plans.

c) CAsh used and generated from financing activities: How the cash generated from operations are being used; whether used for reduction of debt or instead keeping the closing cash instead of reducing the interest bearing debt. In the event of expansion of business, then the cash flow from investing activities will be negative; hence we can check whether the funds raised from equity or debt market is effectively used or kept as idle.

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