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Starbucks Corporation Understanding Financial Statements Starbucks purchases and roasts high quality whole bean coffees and sells them, along with frash,rich-brenwed co ees, Italian style espresso beverages, cold blended beverage, a variety o complementary food items, a selection of premium teas, and beverage-related accessories and equipment, primarily through compay operated retail stores. Starbucks also sells coffee and tea products and licenses its trademark through other channels such as licensed retail stornes and, through certain of its licensess and equity investees, Starbucks produces and sells variety of ready to drink beverages. (Source: investor.starbucks.com) Learning Objectives . Become familiar with a set of financial statements including auditor opinions and significant accounting policy footnotes Perform a basic analysis and interpretation of the financial statements, including common-size income statements and balance sheets Recopnize the role of estimation in the preparation of financial statements Refer to the Starbucks financial statements for fiscal year 2013 (that is, the year ended September 29, 2013) Concepts a What is the nature of Starbucks' business? That is, based on what you know about the company and b. What financial statements are commonly prepared for external reporting purposes? What titles does c. How often do publicly traded corporations typically prepare d Who is responsible for the financial statements? Discuss the potential users of the Starbucks financial e. Who are Starbucks' extermal auditors? Deseribe the two "opinion" letters that Starbucks received in on the accompanying financial statements, how does Starbucks make money? Starbucks give these statements? What does "consolidated" mean? reporting purposes? statements and the type of information they are likely interested in 2013, In your own words what do these opinions mean? Why are both opinions dated several moaths financial statements for external afler Starbucks' year-end? Analysis f. Use a spreadsheet to construct common-size income statements (which Starbucks calls statements of earnings) and balance sheets for 2013 and 2012. Common-size income statements scale each income statement line item by total net revenues (sales) Commou-size balance sheets are created by dividing each figure on a given year's balance sheet by that year's total assets, thereby creating a balance sheet on a "percent of assets" basis. You will use these common-size statements in answering several of the questions below. (Starbucks' investor relations website -investor starbucks.com contains a link to SEC filings. The company's Form 10-K can be found under annual filings and contains an Excel spreadsheet with financial statement data that may be helpfial in creating the common-size statements). g Refer to Starbucks balance sheet for fiscal 2013 (the year ended September 29, 2013) i. Demonstrate that the accounting equation holds for Starbucks. Recall that the accounting equation is: Assets Liabilities + Equity Financial Statements 26

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