Fill This Form To Receive Instant Help

Help in Homework
trustpilot ratings
google ratings


Homework answers / question archive / Exhibit 3

Exhibit 3

Accounting

Exhibit 3.36 presents a statement of cash flows for Starbucks for 2006, 2007, and 2008. This statement is an expanded version of the statement of cash flows for Starbucks shown in Exhibit 1.28.

 

Required

a.    Explain why equity in income of investees appears as a subtraction when net income is converted to cash flow from operations.

b.   Compute the amount of cash received from investees as dividends each year. To answer this question, you need to refer to the income statement of Starbucks in Exhibit 1.27 in Chapter 1 (Integrative Case 1.1).

c.    Explain why stock-based compensation appears as an addition to net income to compute cash flow from operations.

d.   Discuss the relation between net income and cash flow from operations for each of the three years.

e.    Discuss the relation between cash flows from operating, investing, and financing activities for each of the three years.

f.     Refer to the income statement for Starbucks in Exhibit 1.27 in Chapter 1 (Integrative Case 1.1). Compute the amount of EBITDA for 2006, 2007, and 2008.

g.    Discuss the relationships among net income, non-working capital adjustments, working capital adjustments, operating cash flows, and EBITDA for the three years. Are the patterns similar or different? What are the primary determinants of the dif- ferences between the summary measures net income, operating cash flows, and EBITDA?

 

Starbucks Corporation

Comparative Statements of Cash Flows (amounts  in millions)

(Case 3.1)

 

 

Sept. 28,

Sept. 30,

Oct. 1,

Fiscal Year Ended:

2008

2007

2006

OPERATING ACTIVITIES

Net earnings                                                                        $      315.5      $     672.6      $  564.3

Adjustments to reconcile net earnings to net cash provided by operating activities:

 

Cumulative effect of accounting change for FIN 47, net of taxes

17.2

Depreciation and amortization

604.5

491.2

412.6

Provision for impairments and asset disposals

325.0

26.0

19.6

Deferred income taxes, net

(117.1)

(37.3)

(84.3)

Equity in income of investees

(61.3)

(65.7)

(60.6)

Distributions of income from equity investees

52.6

65.9

49.2

Stock-based compensation

75.0

103.9

105.7

Tax benefit from exercise of stock options

3.8

7.7

1.3

Excess tax benefit from exercise of stock options

(14.7)

(93.1)

(117.4)

Other

Cash provided (used) by changes in operating assets and liabilities: Inventories

(0.1)

 

(0.6)

0.7

 

(48.6)

2.0

 

(85.5)

Accounts payable

(63.9)

36.1

105.0

Accrued taxes

7.3

86.4

132.7

Deferred revenue

72.4

63.2

56.6

Other operating assets and liabilities

60.3

22.2

13.2

Net Cash Provided by Operating Activities

$  1,258.7

$  1,331.2

$1,131.6

INVESTING   ACTIVITIES

Purchase of available-for-sale securities

 

$        (71.8)

 

$      (237.4)

 

$ (639.2)

Maturity of available-for-sale securities

20.0

178.2

269.1

Sale of available-for-sale securities

75.9

47.5

431.2

Acquisitions, net of cash acquired

Net purchases of equity, other investments, and other assets

(74.2)

 

(52.0)

(53.3)

 

(56.6)

(91.7)

 

(39.2)

Net additions to property, plant, and equipment

(984.5)

(1,080.3)

(771.2)

Net Cash Used by Investing Activities

$ (1,086.6)

$ (1,201.9)

$ (841.0)

FINANCING  ACTIVITIES

Repayments of commercial paper

 

$(66,068.0)

 

$(16,600.9)

 

Proceeds from issuance of commercial paper

65,770.8

17,311.1

Repayments of short-term borrowings

(228.8)

(1,470.0)

$ (993.1)

Proceeds from short-term borrowings

528.2

770.0

1,416.1

Proceeds from issuance of common stock

112.3

176.9

159.2

 

 

 

(Continued)

 

 

 

                                   EXHIBIT 3.36 (Continued)                                   

 

 

Fiscal Year Ended:

Sept. 28,

2008

Sept. 30,

2007

Oct. 1,

2006

Excess tax benefit from exercise of stock options

14.7

93.1

117.4

Principal payments on long-term debt

(0.6)

(0.8)

(0.9)

Proceeds from issuance of long-term debt

549.0

Repurchase of common stock

(311.4)

(996.8)

(854.0)

Other

(1.7)

(3.5)

Net Cash Used by Financing Activities

$(184.5)

$(171.9)

$(155.3)

Effect of exchange rate changes on cash and cash equivalents

0.9

11.3

3.5

Net increase (decrease) in cash and cash equivalents

$ (11.5)

$ (31.3)

$ 138.8

CASH AND CASH EQUIVALENTS

Beginning of period

 

281.3

 

312.6

 

173.8

End of the Period

$ 269.8

$ 281.3

$ 312.6

                                                          

 

 

h.   The income statement in Exhibit 1.27 in Chapter 1 (Integrative Case 1.1) shows depreciation and amortization expense as follows:

 

2006

2007

2008

$387.2

$467.2

$549.3

 

However, the statement of cash flows shows addbacks for depreciation and amor- tization as follows:

 

2006

2007

2008

$412.6

$491.2

$604.5

 

Explain why the amount on the income statement differs from the amount on the statement of cash flows each year.

Purchase A New Answer

Custom new solution created by our subject matter experts

GET A QUOTE

Related Questions