Starbucks’s Cash Flow Analysis

Introduction

A company’s cash flow statement offers information regarding the firm’s cash payments and cash receipts during the accounting period. It shows how the cash flows are connected to the result cash balance to the starting balance indicated on the firm’s balance sheet. Potential investors in Starbucks may find it essential to conduct a cash flow analysis. A cash flow analysis will offer an analysis of the amount of Cash generated or utilized during a certain accounting period (Fatema & Haitham, n.d). This will enable them to understand the major cash sources and the main areas the Cash is going. To understand Starbucks’s cash flow, it is important to break down the statement into three parts: cash flows offered by or used in investing practices, cash flows provided by or used to finance different activities, and cash flows offered by or used in operational activities.

Net Cash offered by Operating activities

Net Cash refers to the cash outflow or inflow from operating activities apart from discontinued operations. Operating cash flows entail adjustments, transactions and changes in non-defined value as financing or investing activities. In the 2022 financial year, Starbucks had net Cash of 1870.90 during the first quarter, 161 900 in the second quarter and 1 264.800 in the third quarter (Starbucks, 2022). Notably, the company declined in net Cash in the second quarter but increased in the third quarter. However, the value of net Cash in the third quarter did not match that of the first quarter, irrespective of the improvement. To better understand the history of the firm’s net cash flow, there is a need to observe the trend of past years. Notably, the net Cash given by operating activities was 5 047 000 in 2019, 1597800 in 2020 and 5, 989 100 in 2021. This shows the net Cash from operating activities only declined in 2020 but later increased, surpassing the 2019 value. Based on the provided data, it is clear that Starbucks might have had a decline in sales during 2020. The decrease indicates this, mainly contributed to by a reduction in revenue or an increase in costs. However, the enhanced net Cash given by operating activities depicts that the firm is making more sales and has reduced costs.

Net Cash is Offered by investing activities.

This refers to the cash inflow or outflow amount of investing activities apart from the discontinued activities. It entails collection and provision of loans, disposal and acquiring debt or equity property and instruments, equipment and plant, and other productive assets. In 2020 the net Cash offered via investing activities had consistently risen. In the first quarter, the net Cash was valued at 401, 000; in the second quarter, it was 479, 900; in the third quarter, it was 495, 400. Additionally, Starbucks’ net Cash from investing activities declined from 2019 to 2020 but eventually increased from 2020 to 2021, passing the 2019 value (Starbucks, 2022). Notably, a decline in the net value may indicate that the organization was investing in future growth. This could be shown by the increased net worth from investing activities.

Net Cash Offered by Financing

Net Cash offered by financing activities refers to the amount of cash outflow and inflow of the financing activities apart from discontinued operations. Financing activity flows entail attaining resources from owners and offering them with the return of the investment and the return on the investment; repaying borrowed amounts and borrowing money, and gaining and paying for different resources derived from creditors based on a long-term. In 20022, the net Cash from financed activities enhanced from the first quarter to the second quarter. In the third quarter, there was a slight decline in the cash flow (Starbucks, 2022). The net Cash offered by financing activities enhanced from 2019 to 2020 but eventually declined from 2020 to 2021. Based on the company’s financial activities cash flow statement, it is vivid that the organization uses dependent on its income to finance different operations and activities. Therefore, investors may consider this to be a good investment.

Conclusion

Investing in Starbucks would call for a cash flow analysis of the company. The primary reason for conducting a cash flow analysis is that it will enable the investors to utilize the information regarding cash flow histories to project future cash flows. It also shows the changes in balance sheets and aids in the analysis of investing, financing and operating activities. It will also offer insight into the solvency and liquidity of the firm, which is essential for growth and survival. It also aids in offering information about the firms’ abilities to generate Cash. Based on the provided analysis, it is evident that Starbucks is a great investment opportunity. First, it finances most of the major operations, which shows that it is not reliant on debt. Additionally, the firm has recently increased it’s investing a abilities, which are evident in the negative decline between 2020 and 2019.

References

Starbucks (2022). 2022 Annual Report. Retrieved from https://investor.starbucks.com/financial-data/annual-reports/default.aspx. Accessed September 10, 2022.

Starbucks (2021). 2021 10-K form. Retrieved from https://www.sec.gov/cgi-bin/viewer?action=view&cik=829224&accession_number=0000829224-19-000051&xbrl_type=v. Accessed September 10, 2022.

Fatema A, & Haitham, N. (n.d) Sustainability and Corporate Governance: A Mini-Review. http://ssrn.com/abstract=3500885. DOI: 10.2139/ssrn.3500885.