This allowance is determined by the customer credit risk and historical

This allowance is determined by the customer credit

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accounts (Dybek, 2018). This allowance is determined by the customer credit risk and historical experience. For reporting in years 2017 and 2018 the allowance was 9.8 million and 8 million respectively. The use of a contra account focused on servicing bad debts is useful as it reduces the balance in the company’s gross accounts receivable (Dybek, 2018). In reporting, this account appears directly next to accounts receivable allowing readers to view amounts the company can collect from its credit customers while also disclosing the likelihood it will not be recovered. Starbucks relies on heavily on investors to finance debt. In 2013 Starbucks announced that it was seeking debt financing mainly from investors ( Rudarakanchana, 2015). Although nothing was specifically stated for the intent of this investment, Starbucks raised capital 2
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MBA-503 - Milestone One - Horizontal and Vertical Analysis: Starbucks Corporation via the sale of long-term senior notes. Analysts speculated the $750M in debt issuance would likely be used to leverage capital structure to repurchase Starbucks shares rather than expansion ( Rudarakanchana, 2015) . Interestingly, the issuance of this debt had minimal impact on the credit profile of Starbucks. Starbucks acquisition of fixed assets is itemized as property, plant and equipment on the annual reporting. These assets, termed fixed assets, will have the opportunity to be depreciated and is shown on the company’s balance sheet as net property. Starbucks owns warehouses and distribution, roasting and distribution, and manufacturing plants throughout the U.S., Europe, and Asia (). Horizontal Analysis A technique utilized to analyze a corporation’s finances, looking at trends found within corresponding financial statements over a period is called a horizontal analysis. Two or more periods will be evaluated with the oldest period used as the base period and changes from the base will be represented in both dollars and percentage. The utilization of this type of analysis can help understand how Starbucks may do in the upcoming years.
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