Starbucks-. Locate the company’s annual report as outlined previously. Find the company’s segment information; it should be in the “Notes to Consolidated Financial Statements” or other similarly named section. Look for the word “Segment” in a heading—that is usually the section you need.
2. List the segments as reported in the annual report. Make a table listing each operating segment, its revenues, income, and assets. (in millions)
3. Use the data you collected in Requirement 2 to calculate each segment’s sales margin. Interpret your results.
4. Use the data you collected in Question 2 to calculate each segment’s capital turnover. Interpret your results.
5. Use the data you collected in Requirement 2 to calculate each segment’s ROI. Interpret your results.
6. Can you calculate RI using the data presented? Why or why not?
7. The rules for how segments should be presented in the annual report are governed by external financial accounting rules. The information you gathered for the previous requirements would be used by investors and other external stakeholders in their analysis of the company and its stock. Internally, the company most likely has many segments. Based on what you know about the company and its products or services, list at least five potential segments that the company might use for internal reporting. Explain why this way of segmenting the company for internal reporting could be useful to managers.
To complete the first question on locating the annual report of Starbucks, follow these steps:
1. Open a web browser and go to the Starbucks investor relations website.
2. Look for the section labeled "Financial Information" or "Annual Reports & Proxy Statements."
3. Click on the link for the most recent annual report.
4. Once the annual report opens, navigate to the "Notes to Consolidated Financial Statements" section. This section usually comes after the financial statements like the income statement, balance sheet, and cash flow statement.
5. Look for a heading that contains the word "Segment." This is typically where the segment information is found.
For the following questions, you will need to refer to the information in the annual report to answer them. The segments reported in the report can vary over time, so I don't have access to the specific data. However, here's how you can approach answering the questions:
2. List the segments as reported in the annual report: Look for the section that provides a breakdown of the company's operating segments. It should mention the names of each segment and may provide corresponding financial figures like revenues, income, and assets. Create a table with columns for each segment and fill in the respective values.
3. Calculate each segment's sales margin: To calculate the sales margin for each segment, divide the income by the revenues for that segment. Multiply by 100 to express it as a percentage. Sales margin measures the profitability of each segment by showing the portion of revenue converted into income.
4. Calculate each segment's capital turnover: To calculate the capital turnover for each segment, divide the segment's revenues by its assets. Capital turnover measures how efficiently a segment utilizes its assets to generate revenue.
5. Calculate each segment's ROI: To calculate the return on investment (ROI) for each segment, divide the segment's income by its assets. Multiply by 100 to express it as a percentage. ROI shows the return generated by each segment relative to the assets invested.
6. Determine if RI (Residual Income) can be calculated: RI is a measure used to assess whether a segment's return exceeds its cost of capital. To calculate RI, you would need additional information such as the cost of capital and certain assumptions about segment-specific expenses. Without these details, it may not be possible to calculate RI using the provided data alone.
7. Provide potential internal segments for Starbucks: Based on the company's products and services, potential internal segments for Starbucks could include:
- Coffee beverages: This segment would focus on sales and profitability related to Starbucks' various coffee-based beverages.
- Food and snacks: This segment would encompass sales and profitability from food offerings like pastries, sandwiches, and snacks.
- Ready-to-Drink (RTD) beverages: This segment would involve sales and profitability from bottled Starbucks beverages sold in stores and other outlets.
- Merchandise: This segment would cover the sales and profitability of Starbucks-branded merchandise like mugs, tumblers, and coffee beans.
- Digital and Rewards: This segment would analyze the sales and profitability generated by Starbucks' mobile app, loyalty program, and digital initiatives.
Segmenting the company internally in this way allows managers to gain a more detailed understanding of each product/service line's performance, identify areas of growth or improvement, and allocate resources effectively to optimize profitability within each segment.