03 Jan 6. How do the dividends

BUS500 Financial Intelligence

Module 3 Case

INCOME STATEMENT

Assignment Overview

Use the same annual statements for Starbucks as for the prior module. The Starbucks income statements should be used for the first two questions. Do additional research as necessary for the last question.

IBISWorld is a proprietary database providing industry research. It is accessible via the Trident library. The database is found under additional library resources and offers a lot of interesting industry information including financial information.

Case Assignment

• Locate the income statement for the past two years. Prepare a table in good format comparing at least ten revenue and expense items for the two years. Did the numbers increase or decrease? What can we learn from this information?

• Comment on the changes from one year to another. Is the company doing better or worse? Did revenues and expenses increase or decrease? Are revenues and expenses moving in the same direction?

• How is Starbucks doing vis-à-vis the industry? Use IBISWorld to answer this question.

• Investors emphasize earnings per share. Why is this number so important and what are some of the shortcomings of this number?

Assignment Expectations

Incorporate responses to the questions above in an organized format. Start with an introduction and end with a conclusion/summary. Use headings and subheadings to organize the essay. Do not forget to include references in APA format. Incorporate the required table into the Word document. Do not submit a separate spreadsheet. The suggested length is five to seven pages, including the table.

BUS500 Financial Intelligence

Module 3 SLP

INCOME STATEMENT

We reviewed the balance sheet for VWV in the prior module. This time we are examining the income statement for the same entity.

VWV Company

Income Statement

For the Period Ending December 31, 20XX

Revenues

$540,000

Cost of goods sold

200,000

Gross profit

$340,000

Operating expenses

Salaries

$100,000

Lease for office

30,000

Advertising and promotion

24,000

Utilities

9,700

Property taxes

18,000

Payroll taxes

11,500

Insurance

8,000

Depreciation

19,922

Miscellaneous expenses

9,000

Total operating expenses

$230,122

Operating income

$109,878

Interest income

$250

Interest expense

12,000

Net interest expense

$11,750

Net income

$98,128

Use the above income statement to answer the questions below.

1. Is VWV a manufacturer/reseller or a service company?

2. Explain the term cost of goods sold in your own words. Why is this item significant?

3. Does the company have employees?

4. Does the company own some type of property? Can we tell from looking at the income statement alone or do we need to look at the balance sheet too?

5. Are earnings per share important information for VWV Company?

6. How do the dividends affect the income statement?

7. How do we know that VWV Company is using the accrual basis of accounting? Hint: Do not forget to look at the balance sheet from the prior module.

8. Why is the company using the accrual basis of accounting rather the cash basis?

9. Comment on operating income versus net income.

SLP Assignment Expectations

Use Word and respond in a question and answer format. There is no need to use Excel for this particular SLP.