THE BALANCE SHEET (FICTICIOUS)

STARBIRDS (SBUX) 10/02/2022 BALANCE SHEET ($ in millions)

ASSETS LIABILITIES
Cash and cash equivalents $ 1,148.1 Accounts payable $ 540.0
Short-term investments 902.6 Short-term debt 0.0
Accounts receivable 385.6 Other current liabilities 1,535.8
Inventories 965.8 Long-term debt 549.5
Other current assets 392.8 Other noncurrent liabilities 350.2
PPE, net 2,355.0 STOCKHOLDERS’ EQUITY
Goodwill and intangibles 433.5 Contributed capital 41.2
Long-term investments 479.3 Retained earnings 4,297.4
Other noncurrent assets 297.7 Other stockholders’ equity 46.3
TOTAL ASSETS $7,360.4 TOTAL L & SE $7,360.4
 Current assets (CA) are those assets expected to be converted into cash, sold, or consumed within
12 months.
 Property, plant, and equipment (PPE) summarize amounts for equipment, buildings, and land.
These are long-term assets that are expected to benefit more than one accounting period.
Depreciation expense is the cost allocated to each year of an asset’s long-term useful life.
 Goodwill is created when acquiring a company for an amount greater than its net assets; amounts
paid for the value of its management team, customer base, and overall reputation. Other
intangible assets include amounts paid for patents, copyrights, and brand names.
 Other assets are noncurrent asset (NCA) accounts such as long-term investments, which are not
included in any other asset classification.
 Current liabilities (CL) are amounts owed to creditors that are expected to be repaid within 12
months. Examples include accounts payable and short-term debt.
 Noncurrent liabilities (NCL) are amounts owed to creditors that are expected to be repaid in more
than 12 months. Examples include bonds payable and long-term debt.
 Contributed capital (CC) are amounts paid-in (contributed) by stockholders to purchase common
stock and preferred stock.
 Retained earnings (RE) is net income earned by the company since its incorporation and not yet
distributed as dividends.
 Other stockholders’ equity includes treasury stock.
Q1 How many accounts listed are
Current Assets? 5 (Cash and cash equivalents, Short-term investments, Accounts receivable, Inventories,
Other current assets).
Property, Plant, and Equipment? 1(PPE, net).
Goodwill and Intangibles? 1
Other Assets? 2 (Long-term investments & Other noncurrent assets.)

Q2 What is the total amount reported for

Current Liabilities? $ 2,075.8 million
( Accounts payable($ 540.0 million)+Other current liabilities($ 1,535.8 million)) .

Noncurrent Liabilities? $ 899.7 million

 (Long−term debt ($ 549.5 million)+Other noncurrent liabilities ($ 350.2 million)).

Total Stockholders’ Equity? $ 4,384.9 million

{Contributed capital ($ 41.2 million)+ Retained earnings ($ 4,297.4 million)+Other stockholders ’ equity ¿
)}.
UNDERSTANDING THE BALANCE SHEET

a. How much do customers owe this company? $385.6 million (Accounts receivable)

b. What amount of investments does this company intend to hold for more than a year? $479.3 million
(Long-term investments).

c. (Goodwill is created when a company is acquired.

d. How much does this company owe to suppliers? $540.0 million (Accounts payable).

e. Current assets total $3,794.9 million and current liabilities total $2,075.8 million . Current assets
are used to pay off (current) liabilities. This company has sufficient current assets to pay off its
current liabilities.

f. Noncurrent assets total. $3,565.5 million and noncurrent liabilities total. $899.7 million.
Noncurrent liabilities are used to finance noncurrent assets.

g. Contributed capital represents amounts paid in by shareholders

h. This company is relying primarily on retained earnings to finance assets, which is an internal source
of financing.

i. The balance sheet reports a company’s financial position as of a certain date.

j. Assets and liabilities are recorded on the balance sheet in order of liquidity, which means that Cash
will always be reported before PPE.
UNDERSTANDING THE BALANCE SHEET

STARBIRDS (SBUX) BALANCE SHEET ($ in millions)

ASSETS 10/02/2022 10/03/2021 9/27/2020 9/28/2019
Cash and cash equivalents $ 1,148.1 $ 1,164.0 $ 599.8 $ 269.8
Short-term investments 902.6 285.7 66.3 52.5
Accounts receivable 385.6 302.7 271.0 329.5
Inventories 965.8 543.3 664.9 692.8
Other current assets 392.8 460.7 433.8 403.4
Property, plant, and equipment 6,163.1 5,888.7 5,700.9 5,717.3
Accumulated depreciation (3,808.1) (3,472.2) (3,164.5) (2,760.9)
PPE, net 2,355.0 2,416.5 2,536.4 2,956.4
Goodwill and other intangibles 433.5 333.2 327.3 333.1
Long-term investments 479.3 533.3 423.5 374.0
Other noncurrent assets 297.7 346.5 253.8 (L)
TOTAL ASSETS $ 7,360.4 $ 6,385.9 $ 5,576.8 $ 5,672.6
LIABILITIES
Accounts payable $ 540.0 $ 282.6 $ 267.1 $ 324.9
Short-term debt 0.0 0.0 0.0 713.0
Other current liabilities 1,535.8 1,496.5 1,313.9 1,151.8
Long-term debt 549.5 549.4 549.3 549.6
Other noncurrent liabilities 350.2 382.7 400.8 442.4
STOCKHOLDERS’ EQUITY
Contributed capital 41.2 146.3 187.1 40.1
Retained earnings 4,297.4 3,471.2 2,793.2 2,402.4
Other stockholders’ equity 46.3 57.2 65.4 48.4
TOTAL L & SE $ 7,360.4 $ 6,385.9 $ 5,576.8 $ (Z)

Q1 Calculate the amounts that should be reported for (L) and (Z) on the 9/28/2019 balance sheet:

(L)=$ 253.8 million(Other noncurrent assets)

(Z)=$ 5,672.6 million (Total liabilities∧stockholders ' equity ).

Q2 What was the beginning balance of the inventories account for the fiscal year ended on
10/02/2022? $543.3 million. 10/03/2021? $664.9 million. 9/27/2020? $692.8 million.

Q3 What amount of property, plant, and equipment was purchased (assuming no PPE was sold) during fiscal
year ended

10/02/2022?

Change∈Gross PPE=6,163.1−5,888.7=274.4 million

Depreciation Expense=3,808.1−3,472.2=335.9 million

Net PPE Purchased=274.4 +335.9=610.3 million

10/03/2021?

Change∈Gross PPE=5,888.7−5,700.9=187.8 million

Depreciation Expense=3,472.2−3,164.5=307.7 million

Net PPE Purchased=187.8+307.7=495.5 million

Q4 From 9/28/2019 to 10/02/2022 accounts payable increased, indicating

more financial risk. This company paid off accounts payable during fiscal years ended in 2022. As of
10/02/2022 this company owes how much to suppliers? $ 540.0 million .

Q5 Total Assets are increasing, indicating that this company is expanding.

Q6 What are total liabilities for the fiscal year ended on:

10/02/2022? $ 2,975.5 million9/28/2019? $ 3,207.8 million

Q7 From 9/28/2019 to 9/27/2020, Contributed Capital increased, indicating the company issued more stock
during this accounting period.

Q8 Retained Earnings is increasing, indicating the company reported net income during this accounting period.
Assuming no dividends were issued, how much net income (loss) was reported for the fiscal year ended on:

10/02/2022? $826.2 million. 10/03/2021? $678.0 million. 9/27/2020? $390.8 million.

Q9 Develop a strategy to analyze the balance sheet. Which line would you look at first? Second? Third? Why?

First :Current assets , ¿ assess liquidity .

Second :Current liabilities ,¿ short|−term obligations .
Third : Retained earnings , ¿ understand profit reinvestment .
Q10 Review the series of balance sheets. This company appears to report a (strong/weak) financial position.
Why? Support your response with at least two observations.

Strong financial position.

 High retained earnings indicate robust profitability .
 Sufficient current assets ¿ cover current liabilities , demonstrating liquidity .