I preformed a horizontal analysis on the following data. I guess my confusion ex
ID: 2597203 • Letter: I
Question
I preformed a horizontal analysis on the following data. I guess my confusion exactly is what this means. What do you see from the data
Income Statement
Balance Sheet
Oct 2 Sep 27, Sep 28, % Change % Change 2016 2015 2014 2016-2015 2015-2014 Net revenues: Company-operated stores 16,844.10 $15,197.30 $12,977.90 10.84% 17.10% Licensed stores 2,154.20 1,861.90 1,588.60 15.70% 17.20% CPG, foodservice and other 2,317.60 2,103.50 1,881.30 10.18% 11.81% Total net revenues 21,315.90 19,162.70 16,447.80 11.24% 16.51% Cost of sales including occupancy costs 8,511.10 7,787.50 6,858.80 9.29% 13.54% Store operating expenses 6,064.30 5,411.10 4,638.20 12.07% 16.66% Other operating expenses 545.40 522.40 457.30 4.40% 14.24% Depreciation and amortization expenses 980.80 893.90 709.60 9.72% 25.97% General and administrative expenses 1,360.60 1,196.70 991.30 13.70% 20.72% Litigation charge/(credit) - - (20.20) #DIV/0! -100.00% Total operating expenses 17,462.20 15,811.60 13,635.00 10.44% 15.96% Income from equity investees 318.20 249.90 268.30 27.33% -6.86% Operating income/(loss) 4,171.90 3,601.00 3,081.10 15.85% 16.87% Gain resulting from acquisition of joint venture - 390.60 - -100.00% #DIV/0! Loss on extinguishment of debt - (61.10) - -100.00% #DIV/0! Interest income and other, net 108.00 43.00 142.70 151.16% -69.87% Interest expense (81.30) (70.50) (64.10) 15.32% 9.98% Earnings/(loss) before income taxes 4,198.60 3,903.00 3,159.70 7.57% 23.52% Income tax expense/(benefit) 1,379.70 1,143.70 1,092.00 20.63% 4.73% Net earnings including noncontrolling interests 2,818.90 2,759.30 2,067.70 2.16% 33.45% Net earnings/(loss) attributable to noncontrolling interests 1.20 1.90 (0.40) -36.84% -575.00% Net earnings attributable to Starbucks 2,817.70 $2,757.40 $2,068.10 2.19% 33.33% Earnings per share basic 1.91 1.84 1.37 3.80% 34.31% Earnings per share diluted 1.90 1.82 1.35 4.40% 34.81% Weighted average shares outstanding: Basic 1,471.60 1,495.90 1,506.30 -1.62% -0.69% Diluted 1,486.70 1,513.40 1,526.30 -1.76% -0.85%Explanation / Answer
A horizontal analysis of the financial statements shows the trend over a period of time. It compares every individual line item of the income statement and balance sheet with the line items for the preceding period.
In the horizontal analysis provided, the trend analysis is done over the years 2014, 2015 and 2016. To explain, lets look at the total net revenues in the income statement. It shows that the total net revenues for 2016 increased by 11.24% over the total net revenues of 2015. This change is computed as (21315.90 – 19162.70)/19162.70 = 11.24%. Also, the total net revenues for 2015 increased by 16.51% over the total net revenues of 2014. This depicts a declining trend in the total net revenues year-on-year from 16.51% (2015-2014) to 11.24% (2016-2015).
Similarly, looking at the balance sheet, for total current assets we see that the there is an increase in the same of 19.88% for 2016 over 2015 while the increase for 2015 over 2014 is 3.11%. Thus, there is an increasing trend for total current assets over the years.
This analysis can similarly be done for every line item in both the financial statements.