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Reformulation of Starbucks

Reformulation of Starbucks. Mitchell Schmitt. Talking Points. Brief Overview of Enterprise Operations vs. Financing Activities Calculation and Consideration of Net Enterprise Assets (NEA) Calculation of Net Financial Liabilities (Net Financial Assets for Starbucks)

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Reformulation of Starbucks

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  1. Reformulation of Starbucks Mitchell Schmitt

  2. Talking Points • Brief Overview of Enterprise Operations vs. Financing Activities • Calculation and Consideration of Net Enterprise Assets (NEA) • Calculation of Net Financial Liabilities (Net Financial Assets for Starbucks) • Enterprise Profit After Tax (EPAT) • Identifying and Calculating Financing Expenses after Tax (FEAT)

  3. Reformulation • Purpose is to provide relevant information for forecasting and valuation purposes • Focus is on cash flows from operations rather than accounting income • Identification of Enterprise Income (EPAT) and Assets (NEA) is the first step

  4. Identification of Enterprise Operations • The background obtained from Module 1 is key to knowing what the firm does • Similar activities may be categorized differently at each firm • Certain line items will demand further research into the notes

  5. Required Cash Computation

  6. Calculation of NEA

  7. Net Financial Lender • Large amount of excess cash and short-term investments • May be gearing up for future expansion or large dividend • Most firms are net borrowers • Add Financial Assets to NEA to arrive at Common Shareholders Equity

  8. Check Figure

  9. Line Items I questioned 1. Gain on Sale of Property Classified as Operating • No description in notes, laid out as operating in original Income Statement 2. Income from Equity Investees • Royalties and gross margin receipt from franchisees

  10. Computation of Adjusted Income Tax

  11. Statement of Comprehensive Inc.

  12. Check Figure

  13. Questions?

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