Question

Accounting

Of the risks Starbucks Corporation discloses, you must identify at least one risk at Starbucks store level and connect it to a financial statement, explaining its adverse financial statement outcomes if it were to materialize. Demonstrate your understanding by showing an effect one on at least one of the ratios.

At the store level, identifying risk is more challenging than at the company level. Apply your understanding financial reporting concepts you learned but take it a step further to incorporate your understanding of various assets and liabilities. You must analyze risks talking like an accountant, not a marketer or strategic manager. In this deliverable, it is expected that you integrate many different accounting concepts and demonstrate your understanding of what you have read in the textbook applies to what you see in a store.

Risks

1. Economic conditions in the U.S. and international markets could adversely affect our business and financial results.
2. Our success depends substantially on the value of our brands and failure to preserve their value, either through our actions or those of our business partners, could have a negative impact on our financial results.
3. Incidents involving food or beverage-borne illnesses, tampering, adulteration, contamination or mislabeling, whether or not accurate, as well as adverse public or medical opinions about the health effects of consuming our products, could harm our business.
4. The unauthorized access, use, theft or destruction of customer or employee personal, financial or other data or of Starbucks proprietary or confidential information that is stored in our information systems or by third parties on our behalf could impact our reputation and brand and expose us to potential liability and loss of revenues.
5. We rely heavily on information technology in our operations and growth initiatives, and any material failure, inadequacy, interruption or security failure of that technology could harm our ability to effectively operate and grow our business and could adversely affect our financial results.
6. We may not be successful in implementing important strategic initiatives or effectively managing growth, which may have an adverse impact on our business and financial results.
7. We face intense competition in each of our channels and markets, which could lead to reduced profitability.
8. We are highly dependent on the financial performance of our Americas operating segment.
9. We are increasingly dependent on the success of certain international markets in order to achieve our growth targets.
10. Increases in the cost of high-quality arabica coffee beans or other commodities or decreases in the availability of high quality arabica coffee beans or other commodities could have an adverse impact on our business and financial results.
11. Our financial condition and results of operations are sensitive to, and may be adversely affected by, a number of factors, many of which are largely outside our control.
12. Interruption of our supply chain could affect our ability to produce or deliver our products and could negatively impact our business and profitability.
13. Failure to meet market expectations for our financial performance and fluctuations in the stock market as a whole will likely adversely affect the market price and volatility of our stock.
14. The loss of key personnel or difficulties recruiting and retaining qualified personnel could adversely impact our business and financial results.
15. Failure to comply with applicable laws and changing legal and regulatory requirements could harm our business and financial results.

Financial Statements

Answer 1

As given above each of the risks can be connected to financial statement in one way or the other.

Below are given afew of the risks and the impact of the relevant risk to the financial statments

1.Risk: Our success depends substantially on the value of our brands and failure to preserve their value, either through our actions or those of our business partners, could have a negative impact on our financial results.

IMPACT ON FINANCIAL STATEMENT:

Brand Name is an Intangible Asset of the Company which is not reported in the financial statement but surly have a huge effect on the financial statement. If it is reported in the financial statement then the asset would decrease when it gets harmed as the net worth of the company would deteriorate. And this would result in decrease in the profit and/or increase in loss for the company in the financial statement.

2.Risk: We are highly dependent on the financial performance of our Americas operating segment.

IMPACT ON FINANCIAL STATEMENT:

When an organisation is hugely dependent on a specific geographical location for its financial performance in the segment reporting on the geographical basis then there is a big risk as if anything uncertain or unfavourable occurs in that particular geographical location then the financial statement may face a huge change as it will reduce the operating profit of the most significant financial performing segment of the company and the overall financial statements would decrease because of it.

Eg: During the outbreak of corona virus the all of America is shut down under national emergency.

3.Risk: Increases in the cost of high-quality arabica coffee beans or other commodities or decreases in the availability of high quality arabica coffee beans or other commodities could have an adverse impact on our business and financial results.

IMPACT ON FINANCIAL STATEMENT:

When the cost of the raw material would increase the gross profit for the company would decrease and would result in an impact on the assets of the company.