Question

At the most recent strategic planning meeting, the board of directors of your company has voted to issue additional stock to raise capital for major expansions for the company in the next five years. The board is considering $5 billion. Take the most recent financial statements and prepare a set of projected financial statements based on the given assumptions. The CEO requests that you prepare a written report (including the financial statements) for her. The company is Starbucks.

Generate a projected income statement based on the given scenario. Analyze the impact on the income statement based on the given scenario.

Generate a projected statement of retained earnings based on the given scenario. Analyze the impact on the statement of retained earnings based on the given scenario.

Generate a projected balance sheet based on the given scenario. Analyze the impact on the balance sheet based on the given scenario.

Generate a projected cash flow statement based on the given scenario. Analyze the impact on the cash flow statement based on the given scenario.

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Answer 1

B.

The injection of $5 million capital expansion seemed to have had significant impact on the income earned to the company. A income increased due to the growing sales of the company to projected figures of $150,250. The net earning of the company were appropriate in obtaining an appropriate levels of net income.

D. Impact on the Statement of Retained Earnings

The injection of the $5million for the case study scenario had positive impact on the statement of retained earnings. For instance, the cash dividend declared was increased to $300 million, the company was can to retain more earning from the net earning obtained. The common stock valuation increased from $959 million to $964 million to support the additional capital expansion equity. As a result, the additional equity was increased following the offering and issuance of common stocks

F. Impact on the Balance Sheet

The strategic decision to raise the capital for expansion led to positive impact on the expansion of the balance sheet items. The overall amount of total assets, liability, and equity increased by a significant margin. Also, the amount of total equity was higher than the total amount of liabilities (Fund, 2013). This implies an improvement in the solvency position and level of the company towards supporting the future expansion and growth of the company. The ability of the company to purchase equipments relies on the equity capital, which lower interest cost from external borrowing. Therefore, the strategic decision had a positive impact on the balance sheet items.

H. The impact on the cash flow statement

The injection of the $5 million supported the cash flows of the company. For instance, Kroger will be able to increases the inventories and receivables to promote the cash flow from the operating activities. It also leads to the increase in the cash and temporary cash investments within the fiscal year. In terms of investing activities, the investing amount increased significantly (Weisenfeld et al., 2012). Therefore, the injection of the $5million lead to the increase in the cash allocated for investing to support the growth and financial performance of the company.