Can anyone explain to me why a CFO line item (or any SCF line item) may not reflect the same number as I calculate from the balance sheet for a corresponding line item?
I'm working on modeling Starbucks and a number of working capital and non-cash items do not match what is reported on the B/S or I/S.
A few of SBUX Working Capital:
2014 2013 Calculated change CFO reported
A/R 631 561.4 (69.6) (79.7)
Inventory 1090.9 1111.2 20.3 14.3
D&A 709.6 621.4 N/A 748.4, 655.6 for 2013 and 2014, respectively
What gives? Can't find any explanation in the 10k either.
Apologies, I had tried to line that up to read easier. WSO just smashed it all to the side for me, thanks WSO.
It's pretty common for it not to tie up perfectly. For example, if a company sells some PP&E it won't appear in D&A, instead appearing in cash flow from investing. Also, you might have some accounts receivable written off, which would be added back elsewhere in the cash flow from operations statement. I believe you can also have foreign exchange differences. The list is endless but usually isn't material.
Hm, thanks and one more question if you don't mind; for modeling purposes, should I then try to model that treatment in or not?
No I wouldn't bother with it. Just make your balance sheet assumptions going forward (e.g. A/R is X% of sales, A/P is Y% of COGS, inventory is Z%, etc.) and then drive your cash flow projections based upon that. Trying to get any more specific is a waste of time.
Got it, thanks for the help!
That's up to you. You could model that a % of receivables or % of sales are going to doubtful accounts. Otherwise, I wouldn't assume it going forward. If the company actually has allowance for doubtful accounts on their balance sheet, I'd just straight line it.
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