Working Capital Recommendations and Impact of Revenue Increase Essay

Working Capital Recommendations and Impact of Revenue Increase Working capital recommendations refer to an increase of financial investments through the issuance of stocks and bonds. What this does is increase money so Starbucks can use it for restructuring and for the potential of bringing new products and services into the market. According to the Starbucks, (2008) “Increased leverage and/or increases in interest rates may harm the Company’s financial condition and results of operations” (Quantitive and Qualitive Disclosures about Market, para. 1). The learning team does not recommend increasing leverage currently.According to Starbucks, (2008) by the end of September 2008, Starbucks had “$5. 1 billion in minimum future rental payments under noncancelable operating leases and $3.

2 billion of total liabilities on a consolidated basis, and aggregate principal indebtedness is included in the total liabilities coming in around $713 million under the outstanding commercial paper” (Quantitive and Qualitive Disclosures about Market, para. 2). The company 2008 annual report shows the “revolving credit facility borrowings around $550 million” (Quantitive and Qualitive Disclosures about Market, para. ). In August 2017 the 10-year notes will mature, which is where the borrowings are found. Increasing Starbucks financial obligations could have a negative outcome on the future of the company without the 20% increase of forecasted sales Starbucks should remain fairly stable and will have funds available to pay of debts. Starbucks would see some positive outcomes with the increase.

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Some of the positive outcomes the learning team found are the possibility of the company obtaining more financing for working capital, general corporate, and capital expenditures.Starbucks could satisfy their lease obligations, plan or react to changes in the industry, make payments of interest and principal on debts, and bring in enough cash flow to satisfy the company financial obligations. The increase in current liabilities, which was from short-term borrowings the company made were the primary result of why the working capital deficits occurred in 2008. These measures will be sufficient for Starbucks to satisfy its financial obligations.Because the company will not have to ask for financing, refinance, or sell assets this puts the company in a favorable position because of the 20% increase. Starbucks credit ratings could deteriorate if there were an increase in leverage. If Starbucks has a reduction in their credit rating, this would limit future financing opportunities regardless of the cause, and potentially increase future costs for seeking financing in today’s economy. References Starbucks.

(2008). Annual Report. Retrieved from http://phx.

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