General Mills Inc Case Study Final answer PDF

Preview

Summary

General Mill Case, Case study #1 ...

Description

Concepts a. a.

It’s producer of consummer foods in the United States. The company also have international segment in Canada, Europe, Latin America and Asia. the major products are ready-to eat cereals, meals, snacks, frozen dough, baking products, yogurt and organic foods .

b. b. b.

Income Statement, Balance sheet, Cash Flow Statement , and Statement of Stockholders' Equity Consolidated Statements of Earnings, Consolidated Balance Sheets, Consolidated Stateemnts of Cash Flows, Consolidated Statement of Stockholers' Equity and Comprehensive Income. Consolidated mean the financial statement combines all the financial statement from all subsidiaries to one summaried financial statements.

c.

each quarter (10-Q) Q-1 to Q-3, (10-K) for Q4

d. d.

The management of General Mills is responsible for the financial statements and internal control such as CEO, CFO. current Investors and potential investors. They are looking for if they can receive divident/ whehter the investment is worthwell managemen. How is the company running, what to improve, do they need to change the strategy, etc employee: whether can get sotck option, whether the company has solvency issue for them to continue work here current and potential creidtor : whether the lended money can get paid government: whether the company operate with rules, whether owe taxes, etc competitor : they are looking for the information about its competitors suppliers, customers, labor unions: seek the information to meet it own needs

e. e. e.

KPMG, LLP One is the audited management's assessment for internal control, the other one is the audited for financial statement and related schedule audited internal control: audited management's assessment means General Mills has effective internal control to deliver financial reports. audited financial statement: the unqualified opinion means the financial statement was conducted according the U.S GAAP, and no material mistakes have been fund. auditor need to take time to get sufficient appropriate evidence to support auditor's opinion. And auditor report can not be dated earlier than he/she obtain sufficient appropriate evidence. So the reports are dated when auditor finished the filed-work.

e.

Analysis f.

Common-size income statement and balance sheets for 2006 and 2005 are attached later

g.i.

Assets= Liabilites+ Equity 18,207=11,299+1,136+5,772

g.ii

Goodwills, other intangible assets, and land, buildings, and equipment Short-term Asset: 17.44% Long-term Assets : 82.56% yes, it is approperate. General Mills has lots of PPE for production and goodwills for the brand name

g.iii. Intangible assets are assets that are lack of physical substance. For example, patents, goodwills, copyrights, etc are hard to evaluate the value. Goodwill is an intangible asset that come from purchase of one company by another company. It is the value of a company's reputation and brand.

Per note 1, Goodwill represents the difference between purchase prices of company and related fair value of net assets acquired from purchasing The goodwill, which is the brands of General Mills. Goodwills and other intangible assets are the two major intangible assets that reflected on balance sheet. The other intangible assets may reflected as purchased brands and patents. g.iv. long term finance through debt: non-owner fiance 32.7%. And also some from Internal finance through retained earning h.i.

revenue is recognizaed when customer acceptance the shipment, at the time of recognize revenue the sales promotion and return are recognized. it match the GAAP criteria with matching principle. The net sales are reflected when sales price are to be allocated in the term of sales.However, General Mille deosn not allow for returns, so return is recorded as a reduction to sales when they happen.

h.ii

Cost of sales 60%, selling, geneal and adminiton 22%, are the two major expenses

h.iii. The cost of sales decresed 1% from 60.8% to 59.8%, which lead to 1% of increase on gross profit. h.iv. it is one time thing and not related to the ordinary operation of business, so add into SG&A would be misleading. h.v.

Company were profitable for both 2006 and 2005 when a company's revenue can cover the operating expenses and non operating expenses, the company is considered as profitable. So, company can finance itself with the business activities, without other finance sources from stockhers and creditors

h.vi. from 2005 to 2006: from 2004 to 2005:

-12.10% 17.54%

h.vi. from 2005 to 2006: from 2004 to 2005:

7.22% -3.64%

i.i.

Net Earnings: $ 1,090 millions Net cash provided by operating activities: $ 1,771 millions The two differences come from the depreciation and amortization expense items, $424 million, which are not related to cash and net increase in non-cash working capital $184 million.

Difference $

681 million

i.ii.

General Mills purchased $360 millions of land, buildings and equipment on cash in 2006.

i.iii.

Paid dividend was $485 millions.

j.

estimated: goodwills, other intangible assets, accounts receviable, inventories, short-term and long-term investment, PP&E, deferred tax, long-term debt, retained earning, accrued litigation expense estimated free: cash, prepaid expenses, accounts payable, common stock outstanding. GAAP requires when company conducted financial statement, compoany must make assumption and estimation that affect reported amount on Consolidated Financial Statement

GENERAL MILLS, INC. AND SUBSIDIARIES Statement of Earnings Fiscal Year Ended Net Sales Cost of Sales Gross Profit Expenses Selling, general and administrative Interest, net Restructuring and other exit costs Divestitures(gain) Debt repurchase costs Total Costs and Expenses Earnings before income Taxes and After-tax Earnings from Joint Ventures Income Taxes After-tax Earnings from Joint Ventures Net Earings

May 28,2006 100% 59.8% 40.2%

May 29,2005 100% 60.8% 39.2%

23.0% 3.4% 0.3% 0.0% 0.0% 86.5%

21.5% 4.0% 0.7% -4.4% 1.2% 83.9%

13.5% 4.6% 0.5% 9.4%

16.1% 5.9% 0.8% 11.0%

GENERAL MILLS, INC. AND SUBSIDIARIES COMMON SIZE BALANCE SHEET May 28,2006 ASSETS Current Assets: Cash and cash equivalents Receivables Inventories Prepaid expenses and other current assets Deferred income taxes Total Current Assets

16.5% 36.5% 19.8% 9.7% 100.0%

3.2% 5.7% 5.7% 1.1% 1.2% 16.9% 0.0% 17.2% 37.0% 19.6% 9.3% 100.0%

LIABILITIES AND EQUITY Current Liabilities: Accounts payable Current portion of long-term debt Notes payable Other current liabilities Total Current Liabilities

6.3% 11.7% 8.3% 7.4% 33.7%

6.3% 9.1% 1.7% 6.1% 23.2%

Long-term Debt Deferred Income Taxes Other Liabilities Total Liabilities

13.3% 10.0% 5.1% 62.1%

23.6% 10.2% 5.4% 62.3%

6.2%

6.3%

0.0% 0.3% 31.5% 28.0%

0.0% 0.3% 31.5% 24.9%

-28.4% -0.5% 0.7% 31.7% 100.0%

-24.7% -0.6% 0.0% 31.4% 100.0%

Land, Buildings and Equipment Goodwill Other Intangible Assets Other Assets Total Assets

Minority Interests Stockholders' Equity: Cumulative preference stock, none issued Common stock, 502 shares issued Additional paid-in capital Retained earnings Common stock in treasury, at cost, shares of 146 in 2006 and 133 in 2005 Unearned compensation Accumulated other comprehensive income Total Stockholders' Equity Total Liabilities and Equity See accompanying notes to consolidated financial statements

3.6% 5.9% 5.8% 1.2% 1.0% 17.4%

May 29, 2005...