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A. General Mills Consolidated Statements of Earnings:
1. The recorded sale amount of
almost $8 billion is not the actual amount of cash collected. The
amount of $8 billion includes cash and credit sales.
2. Sales increased each year from 2000 to 2002. The difference
between the year 2000 and 2001 was a 5.35% increase (5,450-5,173/5,173
= .0535). The difference between the year 2001 and 2002 was a 45.85%
increase (7,949-5,450/5,450 = .4585).
3. The largest expense for General Mills for the years 2000, 2001,
and 2002 was the same; over 50% of the revenue each year went towards
the cost of sales. Sales in 2002 were the largest, about 7% more than
the two previous years.
2000: (2,698/5,173) = .522 = 52.2% 2001: (2,841/5,450 = .521 = 52.1%
2002: (4,767/7,949) = .599 = 59.9% 4. Net Income: 2000: $614 million
2001: $665 million 2002: $458 million When comparing the net income
figures for the past three years, it is seen that between 2000 and
2001, the net income increased by $51 million, but between 2001 and
2002, the net income decreased by $207 million.
5. A company's stock price is usually influenced by the amount of
net income because when finding the price of the stock, you must divide
the number of stocks by the net income. So, the higher the net income,
the lower the price of stocks, which is what buyers look for (means
better profit).
6. Even though General Mills paid dividends in 2000, 2001 and 2002,
the corresponding total dividend payments did not appear as an expense
on the income statement because dividends are not an expense; they are
a financing activity that is reported on the statement of stockholder's
equity. They are payments that are made to only the owners of the
company.
B. General Mills Consolidated Balance Sheets: 7. A company has
assets so that they have a location and equipment to operate/create a
business. Assets are resources that are controlled by a business.
Without assets, one cannot produce and/or run a company. The purpose of
assets are to keep track of expenses, what a company owns, like
equipment, inventory, cash etc., and creates value for the company.
8. The total amount of assets at the end of 2002 was $16,540 million.
9. When comparing the assets from the beginning of 2002 to the end,
we found that the percentage increase in assets was 224.89% (
16,540-5,091/5,091 = 2.2489 = 224.89%). Goodwill is the type of asset
that is responsible for the increase.
10. The two groups that have contributed assets to General Mills and
claims on the their assets are shareholders and lenders. Shareholders
have about $5,733 million in claims and the lenders have a claim of
$5,591 million.
C. General Mills Consolidated Statement of Stockholder's Equity: 11.
The General Mill's total stockholders increased significantly from May
27, 2001 to May 26, 2002 because they sold more stock.
12. Comprehensive income is the change in a company's owner's equity
during a period that is the result of all transactions and activities
that are not by the owner. These can include profits from operating
activities, foreign currency, net income, events that change owner's
equity except those from the company's own stockholders and selling
stock or paying dividends.
D. General Mills Consolidated Statement of Cash Flows: 13. There are
three categories of cash flows shown on the company's cash flow
statement. They are the following: 1. Operating activities 2. Investing
activities 3. Financial activities 14. When comparing the net income
figure to the amount of net cash provided by operating activities for
each of the three years, one observes that the net income went up in
the first two years and than decreased between the second and the third
year. The net cash from operating activities increased each year, but
its greatest growth was between the second and the third year. So, when
the net income was the lowest, the net cash from operating activities
was the greatest.
15. Net cash provided by Net cash used by operating activities
investment activities 2000: $722 million (564 million) 2001: $737
million (460 million) 2002: $913 million(3,271 million) It is clear to
see that in the year 2000 and 2001, operating activities was large
enough to cover the investing cash outflow, but in 2002, the investing
cash outflow exceeded far past the amount of net cash provided by
operating activities. Loans were used to make up the difference.
16. When comparing the dividend payments to the income amounts for
the current year, we found that the dividend payout ratio for 2002 was
78.2% (358/458 = .7816 = 78.2) E. General Mills Report of Management
Responsibilities and Reports of Independent Public Accountants: 17. The
management of General Mills, Inc. is responsible for the accounting
numbers in the annual report.
18. For safeguards, General Mills used internal controls to ensure
the accuracy of the reported numbers, including: an audit program, a
separation of duties and responsibilities, and instated policies that
demand ethical behavior from employees.
19. The independent accountant does not say that the reported
amounts are correct, but does state that they are reported fairly. "We
believe these consolidated financial statements do not misstate or omit
any material facts... In our opinion, the consolidated financial
statements referred to above present fairly, in all material
respects..." The CPA assures that the statements are in accordance with
the GAAP.
20. General Mills hired a CPA (Certified Public Accountant) to audit
the financial statements to ensure accuracy and to verify that the
numbers on the statements (disclosures made by the management in its
reports) are consistent with the company's actual financial position,
cash flow, and results from its operating activities.
21. General Mills hired KPMG LLP as their accountant to audit their
financial statements. The report of the independent accountants that
performed this was signed on June 24, 2002.
F. General Mills Financial Statements: 22. General Mills major
operating activities during 2002 were net sales, selling, general, and
administrative, and cost of goods. The major difference between accrual
and the cash flow of these activities is that accrual includes cash and
credit, where these major operating activities only include cash.
Accrual accounts for all, while the cash flow doesn't account for
credit sales until the money is collected.
23. General Mills return on total assets for 2001 was 13.1%
(665/5,091= .1306) and in 2002, the return on total assets was 2.8%
(458/16,540 = .0276). The return on total assets deteriorated from 2001
by 10.3% (.1306-.0276 = .103) 24. If you owned 10,000 of the company's
common stock in 2002, your claim on the company's earnings would be
$13,800 (10,000 x 1.38 ( EPS-basic) = 13,800). If you were to own
10,000 of the company's common stock in 2001, your claim would be
greater than your claim if you would to purchase them in 2002 by
$9,600, making your claim in 2001 $23,400. (10,000 x 2.34 (EPS-basic) =
23,400).
25. The major source of cash for General Mills in 2002 was the
issuance of long-term debt. With the cash they received, they were able
to purchase Pillsbury (acquired in a stock and cash transaction).
26. Major financing activities performed in 2002 was the change in
long-term debt. They increased their amount of debt while paying off
some of their notes payable. They also purchased some treasury stocks.
In the year 2002, their net cash increased incredibly, by about $3,500
million, which was one of the biggest increases recorded over the
previous years for net cash.
27. A major investing activity that occurred in 2002 was when General Mills purchased Pillsbury.
28. At the end of 2002, the company's most important assets were:
inventories, goodwill, receivables, and land, buildings, and equipment.
Other resources that might be important that aren't reported on the
balance sheet are the skills and level of intelligence of the
management and the employees, as well as the value of the brand name
29. If asked to assess the company's financial performance of General
Mills in 2002, I would have to say that they were very successful.
Their financial activities show that they are a growing and prosperous
company; their operating and financing activities are increasing and
the investing cash flows decreasing, keeping the inflow larger than the
outflow. Their successfulness opens many new opportunities for them in
the future.
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