Formulating Financial Statements from Raw Data 

Formulating Financial Statements from Raw Data 

Formulating Financial Statements from Raw Data 
Following is selected financial information from General Mills, Inc., for its fiscal year ended May 30, 2004 ($ millions):

Revenue $ 11,070
Cash from operating activities 1,461
Cash, beginning year 703
Stockholders’ equity 5,547
Noncash assets 17,697
Cash from financing activities* (943)
Cost of goods sold 6,584
Total expenses (other than cost of goods sold) 3,431
Cash, ending year 751
Total liabilities 12,901
Cash from investing activities (470)

*Cash from financing activities includes the effects of foreign exchange rate fluctuations.

 

 

(a) Prepare the income statement, the balance sheet, and the statement of cash flows for General Mills for the fiscal year ended May 2004.

Formulating Financial Statements from Raw Data  Following is selected financial information from General Mills, Inc., for its fiscal year ended May 30, 2004 ($ millions): Formulating Financial Statements from Raw Data  Following is selected financial information from General Mills, Inc., for its fiscal year ended May 30, 2004 ($ millions): Formulating Financial Statements from Raw Data  Following is selected financial information from General Mills, Inc., for its fiscal year ended May 30, 2004 ($ millions):

<strong>(b) Does the negative amount for cash from financing activities concern us? Explain. strong>

  1. A negative amount for cash from financing activities implies that the company is unable to pay its debts as they come due and should be interpreted negatively.
  2. A negative amount for cash from financing activities is the result of additional borrowings. Because the additional funds are invested in earnings-generating assets, this should be viewed positively.
  3. A negative amount for cash from financing activities implies that the market value of the company’s long-term debt has declined and this change should be viewed negatively.
  4. A negative amount for cash from financing activities reflects the reduction of long-term debt, which is a positive sign of the company’s ability to retire debt obligations.

Correct answer:

A negative amount for cash from financing activities reflects the reduction of long-term debt, which is a positive sign of the company’s ability to retire debt obligations.

 

Formulating Financial Statements from Raw Data 
Following is selected financial information from General Mills, Inc., for its fiscal year ended May 30, 2004 ($ millions):

Revenue $ 11,070
Cash from operating activities 1,461
Cash, beginning year 703
Stockholders’ equity 5,547
Noncash assets 17,697
Cash from financing activities* (943)
Cost of goods sold 6,584
Total expenses (other than cost of goods sold) 3,431
Cash, ending year 751
Total liabilities 12,901
Cash from investing activities (470)

*Cash from financing activities includes the effects of foreign exchange rate fluctuations.

 

 

c) Using the statements prepared for part a. compute the following ratios

(for this part only, use the year-end balance instead of the average for assets and stockholders’ equity):

Round answers to two decimal places (example for percentage answers: 0.12345 = 12.35%).

Solution-c

Profit margin ==$237 / $4,511

 

Profit margin = 5.25%

 

Asset turnover =$4,511 / $2,987

 

Asset turnover = 1.51

 

Return on assets=$237 / $2,987

 

Return on assets = 7.93% (5.25% ×1.51)

 

Return on equity =$237 / $1,818

 

Return on equity = 13.04%

 

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