Operating performance
1) A good friend who graduated from LSU, comes to stay for the weekend and wouldn't you know it, he' arrives when you are starting your ACCT 610 exam on General Mills. He excitedly proclaims, "Wow, with total Assets of $23,145.7 million, General Mills must have plowed all their past profits back into buying assets." You don't want to spoil a nice weekend, but you are dying to say2) Consider the operating profit for General Mills.
1) Was operating profit higher or lower in 2014 as compared to 2013? Pick one.
HIGHER LOWER
ii) What factors explain this change?
3) Consider General Mills' gross profit.
i) Calculate the gross profit margin for 2014 and 2012. (YES, this says 2012.)
ii) If the gross profit margin in 2014 had been the same as in 2012, what would General Mills have reported as "Operating profit" in 2014?
4) If "Net earnings attributable to General Mills" had been $2,200 million instead of $1,824.4 million and all other events during fiscal 2014 were unchanged, what would the balance in "Retained earnings" have been at May 25, 2014?
II Intangible assets
1) General Mills reports a total of $13,664.8 of"Goodwill" and "Other intangible assets" on the balance sheet. How much of this represents the value of the General Mills brand name?
2) Provide an approximation of the value of the intangible assets that are not recorded on General Mills' balance sheet.
III Nonoperating obligations
1) Consider Note 15 and the information on operating leases on page 80. Assume the following:
- The sub-lease receipts of $6 million will be received in 2015.
- The lease payments DUE after 2019 will be paid 50% in 2020 and 50% in 2021.
- The appropriate discount rate is 5%.
- Taxes are irrelevant. That is, ignore any tax implications.
Determine the amount that would be added to property, plant and equipment, if General Mills had capitalized these leases.
2) In your opinion, would adding these leases to the GIS balance sheet make a significant difference to the company's financial position? Your must present quantitative facts to support your conclusion.
IV Analysis
NOTE: FOR THIS EXAM CONSIDER REDEEMABLE INTEREST AS A TYPE OF EQUITY, THAT IS, TREAT IT AS YOU WOULD "NONCONTROLLING INTEREST."
a) Calculate Return on Equity (ROE) for 2014.
b) Calculate Return on Net Operating Assets (RNOA) for 2014.
c) Provide two explicit reasons that ROE and RNOA differ for General Mills for 2014.