Analysis and Interpretation of ProfitabilityBalance sheets and income statements for 3M Company follow.3M COMPANY...Analysis...

90.2K

Verified Solution

Question

Accounting

Analysis and Interpretation of Profitability
Balance sheets and income statements for 3M Company follow.
3M COMPANY
Consolidated Statementsof Income
For Years ended December 31 ($millions) 2015 2014 2013
Net sales $30,274 $31,821 $30,871
Operating expenses
Cost of sales 15,383 16,447 16,106
Selling, general and administrative expenses 6,182 6,469 6,384
Research, development and related expenses 1,763 1,770 1,715
Total operating expenses 23,328 24,686 24,205
Operating income 6,946 7,135 6,666
Interest expenses and income
Interest expense 149 142 145
Interest income (26) (33) (41)
Total interest expense--net 123 109 104
Income before income taxes 6,823 7,026 6,562
Provision for income taxes 1,982 2,028 1,841
Net income including noncontrolling interest $4,841 $4,998 $4,721
Less: Net income attributable to noncontrolling interest 8 42 62
Net income attributable to 3M $ 4,833 $ 4,956 $ 4,659
3M COMPANY
Consolidated BalanceSheets
At December 31 ($ millions, exceptper share amount) 2015 2014
Current Assets
Cash and cash equivalents $1,798 $1,897
Marketable securities-current 118 1,439
Accounts receivable-net of allowances of $91 and $94 4,154 4,238
Inventories
Finished goods 1,655 1,723
Work in process 1,008 1,081
Raw materials and supplies 855 902
Total inventories 3,518 3,706
Other current assets 1,398 1,023
Total current assets 10,986 12,303
Marketable securities-noncurrent 9 15
Investments 117 102
Property, plant and equipment 23,098 22,841
Less: Accumulated depreciation (14,583) (14,352)
Property, plant and equipment-net 8,515 8,489
Goodwill 9,249 7,050
Intangible assets-net 2,601 1,435
Prepaid pension benefits 188 46
Other assets 1,053 1,769
Total assets $32,718 $31,209
Liabilities
Current liabilities
Short-term borrowings and current portion of long-termdebt $2,044 $106
Accounts payable 1,694 1,807
Accrued payroll 644 732
Accrued income taxes 332 435
Other current liabilities 2,404 2,884
Total current liabilities 7,118 5,964
Long-term debt 8,753 6,705
Pension and postretirement benefits 3,520 3,843
Other liabilities 1,580 1,555
Total liabilities $20,971 $18,067
Equity
3M Company shareholders' equity
Common stock, par value $0.01 per share:
Shares outstanding-2015: 609,330,124;
Shares outstanding-2014: 635,134,594 $9 $9
Additional paid-in capital 4,791 4,379
Retained earnings 36,575 34,317
Treasury stock (23,308) (19,307)
Accumulated other comprehensive income (loss) (6,359) (6,289)
Total 3M Company shareholders' equity 11,708 13,109
Noncontrolling interest 39 33
Total equity $11,747 $13,142
Total liabilities and equity $32,718 $31,209

(a) Compute net operating profit after tax (NOPAT) for 2015. Assumethat the combined federal and statutory rate is: 37.0% (Round youranswer to the nearest whole number.)
2015 NOPAT =Answer($ millions)

(b) Compute net operating assets (NOA) for 2015 and 2014. Treatnoncurrent investments as a nonoperating item.
2015 NOA =Answer($ millions)
2014 NOA =Answer($ millions)

(c) Compute 3M's RNOA, net operating profit margin (NOPM) and netoperating asset turnover (NOAT) for 2015. (Round your answers totwo decimal places. Do not round until your final answer. Do notuse NOPM x NOAT to calculate RNOA.)
2015 RNOA =Answer%
2015 NOPM =Answer%
2015 NOAT =Answer

(d) Compute net nonoperating obligations (NNO) for 2015 and2014.
2015 NNO =Answer($ millions)
2014 NNO =Answer($ millions)

(e) Compute return on equity (ROE) for 2015. (Round your answers totwo decimal places. Do not round until your final answer.)
2015 ROE =Answer%

(f) What is the nonoperating return component of ROE for 2015?(Round your answers to two decimal places.)
2015 nonoperating return =Answer%

(g) Which of the following statements reflects the best inferencewe can draw from the difference between 3M's ROE and RNOA?
ROE > RNOA implies that 3M has taken on too much financialleverage.
ROE > RNOA implies that 3M is able to borrow money to fundoperating assets that yield a return greater than its cost ofdebt.
ROE > RNOA implies that 3M's equity has grown faster than itsNOA.
ROE > RNOA implies that 3M has increased its financialleverage during the period.

3M COMPANY
Net sales	$30,274	$31,821	$30,871
Operating expenses
Cost of sales	15,383	16,447	16,106
Selling, general and administrative expenses	6,182	6,469	6,384
Research, development and related expenses	1,763	1,770	1,715
Total operating expenses	23,328	24,686	24,205
Operating income	6,946	7,135	6,666
Interest expenses and income
Interest expense	149	142	145
Interest income	(26)	(33)	(41)
Total interest expense--net	123	109	104
Income before income taxes	6,823	7,026	6,562
Provision for income taxes	1,982	2,028	1,841
Net income including noncontrolling interest	$4,841	$4,998	$4,721
Less: Net income attributable to noncontrolling interest	8	42	62
Net income attributable to 3M	$ 4,833	$ 4,956	$ 4,659

3M COMPANY
Current Assets
Cash and cash equivalents	$1,798	$1,897
Marketable securities-current	118	1,439
Accounts receivable-net of allowances of $91 and $94	4,154	4,238
Inventories
Finished goods	1,655	1,723
Work in process	1,008	1,081
Raw materials and supplies	855	902
Total inventories	3,518	3,706
Other current assets	1,398	1,023
Total current assets	10,986	12,303
Marketable securities-noncurrent	9	15
Investments	117	102
Property, plant and equipment	23,098	22,841
Less: Accumulated depreciation	(14,583)	(14,352)
Property, plant and equipment-net	8,515	8,489
Goodwill	9,249	7,050
Intangible assets-net	2,601	1,435
Prepaid pension benefits	188	46
Other assets	1,053	1,769
Total assets	$32,718	$31,209
Liabilities
Current liabilities
Short-term borrowings and current portion of long-termdebt	$2,044	$106
Accounts payable	1,694	1,807
Accrued payroll	644	732
Accrued income taxes	332	435
Other current liabilities	2,404	2,884
Total current liabilities	7,118	5,964
Long-term debt	8,753	6,705
Pension and postretirement benefits	3,520	3,843
Other liabilities	1,580	1,555
Total liabilities	$20,971	$18,067
Equity
3M Company shareholders' equity
Common stock, par value $0.01 per share:
Shares outstanding-2015: 609,330,124;
Shares outstanding-2014: 635,134,594	$9	$9
Additional paid-in capital	4,791	4,379
Retained earnings	36,575	34,317
Treasury stock	(23,308)	(19,307)
Accumulated other comprehensive income (loss)	(6,359)	(6,289)
Total 3M Company shareholders' equity	11,708	13,109
Noncontrolling interest	39	33
Total equity	$11,747	$13,142
Total liabilities and equity	$32,718	$31,209

Answer & Explanation Solved by verified expert

3.8 Ratings (733 Votes)

Part A 2015 NOPAT 6946 operating income 1982 provision for interest income taxes 123 total interest expensenet 037 6946 1982123037 4918 Part B 2015 NOA 32718 total assets 1798 Cash and equivalents 118 Marketable securities 117 See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

In: AccountingAnalysis and Interpretation of ProfitabilityBalance sheets and income statements for 3M Company follow.3M COMPANY...Analysis and Interpretation of ProfitabilityBalance sheets and income statements for 3M Company follow.3M COMPANYConsolidated Statementsof IncomeFor Years ended December 31 ($millions)201520142013Net sales$30,274$31,821$30,871Operating expensesCost of sales15,38316,44716,106Selling, general and administrative expenses6,1826,4696,384Research, development and related expenses1,7631,7701,715Total operating expenses23,32824,68624,205Operating income6,9467,1356,666Interest expenses and incomeInterest expense149142145Interest income(26)(33)(41)Total interest expense--net123109104Income before income taxes6,8237,0266,562Provision for income taxes1,9822,0281,841Net income including noncontrolling interest$4,841$4,998$4,721Less: Net income attributable to noncontrolling interest84262Net income attributable to 3M$ 4,833$ 4,956$ 4,6593M COMPANYConsolidated BalanceSheetsAt December 31 ($ millions, exceptper share amount)20152014Current AssetsCash and cash equivalents$1,798$1,897Marketable securities-current1181,439Accounts receivable-net of allowances of $91 and $944,1544,238InventoriesFinished goods1,6551,723Work in process1,0081,081Raw materials and supplies855902Total inventories3,5183,706Other current assets1,3981,023Total current assets10,98612,303Marketable securities-noncurrent915Investments117102Property, plant and equipment23,09822,841Less: Accumulated depreciation(14,583)(14,352)Property, plant and equipment-net8,5158,489Goodwill9,2497,050Intangible assets-net2,6011,435Prepaid pension benefits18846Other assets1,0531,769Total assets$32,718$31,209LiabilitiesCurrent liabilitiesShort-term borrowings and current portion of long-termdebt$2,044$106Accounts payable1,6941,807Accrued payroll644732Accrued income taxes332435Other current liabilities2,4042,884Total current liabilities7,1185,964Long-term debt8,7536,705Pension and postretirement benefits3,5203,843Other liabilities1,5801,555Total liabilities$20,971$18,067Equity3M Company shareholders' equityCommon stock, par value $0.01 per share:Shares outstanding-2015: 609,330,124;Shares outstanding-2014: 635,134,594$9$9Additional paid-in capital4,7914,379Retained earnings36,57534,317Treasury stock(23,308)(19,307)Accumulated other comprehensive income (loss)(6,359)(6,289)Total 3M Company shareholders' equity11,70813,109Noncontrolling interest3933Total equity$11,747$13,142Total liabilities and equity$32,718$31,209(a) Compute net operating profit after tax (NOPAT) for 2015. Assumethat the combined federal and statutory rate is: 37.0% (Round youranswer to the nearest whole number.)2015 NOPAT =Answer($ millions)(b) Compute net operating assets (NOA) for 2015 and 2014. Treatnoncurrent investments as a nonoperating item.2015 NOA =Answer($ millions)2014 NOA =Answer($ millions)(c) Compute 3M's RNOA, net operating profit margin (NOPM) and netoperating asset turnover (NOAT) for 2015. (Round your answers totwo decimal places. Do not round until your final answer. Do notuse NOPM x NOAT to calculate RNOA.)2015 RNOA =Answer%2015 NOPM =Answer%2015 NOAT =Answer(d) Compute net nonoperating obligations (NNO) for 2015 and2014.2015 NNO =Answer($ millions)2014 NNO =Answer($ millions)(e) Compute return on equity (ROE) for 2015. (Round your answers totwo decimal places. Do not round until your final answer.)2015 ROE =Answer%(f) What is the nonoperating return component of ROE for 2015?(Round your answers to two decimal places.)2015 nonoperating return =Answer%(g) Which of the following statements reflects the best inferencewe can draw from the difference between 3M's ROE and RNOA?ROE > RNOA implies that 3M has taken on too much financialleverage.ROE > RNOA implies that 3M is able to borrow money to fundoperating assets that yield a return greater than its cost ofdebt.ROE > RNOA implies that 3M's equity has grown faster than itsNOA.ROE > RNOA implies that 3M has increased its financialleverage during the period.

3M COMPANY
Consolidated Statementsof Income
For Years ended December 31 ($millions)	2015	2014	2013
Net sales	$30,274	$31,821	$30,871
Operating expenses
Cost of sales	15,383	16,447	16,106
Selling, general and administrative expenses	6,182	6,469	6,384
Research, development and related expenses	1,763	1,770	1,715
Total operating expenses	23,328	24,686	24,205
Operating income	6,946	7,135	6,666
Interest expenses and income
Interest expense	149	142	145
Interest income	(26)	(33)	(41)
Total interest expense--net	123	109	104
Income before income taxes	6,823	7,026	6,562
Provision for income taxes	1,982	2,028	1,841
Net income including noncontrolling interest	$4,841	$4,998	$4,721
Less: Net income attributable to noncontrolling interest	8	42	62
Net income attributable to 3M	$ 4,833	$ 4,956	$ 4,659

3M COMPANY
Consolidated BalanceSheets
At December 31 ($ millions, exceptper share amount)	2015	2014
Current Assets
Cash and cash equivalents	$1,798	$1,897
Marketable securities-current	118	1,439
Accounts receivable-net of allowances of $91 and $94	4,154	4,238
Inventories
Finished goods	1,655	1,723
Work in process	1,008	1,081
Raw materials and supplies	855	902
Total inventories	3,518	3,706
Other current assets	1,398	1,023
Total current assets	10,986	12,303
Marketable securities-noncurrent	9	15
Investments	117	102
Property, plant and equipment	23,098	22,841
Less: Accumulated depreciation	(14,583)	(14,352)
Property, plant and equipment-net	8,515	8,489
Goodwill	9,249	7,050
Intangible assets-net	2,601	1,435
Prepaid pension benefits	188	46
Other assets	1,053	1,769
Total assets	$32,718	$31,209
Liabilities
Current liabilities
Short-term borrowings and current portion of long-termdebt	$2,044	$106
Accounts payable	1,694	1,807
Accrued payroll	644	732
Accrued income taxes	332	435
Other current liabilities	2,404	2,884
Total current liabilities	7,118	5,964
Long-term debt	8,753	6,705
Pension and postretirement benefits	3,520	3,843
Other liabilities	1,580	1,555
Total liabilities	$20,971	$18,067
Equity
3M Company shareholders' equity
Common stock, par value $0.01 per share:
Shares outstanding-2015: 609,330,124;
Shares outstanding-2014: 635,134,594	$9	$9
Additional paid-in capital	4,791	4,379
Retained earnings	36,575	34,317
Treasury stock	(23,308)	(19,307)
Accumulated other comprehensive income (loss)	(6,359)	(6,289)
Total 3M Company shareholders' equity	11,708	13,109
Noncontrolling interest	39	33
Total equity	$11,747	$13,142
Total liabilities and equity	$32,718	$31,209