Base your answers to the following questions on the 2009 financial statements for Michelin Group in Exhibit 1-8. This international French company manufactures and sells tires.
In Exhibit 1-8
CONSOLIDATED INCOME STATEMENT

a. Michelin has issued consolidated financial statements. What does the word "consoli­dated" at the top of a financial statement tell you about the company's structure?
b. Michelin prepared a classified balance sheet. Calculate the difference between the current assets and current liabilities at the end of 2009, and at the end of 2008. This amount is referred to as working capital. Did the company's working capital improve in 2009? Explain.
c. Find the following amounts in Michelin's statements (note that the amounts are in millions of Euros):
i. Sales revenues in 2009
ii. Cost of sales in 2009
iii. Interest expense (cost of debt) in 2008
iv. Income tax expense in 2009
v. Net income (earnings) in 2008
vi. Intangible assets at the end of 2009 (note that goodwill is an intangible asset)
vii. Trade receivables (accounts receivable) at the beginning of 2009
viii. Share capital at the end of 2009
ix. Property, plant, and equipment at the end of 2009
x. Cash produced from operating activities in 2009
xi. Cash payments to acquire intangibles and property, plant, and equipment in 2008
xii. Cash used for the payment of dividends in 2009
xiii. Cash produced or used for financing activities in 2009
d. Did Michelin finance the company's assets mainly from creditors (total liabilities) or from shareholders (shareholders' equity) in 2009? Support your answer with appro­priate calculations.
e. List the two largest sources of cash and the two largest uses of cash in 2009. (Consider cash generated from operating activities to be a single source or use of cash.)
f. Suggest some reasons why net income was ‚¬104 million in 2009, yet cash generated from operating activities was ‚¬2,123 million.
g. Because Michelin manufactures the tires it sells, it must devote resources to the development of new materials and designs for tires. This activity is called research and development. How much did Michelin spend in 2009 on research and development? Where did you find this amount? In terms of size, what percentage is research and development expense relative to gross income?

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Dec 31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 2009 14,807 lin EUR million, except per share Net sales Cost of sales Gross income datal 2007 16.867 15,590 10.527) (12,024) 11,760 (11,653) (10,835) 4,755 16.408 16,384 4,280 ,384 5,107 4,731 Sales and marketing expenses Research and development expenses General and administrative expenses Other operating income and expenses Operating income before non-recurring income and expenses Non-recurring profits Non-recurring expenses Operating income (1650) 1,730) 1.738) (1,799) 1.775) 506) (499) (561) (591)(565) (999) (48) 1,368 256 (50) 1,574 (1113) 161) (1069) 1,113),16) (1,069) (94 1,645 (965) (38) 1.338 149) (74) (326) 1,319 (220) 1,118 450 292) 40 (310) 30 294) 29 17 1,071 (315) 135 Cost of net debt Other financial income and expenses Share of profit/(loss) from associates Income before taxes (330) 207 520 1.300 (411) Income tax Net income 104 106 357 360 (299) 772 774 573 572 Attributable to Shareholders of the Company Attributable to non-controlling interests Earnings per share (in euros) Basic Diluted 0.71 0.71 2.46 2.46 5.32 5.22 .95 3.94 6.13 6.12