Relating net income to balance sheet changes. The comparative balance sheet for Nestl, a Swiss consumer foods

Relating net income to balance sheet changes. The comparative balance sheet for Nestlé, a Swiss consumer foods company, for Year 4, Year 5, and Year 6 appears on the next page (amounts in millions of Swiss francs).

Dividends declared and paid were SF617 during Year 5 and SF740 during Year 6.

a. Compute net income for Year 5 and Year 6 by analyzing the change in retained earnings.

b. Demonstrate that the following relation holds:

\[ \begin{aligned} \text { Net Income }= & \text { Increase in Assets }- \text { Increase in Liabilities } \\ & - \text { Increase in Contributed Capital }+ \text { Dividends } \end{aligned} \]

Transcribed Image Text:

NESTL Comparative Balance Sheet December 31, Year 4, Year 5, and Year 6 Total Assets December 31 Year 4 Year 5 SF39,209 SF41,205 Year 6 SF41,436 Liabilities 21,760 22,395 21,470 Common Stock Retained Earnings 353 17,096 371 18,439 371 19,595 Total Liabilities and Shareholders' Equity.... SF39,209 SF41,205 SF41,436