Comparing Two Companies in the Same Industry:

Kellogg’s and General Mills Refer to the fi nancial information for Kellogg’s and General Mills reproduced at the end of this book and answer the following questions:

Required 1. Are Kellogg’s and General Mills merchandisers, manufacturers, or service providers?

2. What is the dollar amount of inventories that each company reports on its balance sheet at the end of the most recent year? What percentage of total assets do inventories represent for each company?

3. Refer to Note 1 in Kellogg’s annual report. What inventory valuation method does the company use? What is the advantage to the company of using this method?

4. Refer to Note 1 in General Mills’s annual report. What inventory valuation method(s) does the company use? Does the fact that Kellogg’s and General Mills use different methods make it diffi cult to compare the two companies?

5. Given the nature of their businesses, which inventory system, periodic or perpetual, would you expect both Kellogg’s and General Mills to use? Explain your answer.

AppendixLO1