Kellogg Corporation is the world’s leading producer of ready-to-eat cereal products. In recent years the company has taken numerous steps aimed at improving its profitability and earnings per share. Presented below are some basic facts for Kellogg Corporation.

Instructions

(a) What are some of the reasons that management purchases its own stock?

(b) Explain how earnings per share might be affected by treasury stock transactions.

(c) Calculate the ratio of debt to total assets for 2003 and 2004, and discuss the implications of the change.

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(all dollars in millions) 2004 2003 Net sales $9,614 $8,812 Net earnings 891 787 Total assets 10,790 10,143 Total liabilities 8,533 8,699 Common stock, $0.25 par value 104 104 Capital in excess of par value 25 Retained earnings 2,701 2,248 Treasury stock, at cost 108 204 Number of shares outstanding 413 410 (in millions)