Kellogg Company Kellogg Company has its headquarters in Battle Creek, Michigan. The company manufactures and sells ready-to-eat breakfast cereals and convenience foods including cookies, toaster pastries, and cereal bars.

Selected data from Kellogg Company’s 2001 annual report follows (dollar amounts in millions).

In its 2001 annual report, Kellogg Company discussed its strategies for “creating more value in the future.”
One of the principles designed to drive growth relates to the use of accounting measures:
Set the Right Targets and Measures—Set targets that are both challenging and realistic and which do not risk long-term health for short-term gains.
Specifically, Kellogg has established performance incentives based on net sales, operating profit, and cash flow.

Instructions

(a) Compute the percentage change in sales, operating profit, net cash flow, and net earnings from year to year for the years presented.

(b) Evaluate Kellogg’s performance. Which trend seems most favorable? Which trend seems least favorable?
What are the implications of these trends for Kellogg’s objective to “create more value in the future”? Explain.

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Net sales Operating profit Net cash flow provided by operations less capital expenditures Net earnings 2001 2000 1999 $8,853.3 $6,954.7 $6,984.2 1,167.9 989.8 828.8 855.5 650.0 529.0 473.6 587.7 338.3