In July 2015, H. J. Heinz Company and Kraft Foods Group completed their merger. The new company, named The Kraft Heinz Company (KHC), became the fifth largest food and beverage company in the world. Prior to the merger, Kraft had been much larger than Heinz in terms of sales, $18 billion versus $6 billion, but Heinz was larger in terms of assets. To complete the requirements below you will need to obtain Kraft Foods Group Inc.’s Form 10-K for 2014, the year before the acquisition, and KHC’s Form 10-K 2017, two years after the deal was closed. The 2014 Form 10-K for Kraft Foods can only be found on the SEC’s EDGAR website. Be sure to search and select Kraft Foods Group, not Kraft Heinz Company.

The 2017 Form 10-K for Kraft Heinz Company can be found on the EDGAR website on the company’s website, www.kraftheinzcompany.com, or through the EDGAR system.

Required

a. Compute the following ratios for 2014 and 2017. To make the computations simpler, use end-of-year amounts for total assets and total equity rather than averages. Also, changes to the federal income tax laws enacted in 2017 caused some unusual effects on KHC’s 2017 net earnings. Therefore, for this problem, use “Earnings before income taxes” instead of net earnings for computing the following ratios. Show your calculations.

Net margin                             Current ratio
Return on investment          Debt-to-assets ratio
Return on equity

b. Based on the ratios computed in Requirement a, comment on the apparent effects of Kraft’s merger with Heinz. Assume any significant change in these ratios was the result of the acquisition.

c. Based on this limited analysis, does it appear that the effects of the merger were good or bad for Kraft?