AFS1-3 AFS1-2 Kraft Acquires Cadbury PLC LO 3 The following information from the financial statements of Kraft Foods and Cadbury PLC is available for the three years prior to their merger. Evaluate the performance of each company leading up to the year of the acquisition (2010). Note that Cadbury's financial statements are in millions of pounds, while Kraft's statements are in millions of dollars. Required: A. Evaluate the health of the target company and point out any trends that might have been worrisome to Kraft. Also indicate any strengths in the firm's performance. Hint: A supplemental appendix "Evaluating Firm Performance" is available from your instructor and may prove useful in addressing this question. Kraft Foods ($ millions) Balance Sheet Assets 2007 2008 2009 67,993 63,173 66,714 Total liabilities 40,698 40,817 40,742 Stockholders' equity 27,295 22,356 25,972 Selected Balance Sheet items Market value of equity 50,480 48,110 40,111 Current assets 10,737 9,917 12,454 Current liabilities 17,086 11,044 11,491 Accounts receivable 5,197 4,704 5,197 Inventory 4,096 3,881 3,775 Long-term debt 13,624 19,354 18,537 Retained earnings 12,209 13,440 14,636 Income Statement Total revenues 37,241 40,492 38,754 Cost of goods sold 24,651 27,164 24,819 Gross margin 12,590 13,328 13,935 Income continuing operations 2,590 1,678 2,810 Net income Selected Income Statement items Interest expense Tax expense 2,590 2,884 3,021 604 1,240 1,237 1,137 658 1,136