Analysis and Interpretation of Profitability Balance sheets and income statements for 3M Company follow. 3M COMPANY Consolidated Statements of Income For Years ended December 31 ($ millions) 2015 2014 2013 Net sales $30,274 $31,821 $30,871 Operating expenses Cost of sales 15,383 16,447 16,106 Selling, general and administrative expenses 6,182 6,469 6,384 Research, development and related expenses 1,763 1,770 1,715 Total operating expenses 23,328 24,686 24,205 Operating income 6,946 7,135 6,666 Interest expenses and income Interest expense 149 142 145 Interest income (26) (33) (41) Total interest expense--net 123 109 104 Income before income taxes 6,823 7,026 6,562 Provision for income taxes 1,982 2,028 1,841 Net income including noncontrolling interest $4,841 $4,998 $4,721 Less: Net income attributable to noncontrolling interest 8 42 62 Net income attributable to 3M $ 4,833 $4,956 $4,659 2015 2014 $1,798 $1,897 118 1,439 4,154 4,238 1,655 1,723 1,008 1,081 855 902 3M COMPANY Consolidated Balance Sheets At December 31 ($ millions, except per share amount) Current Assets Cash and cash equivalents Marketable securities-current Accounts receivable-net of allowances of $91 and 594 Inventories Finished goods Work in process Raw materials and supplies Total inventories Other current assets Total current assets Marketable securities-noncurrent Investments Property, plant and equipment Less: Accumulated depreciation Property, plant and equipment-net Goodwill Intangible assets-net Prepaid pension benefits Other assets 3,706 3,518 1,398 10.986 1,023 12,303 15 9 117 102 23,098 22,841 (14,583) (14,352) 8,515 8,489 9,249 7,050 2,601 1,435 188 46 1,053 1,769 Total assets $32,718 531,209 $2,044 1,694 $106 1,807 732 644 332 435 2,404 2,884 7,118 5,964 8,753 6,705 3,520 3,843 1,580 1,555 $20,971 $18,067 Liabilities Current liabilities Short-term borrowings and current portion of long-term debt Accounts payable Accrued payroll Accrued income taxes Other current liabilities Total current liabilities Long-term debt Pension and postretirement benefits Other liabilities Total liabilities Equity 3M Company shareholders' equity Common stock, par value $0.01 per share: Shares outstanding-2015: 609,330,124; Shares outstanding-2014: 635,134,594 Additional paid-in capital Retained earnings Treasury stock Accumulated other comprehensive income (loss) Total 3M Company shareholders' equity Noncontrolling interest Total equity Total liabilities and equity $9 $9 4,791 4,379 36,575 34,317 (23,308) (19,307) (6,359) (6,289) 11,708 13,109 39 33 $11,747 $13,142 $32,718 $31,209 (a) Compute net operating profit after tax (NOPAT) for 2015. Assume that the combined federal and statutory rate is: 37.0% (Round your answer to the nearest whole number.) 2015 NOPAT = 0 ($ millions) (b) Compute net operating assets (NOA) for 2015 and 2014. Treat noncurrent investments as a nonoperating item. 2015 NOA = 0 ($ millions) 2014 NOA = 0 ($ millions) (c) Compute 3M's RNOA, net operating profit margin (NOPM) and net operating asset turnover (NOAT) for 2015. (Round your answers to two decimal places. Do not round until your final answer. Do not use NOPM x NOAT to calculate RNOA.) 2015 RNOA = 0 % 2015 NOPM = 0 % 2015 NOAT = 0 (d) Compute net nonoperating obligations (NNO) for 2015 and 2014. 2015 NNO = 0 ($ millions) 2014 NNO = 0 ($ millions) (e) Compute return on equity (ROE) for 2015. (Round your answers to two decimal places. Do not round until your final answer.) 2015 ROE = 0 % (f) What is the nonoperating return component of ROE for 2015? (Round your answers to two decimal places.) 2015 nonoperating return = 0 % (g) Which of the following statements reflects the best inference we can draw from the difference between 3M's ROE and RNOA? OROE > RNOA implies that 3M has taken on too much financial leverage. OROE > RNOA implies that 3M is able to borrow money to fund operating assets that yield a return greater than its cost of debt. OROE > RNOA implies that 3M's equity has grown faster than its NOA. OROE > RNOA implies that 3M has increased its financial leverage during the period