Analysis and Interpretation of Profitability<\/p>
Balance sheets and income statements for 3M Company follow.<\/p>
Consolidated Statements of Income <\/p>
Years ended December 31 ($ millions) <\/p>
2008 2007 2006 <\/p>
Net sales $25,269 $24,462 $22,923<\/p>
Operating expenses <\/p>
Cost of sales 13,379 12,735 11,713<\/p>
Selling, general and administrative expenses 5,245 5,015 5,066 <\/p>
Research, development and related expenses 1,404 1,368 1,522<\/p>
Loss\/(gain) from sale of business 23 (849) (1,074)<\/p>
Total operating expenses 20,051 18,269 17,227<\/p>
Operating income 5,218 6,193 5,969<\/p>
Interest expenses and income<\/p>
Interest expense 215 210 122 <\/p>
Interest income (105) (132) (51)<\/p>
Total interest expense 110 78 71<\/p>
Income before income taxes 5,108 6,115 5,625<\/p>
Provision for income taxes 1,588 1,964 1,723<\/p>
Net income including noncontrolling interest 3,520 4151 3902<\/p>
Less: Net income attributable to noncontrolling interest ,60 55 51<\/p>
Net income $ 3,460 $ 4,096 $ 3,851<\/p>
<\/p>
Consolidated Balance Sheets($ millions)<\/p>
2008 2007<\/p>
AssetsCurrent <\/p>
AssetsCash and cash equivalents $ 1,849 $ 1,896<\/p>
Marketable securities-current 373 579<\/p>
Accounts receivable-net 3,195 3,362<\/p>
Inventories<\/p>
Finished goods 1,505 1,349<\/p>
Work in process 851 880<\/p>
Raw materials and supplies 657 623<\/p>
Total inventories 3,013 2,852<\/p>
Other current assets 1,168 1,149<\/p>
Total current assets 9,598 9,838<\/p>
Marketable securities-noncurrent 352 480<\/p>
Investments 111 298<\/p>
Property, plant and equipment 18,812 18,390<\/p>
Less: Accumulated depreciation (11,926) (11,808)<\/p>
Property, plant and equipment-net 6,886 6,582<\/p>
Goodwill 5,753 4,589<\/p>
Intangible assets-net 1,398 801<\/p>
Prepaid pension benefits 36 1, 378<\/p>
Other assets 1,659 728<\/p>
Total assets $ 25,793 $ 24,694<\/p>
Liabilities<\/p>
Current liabilities<\/p>
Short-term borrowings and current portion of long-term debt $ 1,552 $ 901<\/p>
Accounts payable 1,301 1,505<\/p>
Accrued payroll 644 580<\/p>
Accrued income taxes 350 543<\/p>
Other current liabilities 1,992 1,833<\/p>
Total current liabilities 5,839 5,362<\/p>
Long-term debt 5,166 4,019<\/p>
Pension and postretirement benefits 2,847 ------<\/p>
--Other liabilities 1,637 3,566<\/p>
Total liabilities 15,489 12,947<\/p>
Equity3M Company shareholders' equity 9 9<\/p>
Additional paid-in capital 3,006 2,785<\/p>
Retained earnings 22,227 20,316<\/p>
Treasury stock (11,676) (10,520)<\/p>
Accumulated other comprehensive income (loss) (3,686) (843)<\/p>
Total 3M Company shareholders' equity 9,880 11,747<\/p>
Noncontrolling interest 424 ------<\/p>
--Total equity 10,304 11,747<\/p>
Total liabilities and equity $ 25,793 $ 24,694<\/p>
<\/p>
<\/p>
(a) Compute net operating profit after tax (NOPAT) for 2008. Assume that the combined federal and statutory rate is: 35.9% (Round your answer to the nearest whole number.)<\/p>
2008 NOPAT =Answer<\/p>
<\/p>
<\/p>
($ millions)<\/p>
<\/p>
(b) Compute net operating assets (NOA) for 2008 and 2007. Treat noncurrent Investments as a nonoperating item.<\/p>
2008 NOA =Answer<\/p>
<\/p>
<\/p>
($ millions)<\/p>
2007 NOA =Answer<\/p>
<\/p>
<\/p>
($ millions)<\/p>
<\/p>
(c) Compute 3M's RNOA, net operating profit margin (NOPM) and net operating asset turnover (NOAT) for 2008. (Round your answers to two decimal places. Do not round until your final answer. Do not use NOPM x NOAT to calculate RNOA.)<\/p>
2008 RNOA =Answer<\/p>
<\/p>
<\/p>
%<\/p>
2008 NOPM =Answer<\/p>
<\/p>
<\/p>
%<\/p>
2008 NOAT =Answer<\/p>
<\/p>
<\/p>
<\/p>
<\/p>
(d) Compute net nonoperating obligations (NNO) for 2008 and 2007.<\/p>
2008 NNO =Answer<\/p>
<\/p>
<\/p>
($ millions)<\/p>
2007 NNO =Answer<\/p>
<\/p>
<\/p>
($ millions)<\/p>
<\/p>
(e) Compute return on equity (ROE) for 2008. (Round your answers to two decimal places. Do not round until your final answer.)<\/p>
2008 ROE =Answer<\/p>
<\/p>
<\/p>
%<\/p>
<\/p>
(f) What is the nonoperating return component of ROE for 2008? (Round your answers to two decimal places.)<\/p>
2008 nonoperating return =Answer<\/p>
<\/p>
<\/p>
%<\/p>
<\/p>
(g) Which of the following statements reflects the best inference we can draw from the difference between 3M's ROE and RNOA?<\/p>
ROE > RNOA implies that 3M has taken on too much financial leverage.<\/p>
ROE > RNOA implies that 3M is able to borrow money to fund operating assets that yield a return greater than its cost of debt.<\/p>
ROE > RNOA implies that 3M's equity has grown faster than its NOA.<\/p>
ROE > RNOA implies that 3M has increased its financial leverage during the period.<\/p>", "transcribed_text": "", "related_book": { "title": "Entrepreneurship", "isbn": "1119563097, 9781119563099", "edition": "5th Edition", "authors": "Andrew Zacharakis, William D Bygrave", "cover_image": "https:\/\/dsd5zvtm8ll6.cloudfront.net\/si.question.images\/book_images\/2021\/11\/6192073f58970_0626192073ecba87.jpg", "uri": "\/textbooks\/entrepreneurship-5th-edition-9781119563099", "see_more_uri": "" }, "free_related_book": { "isbn": "069116567X", "uri": "\/textbooks\/the-essential-hirschman-1st-edition-978-0691165677-284872", "name": "The Essential Hirschman", "edition": "1st Edition" }, "question_posted": "2024-06-05 17:03:25", "see_more_questions_link": "\/study-help\/questions\/business-corporate-finance-2020-July-01", "step_by_step_answer": "The Answer is in the image, click to view ...", "students_also_viewed": [ { "url": "\/suppose-you-wanted-to-investigate-the-proportion-of-different-types", "description": "Suppose you wanted to investigate the proportion of different types of nuts in bags of mixed nuts. 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