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 Net income attributable to 3M $ 4,833 $ 4,956 $ 4,659 - 42 - 62 3M COMPANY 3M COMPANY Consolidated Balance Sheets At December 31 ($ millions, except per share amount) 2015 2014 Current Assets Cash and cash equivalents $1,798 $1,897 Marketable securities-current 118 1,439 Accounts receivable-net of allowances of $91 and $94 4,154 4,238 Inventories Finished goods 1,655 1,723 Work in process 1,008 1,081 Raw materials and supplies 855 902 Total inventories 3,518 3,706 Other current assets 1,398 1,023 Total current assets 10,986 12,303 Marketable securities-noncurrent 9 15 Investments 117 102 Property, plant and equipment 23,098 22,841 Less: Accumulated depreciation (14,583) (14,352) Property, plant and equipment-net 8,515 8,489 Goodwill 9,249 7,050 Intangible assets-net 2,601 1,435 Prepaid pension benefits 188 46 Other assets 1,053 1,769 Total assets $32,718 $31,209 Liabilities Current liabilities Short-term borrowings and current portion of long-term debt $2,044 $106 Accounts payable 1,694 1,807 Accrued payroll 644 732 Accrued income taxes 332 435 Other current liabilities 2,404 2,884 753 704 Total current liabilities Long-term dett Pension and postretirement benefit Other Totallaties Equity u Company shareholders equity au share Shares outing 2015 30.12 Shares standing-2014 6.134594 Aditional paid in capital Accumulated other comprehensive income Total 3M Company shareholders equity Noncontrolling interest 55 41 23.308 (12.10 1635952 11.708 2109 Tot s and equity $32.718 5 200 (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- millions) (b) Compute net operating assets (NOA) for 2015 and 2014. Treat noncurrent investments as a nonoperating item 2015 NOA is milions 2014 NOA is millions (c) Compute 3M'S RNDA, net operating profit margin INOPM) and net operating asset turnover (NOT) 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 2015 NOPM 2015 NOAT Support (d) Compute net nonoperating obligations (NNO) for 2015 and 2014. 2015 NNO- 5 millions) 2014 NNO- is millions) le) Compute return on equity (ROE) for 2015. (Round your answers to two decimal places. Do not round until your final answer.) 2015 ROE c) What is the nonoperating return component of ROE for 20157 (Round your answers to two decimal places) Hint: Use your prior rounded answers to compute this answer 2015 nonoperating return (1) What is the nonoperating return component of ROE for 2015? (Round your answers to two decimal places.) Hint: Use your prior rounded answers to compute this answer. 2015 nonoperating return 6) Which of the following statements reflects the best inference we can draw from the difference between 3M'S ROE and RNOA? ROE > RNOA implies that 3M has taken on too much financial leverage. ROERNOA implies that 3M is able to borrow money to fund operating assets that yield a return greater than its cost of debt. ROE > RNOA implies that 3M's equity has grown faster than its NOA ROE > RNOA implies that 3M has increased its financial leverage during the period
