Question
Consider the following income statement and comparative balance sheet. Income Statement - 3M Company (in millions) 12/31/2021 Net sales $35,355.0 Cost of sales 18,795.0 Selling,
Consider the following income statement and comparative balance sheet.
Income Statement - 3M Company | |
---|---|
(in millions) | 12/31/2021 |
Net sales | $35,355.0 |
Cost of sales | 18,795.0 |
Selling, general & administrative expenses | 7,197.0 |
Gain on business divestitures | 0.0 |
Research, development & other operating expenses | 1,994.0 |
Operating income | 7,369.0 |
Interest income (expense) | (462.0) |
Other income (expense) | 297.0 |
Income before income taxes | 7,204.0 |
Provision for income taxes | 1,285.0 |
Add: net income attributable to unconsolidated subsidiaries | 10.0 |
Net income including noncontrolling interest | 5,929.0 |
Less: net income (loss) attributable to noncontrolling interest | (8.0) |
Net income attributable to company | $5,921.0 |
Balance Sheet - 3M Company | ||
---|---|---|
(in millions) | 12/31/2021 | 12/31/2020 |
Assets: | ||
Cash & cash equivalents | $4,564.0 | $4,634.0 |
Short-term marketable securities | 201.0 | 404.0 |
Accounts receivable, net | 4,660.0 | 4,705.0 |
Inventories | 4,985.0 | 4,239.0 |
Prepaid assets | 654.0 | 675.0 |
Other current assets | 339.0 | 325.0 |
Total current assets | 15,403.0 | 14,982.0 |
Property, plant & equipment, net | 9,429.0 | 9,421.0 |
Operating lease right of use assets | 858.0 | 864.0 |
Goodwill | 13,486.0 | 13,802.0 |
Other intangible assets, net | 5,288.0 | 5,835.0 |
Deferred income tax asset | 581.0 | 871.0 |
Other long-term assets | 2,027.0 | 1,569.0 |
Total assets | $47,072.0 | $47,344.0 |
Liabilities: | ||
Current portion of long-term debt & other short-term debt | $1,307.0 | $806.0 |
Accounts payable | 2,994.0 | 2,561.0 |
Accrued payroll | 1,020.0 | 747.0 |
Accrued income taxes | 260.0 | 300.0 |
Operating lease liabilities, current | 263.0 | 256.0 |
Other current liabilities | 3,191.0 | 3,278.0 |
Total current liabilities | 9,035.0 | 7,948.0 |
Long-term debt, less current portion | 16,056.0 | 17,989.0 |
Pension & postretirement benefits | 2,870.0 | 4,405.0 |
Operating lease liabilities, long-term | 591.0 | 609.0 |
Other long-term liabilities | 3,403.0 | 3,462.0 |
Total liabilities | 31,955.0 | 34,413.0 |
Stockholders Equity: | ||
Common stock | 9.0 | 9.0 |
Additional paid-in capital | 6,429.0 | 6,162.0 |
Retained earnings | 45,821.0 | 43,761.0 |
Treasury stock, at cost | 30,463.0 | 29,404.0 |
Accumulated other comprehensive income (loss) | (6,750.0) | (7,661.0) |
Total equity to company shareholders | 15,046.0 | 12,867.0 |
Noncontrolling interest | 71.0 | 64.0 |
Total equity | 15,117.0 | 12,931.0 |
Total liabilities and equity | $47,072.0 | $47,344.0 |
Compute the following amounts for year 2021. Enter your responses below. Do not round intermediate calculations. a. Compute return on equity (ROE). [ Select ] ["12.54%", "42.42%", "39.48%", "33.09%", "37.33%"] b. Calculate ROE using the ROA and Financial Leverage (FL) components. (Financial leverage equals average total assets divided by average stockholders equity.)
ROE | = | ROA | FL | |
[ Select ] ["51.76%", "37.05%", "56.65%", "29.88%", "42.42%"] | = | [ Select ] ["16.75%", "35.60%", "12.54%", "46.84%", "9.78%"] | [ Select ] ["0.30", "2.64", "2.38", "2.95", "3.38"] |
c. Calculate ROA using the Profit Margin (PM) and Asset Turnover (AT) components.
ROA | = | PM | AT | |
[ Select ] ["56.65%", "31.77%", "39.40%", "12.54%", "42.42%"] | = | [ Select ] ["22.11%", "16.75%", "12.54%", "42.42%", "23.78%"] | [ Select ] ["0.99", "0.58", "0.75", "2.53", "1.34"] |
d. Confirm the full DuPont formula: ROE = PM AT FL.
ROE | = | PM | AT | FL | ||
[ Select ] ["51.76%", "56.65%", "29.88%", "42.42%", "37.05%"] | = | [ Select ] ["23.78%", "42.42%", "22.11%", "12.54%", "16.75%"] | [ Select ] ["0.99", "0.75", "0.58", "1.34", "2.53"] | [ Select ] ["2.38", "2.64", "3.38", "2.95", "0.30"] |
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