Formulating Financial Statements from Raw Data

Following is selected financial information from General Mills, Inc., for its fiscal year ended May 25, 2003 ($ millions):

Revenue $ 10,506 Cash from operating activities 1,631 Cash, beginning year 975 Stockholders' equity 4,475 Noncash assets 17,524 Cash from financing activities (885) Cost of goods sold 6,109 Total expenses (other than cost of goods sold) 3,480 Cash, ending year 703 Total liabilities 13,752 Cash from investing activities (1,018)

(a) Prepare the income statement, the balance sheet, and the statement of cash flows for General Mills for the fiscal year ended May 2003. 

Hint: Enter negative numbers only for answers in the statement of cash flows (if applicable). 

General Mills, Inc.

Income Statement ($ millions)

For Year Ended May 25, 2003

Revenue $Answer

Answer

Answer

Gross profit Answer

Answer

Answer

Net income $Answer

 

General Mills, Inc.

Balance Sheet ($ millions)

May 25, 2003

AssetsLiabilities Cash $Answer

Answer

Answer

Total assets $Answer

Total liabilities $Answer

Answer

Answer

Total liabilities and equity $Answer

 

General Mills, Inc.

Statement of Cash Flows ($ millions)

For Year Ended May 25, 2003

Cash from operating activities $Answer

Answer

Answer

Cash from financing activities Answer

Net change in cash Answer

Answer

Answer

Cash, ending year $Answer

(b) Does the negative amount for cash from financing activities concern us? Explain.

A negative amount for cash from financing activities implies that the company is unable to pay its debts as they come due and should be interpreted negatively.

A negative amount for cash from financing activities is the result of additional borrowings. Because the additional funds are invested in earnings-generating assets, this should be viewed positively.

A negative amount for cash from financing activities implies that the market value of the company's long-term debt has declined and this change should be viewed negatively.

A negative amount for cash from financing activities reflects the reduction of long-term debt, which is a positive sign of the company's ability to retire debt obligations.

(c) Using the statements prepared for part a. compute the following ratios (for this part only, use the year-end balance instead of the average for assets and stockholders' equity):

Round answers to two decimal places (example for percentage answers: 0.12345 = 12.35%).

(i) Profit margin

Answer

%

(ii) Asset turnover 

Answer

(iii) Return on assets

Answer

%

(iv) Return on equity

Answer

%