Midwestern Grain Company Financial Calculation & Analysis

Midwestern Grain Company is a producer of agricultural products and machinery for industrial as well as consumer farming markets. They have multiple locations throughout North Dakota, South Dakota, Nebraska and Iowa. The companys income statement is shown below.

Western Grains total assets are $4,357.1 million, and its equity is $1,718.4 million.

Consolidated Earnings and Retained Earnings Year Ended December 31

2018	In Millions
Sales	$6,295.40
Cost of goods sold	2,989.00
Selling and administrative expense	2,237.50
Operating profit	1,068.90
Interest expense	33.3
Other income (expense), net	(1.5)
Earnings before income taxes	1,034.10
Income taxes	353.4
Net earnings	680.7
(Net earnings per share)	$2.94
Retained earnings, beginning of year	3,033.90
Dividends paid	(305.2)
Retained earnings, end of year	$3,409.40

Questions:

1. Using the provided financial data, calculate the profit margin.

2.

Revisit your calculated answer for profit margin. Assume that the industry average for profit margin is 12%

Briefly evaluate Western Grain's profitability relative to the industry average. (HINT: In your evaluation, consider the type of company/industry, as well as how you might use words like, efficiency, profitability, earnings, utilization, cost comparability (of the type of assets), performance, etc. Proofread and spellcheck!)

• What is the company to average difference ? (subtract the two)
• Are they considered high/low?
• Is high/low considered good/bad?
• Speculate on what might drive these numbers to be higher or lower than industry averages.
• Why is this information useful?

3. Using the provided financial data, calculate the return on assets.

4.

Revisit your calculated answer for return on assets. Assume that the industry average for return on assets 18%

• Briefly evaluate Western Grain's profitability relative to the industry average. (HINT: In your evaluation, consider the type of company/industry, as well as how you might use words like, efficiency, profitability, earnings, utilization, cost comparability (of the type of assets), performance, etc. Proofread and spellcheck!)
  • What is the company to average difference ? (subtract the two)
  • Are they considered high/low?
  • Is high/low considered good/bad?
  • Speculate on what might drive these numbers to be higher or lower than industry averages.
  • Why is this information useful?

5. Using the provided financial data, calculate the return on equity.

6.

Revisit your calculated answer for return on equity. Assume that the industry average for return on equity 28%

• Briefly evaluate Western Grain's profitability relative to the industry average. (HINT: In your evaluation, consider the type of company/industry, as well as how you might use words like, efficiency, profitability, earnings, utilization, cost comparability (of the type of assets), performance, etc. Proofread and spellcheck!)
  • What is the company to average difference ? (subtract the two)
  • Are they considered high/low?
  • Is high/low considered good/bad?
  • Speculate on what might drive these numbers to be higher or lower than industry averages.
  • Why is this information useful?

7.

Different companies generate income in different ways. Therefore, different, but equivalent terms may be used in their financial statements.

True

False