Nestls financial statements are presented in Appendix B. Financial statements of Delfi Limited are presented in Appendix C.

a. Based on the information contained in these financial statements, compute the following ratios for each company for the most recent year shown.

1. Inventory turnover. (Round to one decimal.)

2. Days in inventory. (Round to nearest day.)

b. What conclusions concerning the management of the inventory can you draw from these data?

APPENDIX B Specimen Financial Statements: Nestl SA Consolidated income statement for the year ended 31 December 2016 In millions of CHF Notes 2016 89 469 2015 88 785 Sales 3 298 (44 730) 17 899) (20 744) Other revenue Cost of goods sold Distribution expenses Marketing and administration expenses Research and development costs Other trading income Other trading expenses Trading operating profit 317 (44 199) (8 059) (21 485) (1 736) 99 (713) 13 693 (1 678) 4 78 (728) ) 13 382 3 4 354 Other operating income Other operating expenses Operating profit (884) 13 163 126 (1 100) 12 408 101 Financial income Financial expense Profit before taxes, associates and joint ventures 121 (758) ) 12 526 (725) 11 784 13 14 Taxes Income from associates and joint ventures Profit for the year of which attributable to non-controlling interests of which attributable to shareholders of the parent (Net profit) (4 4131 770 8 883 352 9531 (3 305) 988 9 467 401 9066 As percentages of sales Trading operating profit Profit for the year attributable to shareholders of the parent (Net profit) 15 3% 9.5% 15.1% 10.2% Earnings per share (in CHF) Basic earnings per share Diluted earnings per share 15 2.76 2.75 2.90 2.89 5 B-1 B-2 APPENDIX B Specimen Financial Statements: Nestl SA Consolidated statement of comprehensive income for the year ended 31 December 2016 In millions of CHF Notes 2016 8 883 2015 9467 Profit for the year recognised in the income statement 17 1 033 16 17 Currency retranslations, net of taxes Fair value adjustments on available-for-sale financial instruments, net of taxes Fair value adjustments on cash flow hedges, net of taxes Share of other comprehensive income of associates and joint ventures Items that are or may be reclassified subsequently to the income statement 17 (3 771) (144) 62 165 (3 688) 1417 (154) 894 10n17 Remeasurement of defined benefit plans, net of taxes Share of other comprehensive income of associates and joint ventures Items that will never be reclassified to the income statement 14/13 (143) 110) (153) (362) 112 (250) Other comprehensive income for the year 17 741 (3 938) Total comprehensive income for the year of which attributable to non-controlling interests of which attributable to shareholders of the parent 9 624 343 9281 5 529 317 5212 Specimen Financial Statements: Nestl SA B-3 Derivative assets Consolidated balance sheet as at 31 December 2016 before appropriations In millions of CHF Assets Current assets Cash and cash equivalents Short-term investments Inventoric Inventories Trade and other receivables Prepayments and accrued income Notes 2016 2015 12/16 4884 12 921 8 153 6 7/12 7 990 1 306 8 401 12 411 573 550 786 12 252 12 583 DOS 337 337 874 Current income tax assets Assets held for sale Total current assets 25 32 042 1 430 29 434 9 9 Non-current assets Property, plant and equipment Goodwill Intangible assets Investments in associates and joint ventures Financial assets Employee benefits assets Current income tax assets Deferred tax assets Total non-current assets 14 26 576 32 772 19 236 8 675 5419 27554 33 007 20 397 10 709 5 719 310 114 2 049 99 859 12 10 109 128 1 643 94 558 13 Total assets 131 901 123 992 B-4 APPENDIX B Specimen Financial Statements: Nestl SA Consolidated balance sheet as at 31 December 2016 In millions of CHF Notes 2016 2015 Liabilities and equity 12 12 Current liabilities Financial debt Trade and other payables Accruals and deferred income Provisions Derivative liabilities Current income tax liabilities Liabilities directly associated with assets held for sale 12 11B 18 629 3855 620 1 068 1221 6 37 517 9 629 17 038 3 673 564 1 021 1 124 272 33 321 12 2 Total current liabilities 12 10 Non-current liabilities Financial debt Employee benefits liabilities Provisions Deferred tax liabilities Other payables Total non-current liabilities 11 11 091 8420 2 640 3 865 2 387 28 403 11 601 7 691 2 601 3063 1 729 26 685 13 12 Total liabilities 65 920 60 006 17 Equity Share capital Treasury shares Translation reserve Other reserves Retained earnings Total equity attributable to shareholders of the parent Non-controlling interests Total equity 311 (990) ( (18 799) 1 198 82 870 64 590 1 391 65 981 319 7 489) (19 851 1 1 345 88 014 62 338 1 848 63 986 Total liabilities and equity 131 901 123 992 Specimen Financial Statements: Nestl SA B-5 Consolidated cash flow statement for the year ended 31 December 2016 In millions of CHF Notes 2016 2015 17 Operating activities Operating profit Depreciation and amortisation Impairment Net result on disposal of businesses Other non-cash items of income and expense Cash flow before changes in operating assets and liabilities 13 163 3 132 640 12 408 3 178 576 35 422 172 16 756 16 970 18 Decrease/ increase) in working capital Variation of other operating assets and liabilities Cash generated from operations 16 1 801 54 18 825 741 (248) 17 249 18 Net cash flows from treasury activities Taxes paid Dividends and interest from associates and joint ventures Operating cash flow (327) (3 435 519 15 582 (93) (3 310) 456 14 302 14 9 2 Investing activities Capital expenditure Expenditure on intangible assets Acquisition of businesses Disposal of businesses Investments (net of divestments) in associates and joint ventures Inflows/outflows) from treasury investments Other investing activities Investing cash flow 2 (4 010) (682) ) (585) 271 (748) ( (335) (34) (6123) (3 872) (422) 1530) 213 (44) ( 521 (19) (4 153) 14 17 (6 950) (424) 2 Financing activities Dividend paid to shareholders of the parent Dividends paid to non-controlling interests Acquisition (net of disposal) of non-controlling interests Purchase (net of sale) of treasury shares Inflows from bonds and other non-current financial debt Outflows from bonds and other non-current financial debt Inflows/outflows) from current financial debt Financing cash flow (6 937) (432) (1 208) 760 700 1 695 (1 430) 1 368 16 184) (6 377) 1 381 (508) 643 (12 235) Currency retranslations Increase/(decrease) in cash and cash equivalents (169) 3 106 (478) (2564) 7 448 Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year (a) In 2015, mostly relates to the Share Buy Back Programme launched in 2014 4 884 7 990 7 4 884 B-6 APPENDIX B Specimen Financial Statements: Nestl SA Consolidated statement of changes in equity for the year ended 31 December 2016 In millions of CHF Other reserves pauimau Xinbe tenor shareholders of the parent Bunuouw 322 70 130 1 754 71 884 Equity as at 31 December 2014 as originally published Reclassification following the changes in presentation Equity restated as at 31 December 2014 (3 918) (17 255) 953 (3 918) (16 302) 141B 1 418 90 981 2 371) 88 610 322 70 130 1 754 71 884 Profit for the year Other comprehensive income for the year Total comprehensive income for the year (55) 9 066 1250) 8 816 401 (84) (3549) (3 549) 9066 (3 854) 5 212 9467 (3 938) 5529 (55) 317 1424) (6 950) (6 283) 183 17 374) 16 283 16 322) 239 183 Dividends Movement of treasury shares Equity compensation plans Changes in non-controlling interests Reduction in share capital Total transactions with owners 16 950) 39 (56) (21) (2 509) 19 497) (21) 1 (20) (3 2 512 13 571 3 (13 071) (423) (13 494) Other movements (18) 85 67 67 Equity restated as at 31 December 2015 319 (7 489) (19 851) 1 345 88 014 62 338 1 648 63 986 8531 Profit for the year Other comprehensive income for the year Total comprehensive income for the year 8531 750 352 19) 1 052 1 052 (148) (148) (154) 8 377 8 883 741 9 624 9 281 343 (432) (7 369) 776 803 207 Dividends Movement of treasury shares Equity compensation plans Changes in non-controlling interests Reduction in share capital Total transactions with owners (6 937) 127 127 (991) (5 481 (13463) (6 937) 776 180 1991) 180 (1 1591 (168) 18 ( 18 5 489 6 499 (6 972) (800) (7 572) Other movements 1 158) (57) (57) 82 870 64 590 1 391 65 981 Equity as at 31 December 2016 311 (990) (18 799) 1 198 al Reduction in share capital, see Note 17.1. b) Movements reported under retained earnings include the impact of the acquisitions during the period (see Note 2.5) as well as a put option for the acquisition of non-controlling interests APPENDIX C Specimen Financial Statements: Delfi Limited CONSOLIDATED INCOME STATEMENT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016 Note The Group 2016 2015 US$'000 USS 000 4 Revenue Cost of sales Gross profit 402,083 (262,352) 405,862 (285,052) 120,810 139,731 Other operating income 4 4,549 4.906 Expenses Selling and distribution costs Administrative expenses Finance costs Other operating expenses Exceptional items 6 (78,756) (19,462) (4,088) (473) (2,000) (72,641) (19,330) (4.219) (2.138) (20.066) 10 19(a) Share of results of associated companies Profit before income tax (266) 39,235 64 7,386 8 Income tax expense Total profit/(Loss) (13,082) 26,153 (12,126) (4,740) Profit/(loss) attributable to: Equity holders of the Company Non-controlling interest 26,156 (3) 26,153 (4,726) (14) (4.740) Earnings/(Losses) per ordinary share (expressed in US cents per share) Basic and Diluted 11 4.28 (0.77) Note Diluted earnings per share for financial years 2016 and 2015 are the same as basic earnings per share as there were no potentially dilutive ordinary shares The accompanying notes form an integral part of these financial statements C-1 C-2 APPENDIXC Specimen Financial Statements: Delfi Limited CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016 The Group 2016 2015 US$'000 USS'000 Profit/(loss) for the year 26,153 (4.740) Other comprehensive income/loss): Items that may be reclassified to profit or loss: Foreign currency translation reserve - Currency translation differences arising from consolidation 1,835 (16,398) Items that will not be reclassified to profit or loss: Defined pension benefits obligation - Remeasurements of defined pension benefits obligation (Note 29(a)) - Tax on remeasurements (Note 8(b)) - Share of other comprehensive income of associated companies (753) 185 8 (560) 160 (43 51 168 Other comprehensive income/(loss), net of tax 1.275 (16.230) Total comprehensive income/loss) for the year 27,428 120.970) Total comprehensive income/loss) attributable to: Equity holders of the Company Non-controlling interest 27,434 (6) 27,428 (20,947) (23) (20,970) The accompanying notes form an integral part of these financial statements Specimen Financial Statements: Delfi Limited C-3 BALANCE SHEETS AS AT 31 DECEMBER 2016 Note The Group 2016 2015 US$'000 US$'000 The Company 2016 2015 US$ 000 US$'000 119.547 60,030 111,654 ASSETS Current assets Cash and cash equivalents Derivative assets Trade receivables Loan to subsidiary Inventories Tax recoverable Other current assets 12 16 13 14 15 67.737 4 61,756 56,280 1.254 1,337 700 54,685 5,792 12,697 202,671 59,592 7,631 13,437 256,487 17 888 62,955 3,088 115.996 18 35,935 35,935 3,000 3.000 Non-current assets Investments in subsidiaries Investments in associated companies and joint ventures Loans to associated company and joint venture Property, plant and equipment Intangible assets Deferred income tax assets Other non-current assets 19 20 21 22 81b) 24 905 5,167 728 4.613 2,769 932 126,768 5,243 775 3,173 139,660 342,331 2.947 1,382 116,604 4,810 342 5,021 131.106 387,593 45,007 107,962 44,276 160,272 Total assets LIABILITIES Current liabilities Trade payables Other payables Current income tax liabilities Derivative liabilities Borrowings 25 26 332 4,086 34,689 37,820 1.382 91 800 2,741 129 25.925 30.205 489 24 59,453 116,096 16 27 44,197 91 95 4,604 90 3,760 118,179 190 246 Non-current liabilities Borrowings Deferred income tax liabilities Provisions for other liabilities and charges 27 8/b] 29 9,578 1,628 11,654 22,860 141,039 201,292 15,199 4,447 9.697 29.343 145,439 242 154 Total liabilities NET ASSETS 190 4,794 103,168 246 4,006 156 266 95,936 155,951 EQUITY Capital and reserves attributable to equity holders of the Company Share capital Foreign currency translation reserve Other reserves Retained earnings Non-controlling interest TOTAL EQUITY 30 31(a) 31(b) 32 95,936 (60,228) 1,760 163,710 201,178 114 201,292 155,951 (62,066) 2,245 145,904 242,034 120 242,154 7,232 103,168 315 156,266 103,168 156 266 The accompanying notes form an integral part of these financial statements C-4 APPENDIX C Specimen Financial Statements: Delfi Limited CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016 Attributable to equity holders of the Company Foreign Defined currency pension Share translation General benefits Retained capital reserve reserve obligation earnings Total US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 Non- controlling Total interest equity US$'000 US$'000 Note 155,951 162,066) 2,147 98 145,904 242,034 26.156 26.156 120 242,154 (3) 26.153 The Group Balance at 1 January 2016 Profit for the year Other comprehensive income/loss) for the year Total comprehensive income! (loss) for the year 1.838 (560) 1,278 (3) 1.275 1,838 (560) 26,156 27,434 (6) (6) 27,428 75 (75) 32a) 30 (60,015) (60,015) (60,015) Transfer to general reserve Capital reduction Interim dividend relating to 2016 paid Total transactions with owners, recognised directly in equity 33 18.275) (8,275) (8,275) (60,015) 75 (8,350) (68,290) (68,290) Balance at 31 December 2016 95.936 160,228) 2,222 (462) 163,710 201,178 114 201,292 155,951 (45,6771 2,072 (70) 184,907 297,183 (4.726) (4.726) 143 297,326 (14) (4,740 Balance at 1 January 2015 Loss for the year Other comprehensive (loss)/ income for the year Total comprehensive (loss)/ income for the year (16,389) 168 (16,221) (9) (16,230) (16,389) 168 (4,726) (20,9471 (23) (20,970) 32la) 75 (75) 33 (21,757) (21,757) (21,757) Transfer to general reserve Final and special dividend relating to 2014 paid Interim and special dividend relating to 2015 paid Total transactions with owners, recognised directly in equity 33 (12.445) (12,445) ) (12,445) 75 (34,277) (34,202) (34,202) Balance at 31 December 2015 155,951 (62,066) 2,147 98 145,904 242.034 120 242,154 The accompanying notes form an integral part of these financial statements. Specimen Financial Statements: Delfi Limited C-5 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016 Note 2016 US$'000 2015 USS 000 26,153 (4,740) 8(a) 13,082 9,177 73 10 Cash flows from operating activities Total profit/(loss) Adjustments Income tax expense Depreciation and amortisation Property, plant and equipment written off Impairment loss on brands Gain on disposal of property, plant and equipment Exceptional items Interest income Interest expense Fair value loss on derivatives Share of results of associated companies Operating cash flow before working capital changes Changes in working capital Inventories Trade and other receivables Trade and other payables Cash generated from operations (104) 2,000 (3,918) 4,088 63 266 50,880 12,126 7.584 124 265 (1,470) 20,066 (2053) 4,219 64 (64) 36,121 4,907 (2,889) 16,293 69,191 13.158 27,893 (16,246) 60.926 Interest received Income tax paid Net cash provided by operating activities 3,918 (13,454) 59,655 2,053 (19.731) 43,248 (16,674) ( (691) Cash flows from investing activities Purchases of property, plant and equipment Payments for patents and trademarks Payment for final settlement of dispute Proceeds from disposal of property, plant and equipment Net cash used in investing activities 10 (23,479) (341) (38,800) 1,530 161,090) 315 (17,050) 30 (60,015) Cash flows from financing activities Capital reduction Proceeds from bank borrowings Proceeds from/repayment of trade finance Repayment of bank borrowings Repayment of lease liabilities Interest paid Dividends paid to equity holders of the Company Net cash used in financing activities 114 (22,044) (2,802) (4,088) (8,275) (97,110) 22,836 (4,613) (7,113) (5,200) (4,232) (34,202) (32,524) Net decrease in cash and cash equivalents (54,505) (50,366) 12 Cash and cash equivalents Beginning of financial year Effects of currency translation on cash and cash equivalents End of financial year 100,550 (810) 45,235 149,212 1,704 100.550 12 The accompanying notes form an integral part of these financial statements