PLease answer A-D
P4-41. Analysis and Interpretation of Profitability Balance sheets and income statements for 3M Company follow. 3M COMPANY Consolidated Statements of Income For Years Ended Dec. 31 ($ millions) 2015 2013 2014 $31,821 $30,274 $30,871 15,383 6,182 1,763 16,447 6,469 1,770 24,686 7135 16,106 6,384 1,715 24,205 6,666 23,328 6,946 Net sales ............................................ Operating expenses Cost of sales. Selling, general and administrative expenses ......... Research, development and related expenses ........ Total operating expenses....... Operating income..... Interest expense and income Interest expense...... Interest income................ Total interest expense-net......... Income before income taxes...... Provision for income taxes........ Net income including noncontrolling interest ........... Less: Net income attributable to noncontrolling interest. Net income attributable to 3M .... 145 149 (26) 123 6,823 1,982 4,841 142 (33) 109 7,026 2,028 4,998 104 6,562 1,841 4,721 62 $ 4,659 $ 4,833 $ 4,956 3M COMPANY Consolidated Balance Sheets At December 31 ($ millions, except per share amount) 2015 2014 $ 1,798 118 $ 1,897 1,439 4,238 4,154 Current assets Cash and cash equivalents ............................ Marketable securities-current.......... Accounts receivable-net of allowances of $91 and $94......... Inventories: Finished goods ....................... Work in process Raw materials and supplies........ Total inventories .................... Other current assets .................... Total current assets .............. Marketable securities-noncurrent..... Investments ............. Property, plant and equipment. .... Less: Accumulated depreciation .... Property, plant and equipment-net... Goodwill......... Intangible assets-net... Prepaid pension benefits ............. Other assets....... Total assets.................. 1,655 1008 855 3,518 1,398 10,986 1,723 1,081 902 3,706 1,023 12,303 15 117 23,098 (14,583) 8,515 9,249 2,601 188 1,053 $32,718 102 22,841 (14,352) 8,489 7,050 1,435 46 1,769 $31,209 continued continued from revioirs nade continued from previous page At December 31 ($ millions, except per share amount) 2015 2014 Liabilities Current liabilities Short-term borrowings and current portion of long-term debt Accounts payable...................... ... Accrued payroll........... Accrued income taxes........ Other current liabilities.............. Total current liabilities....... Long-term debt.......... Pension and postretirement benefits .......... Other liabilities....... Total liabilities .. Equity 3M Company shareholders' equity: Common stock, par value $0.01 per share: Shares outstanding-2015: 609,330,124; Shares outstanding-2014: 635,134,594... Additional paid-in capital........ Retained earnings......... Treasury stock ......... Accumulated other comprehensive income (loss) Total 3M Company shareholders' equity... Noncontrolling interest ... $ 2,044 1,694 644 332 2,404 7,118 8,753 3,520 1,580 $20,971 $ 106 1,807 732 435 2,884 5,964 6,705 3,843 1,555 $18,067 $ 9 4,791 36,575 (23,308) (6,359) 11,708 $ 9 4,379 34,317 (19,307) (6,289) 13,109 33 $13,142 $31,209 39 Total equity.... Total liabilities and equity................. $11,747 $32,718 Required a. Compute net operating profit after tax (NOPAT) for 2015. Assume that the combined federal and state statutory tax rate is 37%. b. Compute net operating assets (NOA) for 2015 and 2014. Treat noncurrent investments as a nonop- erating item. c. Compute and disaggregate 3M's RNOA into net operating profit margin (NOPM) and net operating asset turnover (NOAT) for 2015. Demonstrate that RNOA = NOPM X NOAT. d. Compute net nonoperating obligations (NNO) for 2015 and 2014. Confirm the relation: NOA = NNO + Total equity. e. Compute return on equity (ROE) for 2015. f. What is the nonoperating return component of ROE for 2015? g. Comment on the difference between ROE and RNOA. What inference can we draw from this comparison
