Question

Formulating Financial Statements from Raw Data Following is selected financial information from General Mills, Inc., for its fiscal year ended May 25, 2008 ($ millions): Revenue $ 13,652.1 Cash from operating activities 1,729.9 Cash, beginning year 417.1 Stockholders' equity 6,215.8 Noncash assets 18,380.6 Cash from financing activities* (1,043.6) Cost of goods sold 8,778.3 Total expenses (other than cost of goods sold) 3,579.1 Cash, ending year 661 Total liabilities 12,825.8 Cash from investing activities (442.4) *Cash from financing activities includes the effects of foreign exchange rate fluctuations. (a) Prepare the income statement, the balance sheet, and the statement of cash flows for General Mills for the fiscal year ended May 2008. 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, 2008 Revenue Gross profit Net income

Answer 1

(a)

General Mills, Inc.
Income Statement ($ millions)
For Year Ended May 25, 2008
Revenue	13652.1
Cost of goods sold	8778.3
Gross profit	4873.8
Total expenses	3579.1
Net income	1294.7

General Mills, Inc.
Balance Sheet ($ millions)
May 29, 2008
Cash	661	Total liabilities	12825.8
Noncash assets	18380.6	Stockholders' equity	6215.8
Total assets	19041.6	Total liabilities and equity	19041.6

General Mills, Inc.
Statement of Cash Flows ($ millions)
For Year Ended May 25, 2016
Cash from operating activities	1729.9
Cash from investing activities	-442.4
Cash from financing activities	-1043.6
Net change in cash	243.9
Cash, beginning year	417.1
Cash, ending year	661

(b) Answer: 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.

Explanation: A negative amount for cash from financing activities denotes payments made towards settlement of long-term debts such as notes payables, bonds payable, mortgage payable, purchase of treasury stock and payment of dividends. It shows the ability of the company to repay its long-term obligations and hence should not be a cause for concern.

(c) Ratios:

(i) Profit margin = Net income/Total revenues = $1294.7/$13652.1 = 9.48%

(ii) Asset turnover = Total revenues/Total assets = $13652.1/$19041.6 = 0.72 times

(iii) Return on assets = Net income/Total assets = $1294.7/$19041.6 = 6.80%

(iv) Return on equity = Net income/Stockholders' equity = $1294.7/$6215.8 = 20.83%