Question

Direct Computation of Nonoperating Return Balance sheets and income statements for 3M Company follow. 3M COMPANY Consolidated Statements of Income For Years Ended December 31 ($ millions) 2018 2017 Net sales $32,765 $31,657 Operating expenses Cost of sales 16,682 16,055 Selling, general and administrative expenses 7,602 6,626 Research, development and related expenses 1,821 1,870 Gain on sale of businesses (547) (586) Total operating expenses 25,558 23,965 Operating income 7,207 7,692 Other expense, net* 207 144 Income before income taxes 7,000 7,548 Provision for income taxes 1,637 2,679 Net income including noncontrolling interest 5,363 4,869 Less: Net income attributable to noncontrolling interest 14 11 Net income attributable to 3M $5,349 $4,858 * Interest expense, gross is $350 million in 2018 and $322 million in 2017. 2018 2017 3M COMPANY Consolidated Balance Sheets At December 31 ($ millions) Current assets Cash and cash equivalents Marketable securities Accounts receivable Total inventories Prepaids Other current assets $2,853 $3,053 380 1,076 5,020 4,911 4,366 4,034 741 937 349 266

Answer 1

a. Computaion of Net Non Operating Expenses and Net Operating Profit After tax.

Year 2018
Particulars
Net Non Operating Expenses	Amount In $	Amount In $
Other Expenses ( Interest Expenses)		350.00
Net Operating Profit after Tax (NOPAT)	Amount In $	Amount In $
Net Sales		32,765.00
Less: Operating Expenses
Cost Of Sales	16,682.00
Selling, General and administrative expenses	7,602.00
Reserch, development and related expenses	1,821.00	26,105.00
Net Operating Income Before Tax		6,660.00
Less: Tax @ 22% ($6660x22%)		1,465.20
Net Operating Income After Tax		5,194.80

b. Computation of Non Operating Obligation.

Non Operating Obligation
	2018	2017
Particulars	Amount In $	Amount In $
Long Term debt	13,411.00	12,096.00
Short Term Debt (As given)	1,211.00	1,853.00
Total Long & Short Term debt	14,622.00	13,949.00
Less: Marketable Securities	380.00	1,076.00
Treasury Stock	29,626.00	25,887.00
Net Non Operating Obligation	(15,384.00)	(13,014.00)
Note:
Net nonoperating obligations (NNO) is defined as the excess of (interest-bearing)debt over investments in nonoperating assets. Net nonoperating obligations can beeither positive (excess of debt) or negative (excess of investments).

c. Financial Leverage.

Financial Leverage
(Finacial Leverage = Total Debt/ Total Shareholder Equity)
	2018	2017
Particulars	Amount In $	Amount In $
Total Debt
Long Term debt	13,411.00	12,096.00
Short Term Debt (As given)	1,211.00	1,853.00
Total Long & Short Term debt	14,622.00	13,949.00
Shareholder'S Equity
Paid In capital	5,643.00	5,352.00
Retained Earning	40,636.00	39,115.00
Non Controlling Interest	52.00	59.00
Accumulated & other comprehensive income(loss)	(6,866.00)	(7,026.00)
Total Equity	39,465.00	37,500.00
Financial Leverage	0.371	0.372