Question

Analysis and Interpretation of Profitability Balance sheets and income statements for 3M Company follow. Consolidated Statements of Income Years ended December 31 ($ millions) 2007 2006 2005 Net sales $24,462 $22,923 $21,167 Operating expenses Cost of sales 12,735 11,713 10,408 Selling, general and administrative expenses 5,015 5,066 4,631 Research, development and related expenses 1,368 1,522 1,274 Loss/(gain) from sale of business (849) (1,074) Total operating expenses 18,269 17.227 16,313 Operating income 6,193 5,696 4,854 Interest expenses and income Interest expense 210 122 82 Interest income (132) (51) (56) Total interest expense 78 1 71 26 Income before income taxes 6,115 5,625 4,828 Provision for income taxes 1,964 1,723 1,627 Net income including noncontrolling interest 4.151 3.902 3,201 Less: Net income attributable to noncontrolling interest 55 51 Net income $4,096 $3,851 $3,146 55

Answer 1

I a) Computation of Wet operating profit after Ton (Nord For 2007 NOPAT = operating In Comex (1- Tox Rote). (For 2002) = $61937(1-35.9%) - $6193x0.641 $3969.713 2 Computation of net operating assets (6) 2007 net operating assets = Total assets Financing anacks (Cash) (NOA) total liabilitiest Financing liabilities 24,694 - 1896 (cash) +4019 (longterm deld) - 12947+901 3 (shost team = $1477) (i) For 2006 net operating arah = 21294 - 1447 - 11335 + 250671647 = $12,065 c) 2007 RNO A NOPAT – 3969.713_092687 NOA 1477) 26.87.). RNOA 2007 NOPM - operdating posit - $6193 - 0.2532 Total Revenue 24462 No PM - 25.32) 2007 NOAT = Dales operating docts - 24462 24694-480-1378 & Perde Benefit

NO A = 1:07ltin. 26 462 22836 d Computation of net non operating obligation (AND - NNO (2007) - Non operating liabilites Non operating Arxts - (90114019) - (480 +298 +1378) = 6920 - 2156 276 Who (2006) = (2506+ 1047) - (166 +314 439) = 3553-875 - 2628 9: 350 e ROE (2002 )= Wet Income = Share hd deris Equity 4096 11747 Corted f) ROE (2007) = Non-operating g - ROFORNOA implies that 3M doo I crossed its financial Condays during the period.