Analysis and Interpretation of Profitability Balance sheets and income statement

Question

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 2014 2013 $31,821 $30,871 Operating expenses 15,383 6,182 1,763 23,328 6,946 16,447 6,469 1,770 24,686 7,135 16,106 6,384 1,715 24,205 6,666 Selling, general and administrative expenses . . . . . . . . . Research, development and related expenses . . . . . . . . Interest expense and income 149 (26) 123 6,823 1,982 4,841 8 142 (33) 109 7,026 2,028 4,998 42 $ 4,956 145 (41) 104 6,562 1,841 4,721 62 $ 4,659 Interest expense Net income including noncontrolling interest. . . . . . . . . . . . Less: Net income attributable to noncontrolling interest. . . Net income attributable to 3M

Explanation / Answer

a) Net Operating Profit after tax (NOPAT) 2015.
= Net operaying Income - Tax @ 37%
= 6946 - 37%*6946
= 6946 - 2570.02
= 4375.98

b)Net Operating assets 2015

NOA
Operating assets = Total assets- cash -marketable securities (current) -marketable securities (n0n current) – Investments
                              = 32718 – 1798 – 118 – 9 -117
                              = 30676
Operating liabilities = Total liabilities – long term debt – short term debt
                                    = 20971-2044-8753
                                     = 10174

Net Operating Assets = 30676-10174
                                       = 20502

NOA 2014

Operating Assets = 31209-1897-1439-15-102
                                = 27756
Operating Liabilities = 18067-106-6705
                                     = 11256

NOA = 27756-11256
         = 16500

c)
RNOA = Net Operating Profit after tax/Average Net Operating assets
            = 4375.98 / [(20502+16500)/2]
            =0.2365
            =23.65%

RNOA = Net Operating Profit margin * Net operating aseet turn over
             = (Net Operating Profit after tax/Sales) * ( Sales/Average Net Operating Asset)
             = (4375.98 / 30274) * (30274/18501)
              = 0.144*1.636
             = 0.2365
              = 23.65%

d) 2015
Net Non Operating Obligation = Non Operating Liabilities - Non Operating Assets
                                                            = (Total Liabilities – Operating Liabilities) - ( Total Assets – Operating Assets)
                                                            = (20971- 10174) - (32718 – 30676 )
                                                            = 10797 – 2042
                                                            = 8755

Net Operating Asset = 20502
NNO = 8755
Total equity = 11747

Therefore, Net Operating Assets = NNO + Total Equity
                                                            = 8755+11747
                                                            =20502


2014
Net Non Operating Obligation = Non Operating Liabilities - Non Operating Assets
                                                        = (18067-11256) – (31209-27756)
                                                        = 6811 -3453
                                                        = 3358
Net Operating Asset = 16500
NNO = 3358
Total equity = 13142

Therefore, Net Operating Assets = NNO + Total Equity
                                                            = 3358+13142
                                                            =16500
e) ROE 2015
   = Net income /Shareholder’s equity
   = 4833/11747
   =0.4114
   =41.14%

   

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