The Blue Chips

Autumn 2011

Assignment 2: Intro to Financial Statements (John King) Please be brief but thorough. Remember, this is not a class you take for a grade, but you get out of this RSO what you put into it. If you get confused, you should email your group leader or work with someone else in your group (or just look it up). Email your responses to your group leader before the discussion section. Application of Financial Statements Kimberly Clark Corporation Go to www.sec.gov and look up the 10-K for Kimberly Clark (ticker KMB). 1. KMB: Balance Sheet a. Which assets are categorized as current assets on this 10-K? Total assets were 6328 million (2010), 5813 (2008). Current assets includes cash and cash equivalents, accounts receivable (net), inventories, deferred income taxes, time deposits, and other current assets. b. By how much did KMBs total assets change from 2007 to 2008? From 6097 to 5813 million (284 million) c. Calculate KMBs total liabilities for 2008. 4752 million 2. KMB: Income Statement a. Did KMBs Net Sales increase from 2007 to 2008? Yes: from 18.266 billion dollars to 19.415 billion dollars. b. Did KMBs Income Before Extraordinary Loss or KMBs Net Income increase from 2007 to 2008? How is this possible given your answer to 2a? No, net income did not increase. This is possible given my previous answer because expenses may have increased a lot. c. What was KMBs EPS (earnings per share) in 2008? 4.06 3. KMB: Cash Flow Statement a. Calculate FCF for KMB in 2008. 1369.85 b. What did KMB do in 2008 to enhance shareholder value according to their CF Statement? Acquisitions of other properties, paid off a lot of short-term debt, reacquired less common stock 4. KMB: Reading a 10-K a. What was the tax rate in 2007 and what was it in 2008? 2008: 27% (paid), 2007: 25.4%. The actual tax rate was 35%.

b. Name three risks that KMB faces. Choose the risk that would concern you most as a shareholder. Explain your selection. Risks include: nonemployee benefits are skyrocketing (pensions, etc), income decreased despite increased sales, signaling increased expenses across the board, focused too much on debt reduction?