Decision Case 1.

1. Net income = 1240 from Income Statement.

Total Assets = Total Liability + Total Shareholders Equity.
11847 = 9693 +2154
2. Property Net Increase = (3128 – 3010)/3128 = 3.77%
More demand leads to the new property getting bought.

Decision Case 1.3

1. Net Sales (Kellogg’s - 2010) = 12397

Net Sales (GM - 2010) = 14796.5

For Kellogg’s, net sales amount decreased from 12575 to 12397 and for General Mills net
sales amount increased from 14691.3 to 14796.5
2. Net Income (Kellogg’s 2010) = 1240.
For Kellogg’s, Net Income increased compared to the previous year (Net Income in 2009 was
1208).

Net Income (General Mills 2010) = 1535.

For General Mills, Net Income increased compared to the previous year (Net Income in 2009
was 1317.7)
3. Asset balance for Kellogg’s increased from 11200 to 11847 from 2009 to 2010.
The largest asset was Goodwill Kellogg’s.
The asset balance for General Mills decreased from 17874.8 to 17678.9 from 2009 to 2010.
The largest asset was Goodwill for General Mills.
4. Retained Earnings 2010 = Retained Earnings 2009 + Net Income – Dividends.
Kellogg’s Dividends = 6122-5481-1247 = 606.
General Mills Dividends = 8122.4-7235.6-1530.5= 643.7

Decision Case 2.1

1. Working Capital for Kellogg’s’ in 2010 = Current Asset - Current Liability = 2915 – 3184 =
-269.

Working Capital for Kellogg’s in 2009 = Current Asset- Current Liability = 2558-2288 =
270.

Working Capital for General Mills in 2010 = Current Asset - Current Liability = 3480 –
3769.1 = -289.1
Working Capital for General Mills in 2009 = Current Asset - Current Liability = 3534.9 –
3606 = -71.1
2. Current Ratio of Kellogg’s in 2010 = Current Asset / Current Liability = 2915/3184 = 0.91
Current Ratio of Kellogg’s in 2009 = Current Asset / Current Liability = 2558/2288 = 1.11
Percentage Change = (1.11-0.91) *100/0.91 = 21 %
Current Ratio of General Mills in 2010 = Current Asset / Current Liability = 3480/3769.1 =
0.92
 Current Ratio of General Mills in 2009 = Current Asset / Current Liability = 3534.9/3609 =
0.98
Percentage Change = (0.98 -0.92) *100/0.92 = 6.52%

3. The current asset for Kellogg’s (2010) is 2915 and it improved over the previous year
(2009) which was 2558.

The current asset for General Mills (2010) is 3480 and it improved over the previous year
(2009) which was 3534.9.

Compared to Kellogg’s General Mills had a reduction in its current asset.

The largest current asset for Kellogg’s is Accounts Receivable is 1190

The largest current asset for General Mills is Inventories is 1344
The difference in current assets for Kellogg’s and General Mills is Deferred Income tax and
also Prepaid expenses and other current assets which are present on the Balance Sheet of
General Mills.

4. Liquidity –
Current Ratio of Kellogg’s in 2010 = Current Asset / Current Liability = 2915/3184 = 0.91

Here Kellogg’s current liability is more than the current assets, which is not a good sign.

Current Ratio of General Mills in 2010 = Current Asset / Current Liability = 3480/3769.1 =
0.92

Also, here General Mills’ current liability is more than the current assets, which is not a
good sign.

Decision Case 2.2

1.
The largest current asset for General Mills is Inventories as 1344.

The percentage of total current assets inventories represent is (1344/3480) *100 =

38.62%

Inventories are a significant asset of General Mills because it reduces the risk of
stock problems.

2.

The second-largest current asset for General Mills is Receivables at 1041.6.

The percentage of total current assets in receivables represented is (1041.6/3480)

*100 = 29.93%
 Receivables are a significant asset of General Mills because if the buyers pay on
time, it improves the current asset and brings in more cash to the company.

3.

Inventories can increase or decrease based on the demand for goods.

Receivables can cause an issue if the buyer doesn’t pay on time and if the buyer is
prompt, it increases the asset of the company.

Decision Case 2.3

It would be better for Charles to work for the job for 40,000 dollars per year as he won’t have
unwanted expenses like Rent etc. and based on the Table, we won’t be able to extrapolate
Commissions Revenue.

Or if we extrapolate the table –

  Year 1 Year 2 Year 3 Remarks

Around
160%
Commissions Revenue 25000 65000 169000 increase
Rent 12000 12000 12000  
Secretarial services 3000 9000 12000  
Car expense, gas and insurance 6000 6500 7000  
Depreciation 15000 15000 15000  
Net Income 11000 22500 215000  
Earnings = 215000-22500 = 192500        

If this is possible in Year 3 then he can stay in his business only.