DECISION CASE 1-2

1. Net Income of Kellog’s company as of 2010 = $1247

2. Accounting Equation:

Assets = Liabilities + Stockholder’s Equity

Total Assets = $11,847

Total Liabilities = $9693

Total Equity = $2154

Hence, the accounting equation for Kellog’s company:

$11847 = $9693 + $2154

3. Property Value in 2010 = $3128

Property Value in 2009 = $3010

Net Increase in the Property in 2010 = $3128 – 3010

= $118

The net increase in the property value in the year 2010 would be due to the appreciation
value of land over the years.

DECISION CASE 1-3

1. Net Sales of Kellog’s in 2010 = $12397

Net Sales of Kellog’s in 2009 = $12575

Net Sales of General Mills in 2010 = $14796.5
Net Sales of General Mills in 2009 = $14691.3

Thus, the Net sales of Kellog’s has decreased by $178 in the year 2010 and the Net sales of
General Mills have increased by $105.2 in the year 2010.

2. Net Income of Kellog’s in 2010 = $1247

Net Income of Kellog’s in 2009 = $1212

Net Income of General Mills in 2010 = $1530.5

Net Income of General Mills in 2009 = $1304.4

Thus, the net income of Kellog’s in the year 2010 has increased by $35 and the net income of
General Mills has also increased by $226.1

3. Total asset value of Kellog’s in 2010 = $11847

Largest asset of Kellog’s in 2010 is Goodwill = $3628

Total asset value of General Mills in 2010 = $17678.9

Largest asset of General Mills in 2010 is Goodwill = $6592.8
4. The dividends per share and the earnings per share have been increasing every year for both
Kellog’s and General Mills. Hence both the company might have paid the dividends to its
shareholders.

DECISION CASE 2-1

1. WORKING CAPITAL = TOTAL CURRENT ASSETS – TOTAL CURRENT LIABILITIES
KELLOG’S:
2010 2009
TOTAL CURRENT ASSETS $2915 $2558
TOTAL CURRENT LIABILITIES $3184 $2288
WORKING CAPITAL ($269) $270

The working capital has decreased for the year 2010 by $539
GENERAL MILLS:

2010 2009
TOTAL CURRENT ASSETS $3480 $3534.9
TOTAL CURRENT LIABILITIES $3769 $3606
WORKING CAPITAL ($289) ($71.1)

The working capital has decreased for the year 2010 by $217.9

2. CURRENT RATIO = CURRENT ASSET / CURRENT LIABILITY

KELLOG’S
2010 2009
TOTAL CURRENT ASSETS $2915 $2558
TOTAL CURRENT LIABILITIES $3184 $2288
CURRENT RATIO 0.916 1.118

Percentage decrease in the current ratio = 18.068%

GENERAL MILLS:

2010 2009
TOTAL CURRENT ASSETS $3480 $3534.9
TOTAL CURRENT LIABILITIES $3769 $3606
CURRENT RATIO 0.923 0.98

Percentage decrease in the current ratio = 5.816%

 3. The 2 companies are different in terms of the account that made up their current asset as
the General Mills has deferred income taxes and the prepaid expenses in the current asset
account for both the years while Kellog’s haven’t recorded these in its current assets
account.
Largest current asset of Kellog’s is Account receivables, net = $1190
Largest current asset of General Mills is Inventories = $1344
4. Both the company’s current ratio is less than 1 indicating that the companies are in short of
the capitals to meet its short-term debts. With respect to liquidity General Mills has a
higher current ratio when compared to Kellog’s, making it more liquid than Kellog’s.

DECISION CASE 2-2

1. Largest current asset -> Inventories = $1344
Total current asset of General Mill = $3480
Percentage of Inventories of the total current asset = 38.62%
Inventories represents all the goods, merchandise and materials held by the company. The
Inventories are a significant asset as if these are not available at the desired time then it
affects the production of the supplies which in turn decreases the sales and revenue,
making it difficult for the company to meet its short-term debts.
2. 2nd Largest current asset -> Receivables = $1041.6
Total current asset of General Mill = $3480

Percentage of Receivables of the total current asset = 29.93%

The receivables are favourable to the company as it is more liquid. The receivables can be
converted into cash at any given point of time very easily thus making it easier to pay the
short-term debts.

3. The Inventories value increases when there is a high demand and the supplies are not
enough to satisfy these demands. The Inventories value decreases when the sales have not
achieved its target thus making the remaining supplies to be sold in a lesser value.
Accounts Receivable increases when the company does more credit-based sales. The
Account Receivable decreases when the company has retrieved the balance cash payments
for the credit purchases.

DECISION CASE 2-3

My advice to Charles will be not to join the investment firm as in the investment firm he can
only earn $40000 per year but his expenses for the year including Rent, Car expenses, gas,
insurance and the depreciation values (12000+7000+15000 = 34000) would still make his
earnings less ($40000 - $34000 = $6000) than his targeted income of $11500.