General Mills Analysis

First, the projected cash flows range from $21.2 million in 2007 to $29.5 million in 2011 as shown in the data exhibit ‘DCF model.’ To generate these numbers Liedtke’s base case performance projections are used for the projected 2007 – 2011 net revenue numbers and the estimated depreciation and then his projections for Balance sheet accounts were used to determine the current net working capital and capital expenditure as in the exhibit ‘Financial statements.’ These projections were based by Liedtke under the following assumptions, women’s casual footwear would be wound down within one year and the historical corporate overhead-revenue ratio would conform to historical averages. These annual cash flows give us a PV (Cash flows) of $96.15 million over the next 5 years.

As concerns profitability, the company seems quite profitable; however, looking at liquidity, the problems appear. Current ratio shows that the firm has enough money in hand to pay short-term obligations. However, quick ratio illustrates that the company

In the two years presented in the case study (2009-2010), Yum Brands, Inc. saw a significant decline in its operating cash flow/current maturities of long-term debt and current notes payable. This indicates that they are less able to meet their current debt obligation. However, when looking at operating cash flow/total debt, there is an increase of 7.3% showing that Yum Brands, Inc. is more able to cover its debt with operating cash. A review of the operating cash flow per share shows an increase of $1.14 showing an improvement in its ability to make capital expense decisions and pay dividends to its shareholders. Finally, Yum Brands, Inc. a .9 increase in operating cash flow/cash

With slow sales, the company had to keep some expenses flat, such as administrative salaries, web creation / maintenance and executive compensations. This is a weakness and as stated before, the company will need to increase sales to increase profits to raise its strength. On the balance sheet for years 7 and 8, the current assets increased in accounts receivables. This is probably due to slow pay and/or unpaid accounts receivables. The change between years 7 and 8 reported -15% with a decrease change of $107,640. Total assets change was -0.2% and this position reflects a financial weakness for the company. Cash and cash equivalents can be used to satisfy during this period, although there was a change of 348.2%, this increase could have been used for operating expenses. This is too much cash sitting idle and not working for the company. Competition Bikes can assess where to put this cash to work for the company.

The company’s current assets are just over two times its current liabilities, giving it a current ratio of 2.08. This is a sign of financial strength. The Quick ratio (current assets-inventory then divided by current liabilities) is 0.96. This measures the company’s ability to come up with cash in a matter of hours to days. It has working capital (current assets-current liabilities) of $7,508,998. With a working capital per dollar of sales of 15%. This is adequate given the high inventory turn.

Although the company’s liquidity ratios have dropped their ratios are still outperforming their RMA industry average by 15%. The decrease in the company’s liquidity ratios is the result of their current liabilities increasing 6.5% from fiscal year 2014 and their current assets only increasing 0.7% from fiscal year 2014. The company saw a decrease in cash and equivalents, accounts receivable, and income tax receivable in 2015. While also increasing accounts payable, accrued expenses, and deferred revenue and other liabilities. The combination of the movement in these accounts result in lower liquidity ratios for fiscal year 2015.

The quick ratio measures short-term liquidity and cash flow. It reveals if a company can cover all of its short-term debt obligations with its liquid assets (i.e., cash or quick assets) (Boundless, 2017). Quick assets are quickly convertible into cash in an amount that is extremely comparable to their present book value (Maverick, 2015). The quick ratio divides the company’s liquid assets by its current liabilities. For Delta, utilizing their cash and cash equivalent value for the third quarter ending September 30, 2017 of $1,478 million and their current liabilities for the same period of $16,496, they would have a quick ratio or 0.09 (Delta Airlines, 2017). A low quick ratio is not a good indication because the higher the quick ratio the better and any value below one is considered disadvantageous to the company. Comparing Delta quick ratio to the industry average of 0.44, Delta would not be able to pay their short-term debt with their most liquid assets (CSI Market, 2017). Utilizing debt financing for the

When analyzing current ratio and quick ratio we can say that the company’s liquidity is efficient enough to pay off its currents debts, since the trend for the period stayed fluctuating around the same percentages. Meanwhile, accounts receivable followed a negative trend, meaning that the company’s days of accounts receivable increased showing that they are having a hard time collecting receivables in a timely manner. In addition, inventory and accounts payable turnover increased over the first three years, showing in one hand the inefficiency of the company at selling inventory and on the other hand that they are making payments faster to the supplier which is a sign of their improving financial conditions. The last item under liquidity ratio is cash conversion cycle, showing a deteriorating trend, which confirms the effectiveness of a company’s management converting cash on hand into inventory to sales and sales back into

Managing debt levels to maintain an investment grade credit rating as well as operate with an efficient capital structure for its growth plans and industry

Overall the liquidity of the company is very stable, THI working capital is healthy and the company is able to support its short term business needs in an efficient manner.

Liquidity ratio. The firm’s liquidity shows a downward trend through time. The current ratio is decreasing because the growth in current liabilities outpaces the growth of current assets. The quick ratio is also declining but not as fast as the current ratio. From 1991 to 1992, it only decreased 0.35 units while the current ratio decreased 0.93 units. Looking at the common size balance sheet, we also see that the percentage of inventory is growing from 33% to 48% indicating Mark X could not convert its inventory to cash.

In June of 2016 General Mills announced that they were going to approximately cut around 1,400 jobs worldwide because few products were in low demand with customers. Customers are demanding for more “real food”. They don’t want processed food instead they want more natural ingredients included in the products. General mills will close its facility in New Jersey which produces progress soup costing 370 jobs. Another General Mills facility in Ohio which produces dry mixes will lose another 180 workers. General Mills will also close facilities in overseas markets. In Brazil, they will shut down a facility which produces meals and snakes costing 420 jobs. Also in China, they will shut down a facility which is involved in producing of

Our analysis attempts to answer the question, “What are the things a company must consider when analyzing a new investment or project?” According to the text, a firm’s first objective when deciding to take on new debt should be that its return on net assets (RONA) should be greater than its weighted average cost of capital (WACC). Since we are working with an income statement only and do not have an amount for net assets, we will instead use return on invested capital (ROIC), which measures how well a company is using its money to generate returns. Comparing a company 's return on capital (ROIC) with its cost of capital (WACC) reveals whether invested capital was used effectively. From our spreadsheet calculations we see that using our estimated operating profit provides us with a 19.9% return on invested capital with only a 7.2% weighted average cost for that same capital. If these numbers are even close to correct, George should definitely make the move.

Leverage and liquidity ratios in respect to the O.M Scott & Sons Company vary widely. The overall liquidity of the company does not indicate that lack of cash will impede their operational ability. Although the current ratio increases to a high of 4.2999 in 1960, their ability to meet short-term obligations should not be affected. However, it may indicate that there is too much inventory or cash could be better spent in other areas of the business. The financial leverage ratio increases from a low of .5335 in 1957, to a high of 1.3928 in 1961. This change shows that the company is becoming more dependent on using debt to finance its assets.

Analysing the historical values of the operating margins from the Income Statement, we forecast values for the 2007-2009 period. The executives of BKI expect the firm to achieve operating margins at least as high as the historical ones. Thus, we took averages and slightly adjusted them toward higher values. Since the declining tendency in the last three years was cause by integration costs and inventory write-downs associated with acquisitions, which already have been completed. To the EBIT, estimated by using those margins, subtract the taxes, Capex, adjust for Depreciation, Amortization and change in Working capital. The capital expenditures were just over $10m on average per year. The company is expecting the Capex remain modest. Thus, we assumed a Capex of $10m for the next three years. We estimated Net Working Capital by using the average ratio of NWC/Net income of the last three years.