a) Compute net operating profit after tax (NOPAT) for 2018. Assume that the combined federal and state statutory tax rate is 22%. (Round your answer to the nearest whole number.) 2018 NOPAT =Answer ($ millions) (b) Compute net operating assets (NOA) for 2018 and 2017. 2018 NOA =Answer ($ millions) 2017 NOA =Answer ($ millions) (c) Compute and disaggregate 3M’s RNOA into net operating profit margin (NOPM) and net operating asset turnover (NOAT) for 2018. Demonstrate that RNOA = NOPM × NOAT. (Round your answers to two decimal places. Do not round until your final answer. Do not use NOPM x NOAT to calculate RNOA.) 2018 RNOA =Answer
Analysis and Interpretation of Profitability
Balance sheets and income statements for 3M Company follow.
| 3M COMPANY | ||
|---|---|---|
| Consolidated Statements of Income | ||
| For Years ended December 31 ($ millions) | 2018 | 2017 |
| Net sales | $32,765 | $31,657 |
| Operating expenses | ||
| Cost of sales | 16,682 | 16,055 |
| Selling, general and administrative expenses | 7,602 | 6,626 |
| Research, development and related expenses | 1,821 | 1,870 |
| Gain on sale of businesses | (547) | (586) |
| Total operating expenses | 25,558 | 23,965 |
| Operating income | 7,207 | 7,692 |
| Other expense, net* | 207 | 144 |
| Income before income taxes | 7,000 | 7,548 |
| Provision for income taxes | 1,637 | 2,679 |
| Net income including noncontrolling interest | 5,363 | 4,869 |
| Less: Net income attributable to noncontrolling interest | 14 | 11 |
| Net income attributable to 3M | $ 5,349 | $ 4,858 |
*Interest expense, gross $350 million in 2018 and $322 million in 2017.
| 3M COMPANY | ||
|---|---|---|
| Consolidated Balance Sheets | ||
| At December 31 ($ millions, except per share amount) | 2018 | 2017 |
| Current Assets | ||
| Cash and cash equivalents | $ 2,853 | $ 3,053 |
| Marketable securities | 380 | 1,076 |
| Accounts receivable | 5,020 | 4,911 |
| Total inventories | 4,366 | 4,034 |
| Prepaids | 741 | 937 |
| Other current assets | 349 | 266 |
| Total current assets | 13,709 | 14,277 |
| Property, plant and equipment-net | 8,738 | 8,866 |
| 10,051 | 10,513 | |
| Intangible assets-net | 2,657 | 2,936 |
| Other assets | 1,345 | 1,395 |
| Total assets | $36,500 | $37,987 |
| Current liabilities | ||
| Short-term borrowings and current portion of long-term debt | $ 1,211 | $ 1,853 |
| Accounts payable | 2,266 | 1,945 |
| Accrued payroll | 749 | 870 |
| Accrued income taxes | 243 | 310 |
| Other current liabilities | 2,775 | 2,709 |
| Total current liabilities | 7,244 | 7,687 |
| Long-term debt | 13,411 | 12,096 |
| Pension and postretirement benefits | 2,987 | 3,620 |
| Other liabilities | 3,010 | 2,962 |
| Total liabilities | 26,652 | 26,365 |
| 3M Company shareholders' equity | ||
| Common stock, par value | $9 | $9 |
| Additional paid-in capital | 5,643 | 5,352 |
| 40,636 | 39,115 | |
| (29,626) | (25,887) | |
| Accumulated other comprehensive income (loss) | (6,866) | (7,026) |
| Total 3M Company shareholders' equity | 9,796 | 11,563 |
| Noncontrolling interest | 52 | 59 |
| Total equity | 9,848 | 11,622 |
| Total liabilities and equity | $36,500 | $37,987 |
(a) Compute
2018 NOPAT =Answer
($ millions)
(b) Compute net operating assets (NOA) for 2018 and 2017.
2018 NOA =Answer
($ millions)
2017 NOA =Answer
($ millions)
(c) Compute and disaggregate 3M’s RNOA into net operating profit margin (NOPM) and net operating asset turnover (NOAT) for 2018. Demonstrate that RNOA = NOPM × NOAT. (Round your answers to two decimal places. Do not round until your final answer. Do not use NOPM x NOAT to calculate RNOA.)
2018 RNOA =Answer
%
2018 NOPM =Answer
%
2018 NOAT =Answer
(d) Compute net nonoperating obligations (NNO) for 2018 and 2017. Confirm the relation: NOA = NNO + Total equity
2018 NNO =Answer
($ millions)
2017 NNO =Answer
($ millions)
(e) Compute
2018 ROE =Answer
%
(f) What is the nonoperating return component of ROE for 2018?(Round your answers to two decimal places.)
2018 nonoperating return =Answer
%
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