1.

Current Ratio =Current Asset/Current Liabilities

General Mills Current Ratio
2010
3480.0/376
9.1
0.9233

2009
3534.9/36
06
0.9801

Hence the liquidity is high for General Mills since the ratio is less than 2:1 or
1.5:1,
2. The current liability for Kelloggs for the year 2010 = $3184 million,
The current liability for General Mills for the year 2010 = $3769 million,
As it can be seen from the figures above the notes Payable for General Mills is
much higher than notes payable for Kelloggs.
Current liability of General Mills is again higher than Kelloggs for the year
2009. However, the main point to be noted for the year 2009 is that the
Current liability due to long term debt for Kelloggs is $1 million while that for
General Mills is $508.5 million.
3. Kelloggs :
Various Legal proceedings and lawsuits have been imposed on the company,
not only these losses are probable and can be reasonably estimated in the
accruals for certain matters. Management does not expect this claim or legal
proceedings pending against the company could impact the companys
consolidated financial statements.
General Mills:
No such listing of any contingent liabilities for General Mills.

Decision Case 10-2

1

Debt-to-equity ratio = Total Liability/ Total Stockholders Equity

Company

It

Total
Liability
9693

Total
Stockholders Debt to Equity
Equity
Ratio
2158
4.49

Kelloggs
General
12030.9
5402.9
2.2
Mills
can be deducted from the table above that the debt to equity ratio is high for
Kelloggs and less for general Mills. So, it can be concluded that it is high on debt
with respect to stockholders equity.

Kelloggs:
In 2010, the long term liability of Kelloggs has increased as it has taken more
long term debt. Though it has paid a part of the long term debt but its effect
is less on the overall increase in the long term debt. Thus, cash flow in the
company has increased.
General Mills:
In 2010, General Mill instead of taking any long term debt has repaid its
running long term debt. Thus, the long term debt has decreased reducing the
cash flow in the company.

3 Kelloggs Financing Activities:

Major Financing activities made by
Kelloggs are as follows:
i.
Issuance of Long Term Debt,
ii.
Reduction of Long Term Debt,
iii.
Net Issuance of common stock,
iv.
Common Stock Repurchases and Cash Dividends.
General Mills Financing Activities: Major Financing activities made by
Genera Mills are as follows:

i.
ii.
iii.
iv.
v.
vi.

Changes in Notes payable,

Payment of Long Term debt,
Proceeds from common stock issued on exercised options,
Tax benefit on exercised options,
Purchases of common stock for treasury,
Dividends paid.

Decision Case 11-1

1)

For Kelloggs
Number of shares of common stock authorized = 1000,000,000
Number of shares Issued = 419,272,027 + 419,058,168 = 83,83,30,195
Number of shares Outstanding = 16,16,69,805
For General Mills
Number of shares of common stock authorized = 1000,000,000
Number of shares Issued = 754.6
Number of shares Outstanding = issued treasury
= 754.6-(98.1+98.6)
= 557.9
2) For Kelloggs
Retained earnings have increased from $5481 to $6122 million.
For General Mills
Retained earnings has increased from $7235.6 to $8122.4
Factors which can affect retained earning balance:

Retained earnings can be described as Retained Earnings = Net Income

Dividend
Hence, on retained earnings depend upon Net Income and Dividend

3) Stockholders equity = Contributed Capital + Retained earnings.

Kelloggs total equity = $2514 million

General Mills total equity = $5648 million.

Companys stock depends on number of shares issued by the company too.
Hence, we cannot determine the stock value just by knowing total equity of a
company.

Decision Case 12-1

1. It can be seen that both companies use the indirect method for the Operating
activities section.
The first line in the statement of cash flow operating activities section for both
the firms is the Net Income and direct cash transactions are not mentioned in
either of the cash flow statements.
2. Kelloggs
Cash provided by the operating activities has decreased by $635 million form
the year 2009 to 2010. From operating activity, depreciation and Amortization
account for the largest adjustment to reconcile the net income to net cash in
2009 and 2010.
General Mills
Cash provided by the operating activities increased by $353 million from the
year 2009 to 2010. From operating activity, depreciation and Amortization
account for the largest adjustment to reconcile the net income to net cash in
2009 and 2010.
3. Amount spent by each company on the property are :
Company
Kelloggs
General
Mills

Property
Investmen
t (2010)
$474

Property
investmen
t (2009)
$377

$649.9

$562.6

4. For Kelloggs, the primary source of financing activities is issuance of long term
debt ,while for General Mills , the primary source of financing activities is
issuance of stock.
Kelloggs has repurchased its shares worth $1052 million in the year 2010,
while general mills have not purchased any shares.
Reasons for buying back could be following:
i.
To make stock available to distribute to employees
ii.
To improve the market price of the stock.

iii.

To maintain control over the firm and prevent unwanted takeover or

buyout attempts.