Understanding Financial Statements
Presented to: James White
By: Nicholas Thebeau
General Mills, Inc. primary business is focused on selling food products. The major products they sell are: cereals, frozen dough, baking products, snacks, yogurt, and organic foods, just to name a few. The company’s operations are international and include a presence in the USA, Canada, Europe, South America, Asia, and Pacific regions.
The industry is saturated with lower price point products and the food products are easily substituted. Because the industry is so competitive, General Mills, Inc. heavily markets their products to generate sales. Because of the small profit margin, General Mills, Inc. has to have a high turnover rate in order for them to have a positive net income.
The four financial statements are the income statement, balance sheet, cash flow and statement of shareholder’s equity.
General Mills uses the following names to describe the statements, respectively; consolidated statements of cash earnings, consolidated balance sheets, consolidated statements of cash flows and consolidated statements of stockholders’ equity and comprehensive income.
Consolidated indicates that General Mills, Inc. is a parent company, and that its subsidiaries are reflected on the statements, as one entity.
Public companies must prepare financial statements based on SEC’s requirements. SEC regulations demand that public companies must file quarterly and annual financial statements or 10-Q and an annual 10-K. d)
Management is responsible for the company’s financial statements and its internal controls. The internal controls are typically audited to ensure that there are no material affects to the financial statements or fraud. The financial statements are signed by the CEO and CFO; which can be held against them in court. They also have to certify the accuracy of the SEC reported statements.
Users of financial statement can include:
6. Government officials
Each user tends to analyze the financial statements differently. Investors, management and analyst will typically use the financial statements in order to assess the company’s operations. Analyst will also use the financial statements to predict patterns or to add value to the historical numbers. Creditors are most likely to analyze the statements to assess if the company has the ability to pay off potential debt, or analyze how liquid the company is. Suppliers are likely to analyze the statements to see if they are a risk in doing business with the company, or if it can meet contractual obligations on time. Financial statements can be analyzed several ways; it all depends on the user and what the user wants to get out of digging into these statements.
General Mills, Inc. auditor is KPMG LLP. KPMG issued two auditors opinion. The first was based on the internal controls audit, while the second was on the financial statements. KPMG stated that management’s assessment of its internal controls over financial report is fairly stated and that KPMG’s opinion is that general mills maintained in all material respects effective internal control. Secondly, KPMG issued an unqualified or a “clean” audit opinion regarding the financial statements audit. It means that KPMG performed their tests and are reasonably sure that the financial statements are in compliance with GAAP. The dates signify that is when the auditors field work ended, or when their audit finished.
i. 18207=12435 or (11299+1136)+5772 ii. General Mills major assets
a. Goodwill at 36.5% of total
b. Intangible assets at 19.8% of total
c. Land, buildings and equipment at 16.5%
Short term assets are 17% vs. long-term assets are 83%. Since General Mills would need space or factories/plants in order to produce their