Question

Compute and Interpret Measures for DuPont Disaggregation Analysis Balance sheets and income statements for 3M Company follow. 3M Company Consolidated Statements of Income For Years Ended Dec. 31 ($millions) 2015 2014 2013 Net sales $31,718 $31,821 $30,871 Operating expenses Cost of sales 15,383 16,447 16,106 Selling, general & administrative expenses 6,182 6,469 6,384 Research, development & related expenses 1,763 1,770 1,715 Total operating expenses 23,328 24,686 24,205 Operating income 8,390 7,135 6,666 Interest expense and income Interest expense 149 142 145 Interest income (26) (33) (41) Total interest expense -net 123 109 104 Income before income taxes 8,267 7,026 6,562 Provision for income taxes 2,480 2,028 1,841 Net income inc. noncontrolling interest 5,787 4,998 4,721 Less: Net income attributable to NCI 8 42 62 Net income attributable to 3M $5,779 $4,956 $4,659 3M Company Consolidated Balance Sheets At December 31 ($ millions, except per share amount) 2015 2014 Current assets Cash and cash equivalents $2,253 $2,352 Marketable securities--current 340 1,661 Accounts receivable, net 4,154 4,238 Inventories: Finished goods 1,655 1,723 Work in process 1,008 1,081 Raw materials and supplies 855 902 Total inventories 3,518 3,706 Other current assets 1,398 1,023 Total current assets 11,663 12,980 Marketable securities--noncurrent 9 15 Investments 117 102 Property, plant and equipment 23,098 22,841 Less: Accumulated depreciation (14,583) (14,352) Property, plant and equipment--net 8,515 8,489 Goodwill 9,249 7,050 Intangible assets -net 2,601 1,435 Prepaid pension benefits 188 46 Other assets 1,053 1,769 Total assets $33,395 $31,886 Liabilities Current liabilities Short-term debt & current portion of LT debt $2,499 $328 Accounts payable 1,916 2,262 Accrued payroll 644 732 Accrued income taxes 332 435 Other current liabilities 2,404 2,884 Total current liabilities 7,795 6,641 Long-term debt 8,753 6,705 Pension and postretirement benefits 3,520 3,843 Other liabilities 1,580 1,555 Total liabilities 21,648 18,744 Equity 3M Company shareholders' equity: Common stock, par value $0.01 per share; Shares outstanding --2015: 609,330,124; Shares outstanding --2014: 635,134,594 9 9 Additional paid-in capital 4,791 4,379 Retained earnings 36,575 34,317 Treasury stock (23,308) (19,307) Accumulated other comprehensive income (loss) (6,359) (6,289) Total 3M Company shareholders' equity 11,708 13,109 Noncontrolling interest 39 33 Total equity 11,747 13,142 Total liabilities and equity $33,395 $31,886 a. Compute the DuPont model component measures for profit margin, asset turnover, and financial leverage. Then, compute ROA. Round profit margin and ROA to two decimal places (ex: 0.12345 = 12.35%) Round asset turnover and financial leverage to three decimal places. Profit margin Answer % Asset turnover Answer Financial leverage Answer ROA Answer % b. Compute ROE. Confirm that ROE equals ROE computed using the component measures from part a (ROE = PM x AT x FL). Round answer to two decimal places (ex: 0.12345 = 12.35%) Answer % c. Compute adjusted ROA (assume a statutory tax rate of 37% and pretax net interest expense of $123). Round answer to two decimal places (ex: 0.12345 = 12.35%) Answer %

Answer 1