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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 $30,674 $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 7,346 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 7,223 7,026 6,562

Provision for income taxes 2,167 2,028 1,841

Net income inc. noncontrolling interest 5,056 4,998 4,721

Less: Net income attributable to NCI 8 42 62

Net income attributable to 3M $5,048 $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 $1,898 $1,997

Marketable securities--current 198 1,519

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 11,166 12,483

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 $32,898 $31,389

Liabilities

Current liabilities

Short-term debt & current portion of LT debt $2,144 $186

Accounts payable 1,774 1,907

Accrued payroll 644 732

Accrued income taxes 332 435

Other current liabilities 2,404 2,884

Total current liabilities 7,298 6,144

Long-term debt 8,753 6,705

Pension and postretirement benefits 3,520 3,843

Other liabilities 1,580 1,555

Total liabilities 21,151 18,247

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 $32,898 $31,389


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

0

%

Asset turnover Answer

0


Financial leverage Answer

0


ROA Answer

0

%



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

0

%


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

0

%

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