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3M Co. (MMM)
Analysis of Investments
High level of difficulty
Accounting Policy on Investments
Marketable securities include available-for-sale debt securities and are recorded at fair value. Cost of securities sold use the first in, first out (FIFO) method. The classification of marketable securities as current or non-current is based on the availability for use in current operations. 3M reviews impairments associated with its marketable securities in accordance with the measurement guidance provided by ASC 320, Investments-Debt and Equity Securities, when determining the classification of the impairment as “temporary” or “other-than-temporary”. A temporary impairment charge results in an unrealized loss being recorded in accumulated other comprehensive income as a component of shareholders’ equity. Such an unrealized loss does not reduce net income for the applicable accounting period because the loss is not viewed as other-than-temporary. The factors evaluated to differentiate between temporary and other-than-temporary include the projected future cash flows, credit ratings actions, and assessment of the credit quality of the underlying collateral, as well as other factors. Amounts are reclassified out of accumulated other comprehensive income and into earnings upon sale or “other-than-temporary” impairment.
Source: 10-K (filing date: 2019-02-07).
Adjustment to Net Income (Loss): Mark to Market Available-for-sale Securities
3M Co., adjustment to net income attributable to 3M
US$ in millions
Based on: 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12).
Adjusted Profitability Ratios: Mark to Market Available-for-sale Securities (Summary)
3M Co., adjusted profitability ratios
Based on: 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12).
| Profitability ratio | Description | The company |
|---|---|---|
| Adjusted net profit margin | An indicator of profitability, calculated as adjusted net income divided by revenue. | 3M Co.’s adjusted net profit margin ratio deteriorated from 2016 to 2017 but then improved from 2017 to 2018 not reaching 2016 level. |
| Adjusted ROE | A profitability ratio calculated as adjusted net income divided by shareholders’ equity. | 3M Co.’s adjusted ROE deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level. |
| Adjusted ROA | A profitability ratio calculated as adjusted net income divided by total assets. | 3M Co.’s adjusted ROA deteriorated from 2016 to 2017 but then improved from 2017 to 2018 not reaching 2016 level. |
3M Co., Profitability Ratios: Reported vs. Adjusted
Adjusted Net Profit Margin
Based on: 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12).
2018 Calculations
1 Net profit margin = 100 × Net income attributable to 3M ÷ Net sales
= 100 × ÷ =
2 Adjusted net profit margin = 100 × Adjusted net income attributable to 3M ÷ Net sales
= 100 × ÷ =
| Profitability ratio | Description | The company |
|---|---|---|
| Adjusted net profit margin | An indicator of profitability, calculated as adjusted net income divided by revenue. | 3M Co.’s adjusted net profit margin ratio deteriorated from 2016 to 2017 but then improved from 2017 to 2018 not reaching 2016 level. |
Adjusted Return on Equity (ROE)
Based on: 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12).
2018 Calculations
1 ROE = 100 × Net income attributable to 3M ÷ Total 3M Company shareholders’ equity
= 100 × ÷ =
2 Adjusted ROE = 100 × Adjusted net income attributable to 3M ÷ Total 3M Company shareholders’ equity
= 100 × ÷ =
| Profitability ratio | Description | The company |
|---|---|---|
| Adjusted ROE | A profitability ratio calculated as adjusted net income divided by shareholders’ equity. | 3M Co.’s adjusted ROE deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level. |
Adjusted Return on Assets (ROA)
Based on: 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12).
2018 Calculations
1 ROA = 100 × Net income attributable to 3M ÷ Total assets
= 100 × ÷ =
2 Adjusted ROA = 100 × Adjusted net income attributable to 3M ÷ Total assets
= 100 × ÷ =
| Profitability ratio | Description | The company |
|---|---|---|
| Adjusted ROA | A profitability ratio calculated as adjusted net income divided by total assets. | 3M Co.’s adjusted ROA deteriorated from 2016 to 2017 but then improved from 2017 to 2018 not reaching 2016 level. |