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Analysis of Inventory
Difficulty: Advanced
- Inventory Accounting Policy
- Inventory Disclosure
- Adjustment to Inventory: from LIFO to FIFO
- Adjusted Ratios: LIFO vs. FIFO (Summary)
- Adjusted Current Ratio
- Adjusted Net Profit Margin
- Adjusted Total Asset Turnover
- Adjusted Financial Leverage
- Adjusted Return on Equity (ROE)
- Adjusted Return on Assets (ROA)
Inventory Accounting Policy
All inventories in the United States other than grain are valued at the lower of cost, using the last-in, first-out (LIFO) method, or market. Grain inventories are valued at net realizable value, and all related cash contracts and derivatives are valued at fair value, with all net changes in value recorded in earnings currently.
Inventories outside of the United States are generally valued at the lower of cost, using the first-in, first-out (FIFO) method, or net realizable value.
Shipping costs associated with the distribution of finished product to General Mills’ customers are recorded as cost of sales, and are recognized when the related finished product is shipped to and accepted by the customer.
Source: 10-K (filing date: 2018-06-29).
Inventory Disclosure
General Mills Inc., Statement of Financial Position, Inventory
USD $ in thousands
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Based on: 10-K (filing date: 2018-06-29), 10-K (filing date: 2017-06-29), 10-K (filing date: 2016-06-30), 10-K (filing date: 2015-07-06), 10-K (filing date: 2014-07-03), 10-K (filing date: 2013-07-03).
| Item | Description | The company |
|---|---|---|
| Inventories | Amount after valuation and LIFO reserves of inventory expected to be sold, or consumed within one year or operating cycle, if longer. | General Mills Inc.’s inventories increased from 2016 to 2017 and from 2017 to 2018. |
Adjustment to Inventory: from LIFO to FIFO
Adjusting LIFO Inventory to FIFO (Current) Cost
USD $ in thousands
Based on: 10-K (filing date: 2018-06-29), 10-K (filing date: 2017-06-29), 10-K (filing date: 2016-06-30), 10-K (filing date: 2015-07-06), 10-K (filing date: 2014-07-03), 10-K (filing date: 2013-07-03).
General Mills Inc.’s inventory value on May 27, 2018 would be $1,855,400 (in thousands) if the FIFO inventory method was used instead of LIFO. General Mills Inc.’s inventories, valued on a LIFO basis, on May 27, 2018 were $1,642,200 . General Mills Inc.’s inventories would have been $213,200 higher than reported on May 27, 2018 if the FIFO method had been used instead.
General Mills Inc., Financial Data: Reported vs. Adjusted
Adjusted Ratios: LIFO vs. FIFO (Summary)
General Mills Inc., adjusted ratios
Based on: 10-K (filing date: 2018-06-29), 10-K (filing date: 2017-06-29), 10-K (filing date: 2016-06-30), 10-K (filing date: 2015-07-06), 10-K (filing date: 2014-07-03), 10-K (filing date: 2013-07-03).
| Ratio | Description | The company |
|---|---|---|
| Adjusted current ratio | A liquidity ratio calculated as adjusted current assets divided by current liabilities. | General Mills Inc.’s adjusted current ratio deteriorated from 2016 to 2017 and from 2017 to 2018. |
| Adjusted net profit margin | An indicator of profitability, calculated as adjusted net income divided by revenue. | General Mills Inc.’s adjusted net profit margin improved from 2016 to 2017 and from 2017 to 2018. |
| Adjusted total asset turnover | An activity ratio calculated as total revenue divided by adjusted total assets. | General Mills Inc.’s adjusted total asset turnover deteriorated from 2016 to 2017 and from 2017 to 2018. |
| Adjusted financial leverage | A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income. |
General Mills Inc.’s adjusted financial leverage increased from 2016 to 2017 but then slightly declined from 2017 to 2018. |
| Adjusted ROE | A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. | General Mills Inc.’s adjusted ROE improved from 2016 to 2017 but then slightly deteriorated from 2017 to 2018 not reaching 2016 level. |
| Adjusted ROA | A profitability ratio calculated as adjusted net income divided by adjusted total assets. | General Mills Inc.’s adjusted ROA deteriorated from 2016 to 2017 and from 2017 to 2018. |
General Mills Inc., Ratios: Reported vs. Adjusted
Adjusted Current Ratio
Based on: 10-K (filing date: 2018-06-29), 10-K (filing date: 2017-06-29), 10-K (filing date: 2016-06-30), 10-K (filing date: 2015-07-06), 10-K (filing date: 2014-07-03), 10-K (filing date: 2013-07-03).
2018 Calculations
1 Current ratio = Current assets ÷ Current liabilities
= ÷ =
2 Adjusted current ratio = Adjusted current assets ÷ Current liabilities
= ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted current ratio | A liquidity ratio calculated as adjusted current assets divided by current liabilities. | General Mills Inc.’s adjusted current ratio deteriorated from 2016 to 2017 and from 2017 to 2018. |
Adjusted Net Profit Margin
Based on: 10-K (filing date: 2018-06-29), 10-K (filing date: 2017-06-29), 10-K (filing date: 2016-06-30), 10-K (filing date: 2015-07-06), 10-K (filing date: 2014-07-03), 10-K (filing date: 2013-07-03).
2018 Calculations
1 Net profit margin = 100 × Net earnings attributable to General Mills ÷ Net sales
= 100 × ÷ =
2 Adjusted net profit margin = 100 × Adjusted net earnings attributable to General Mills ÷ Net sales
= 100 × ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted net profit margin | An indicator of profitability, calculated as adjusted net income divided by revenue. | General Mills Inc.’s adjusted net profit margin improved from 2016 to 2017 and from 2017 to 2018. |
Adjusted Total Asset Turnover
Based on: 10-K (filing date: 2018-06-29), 10-K (filing date: 2017-06-29), 10-K (filing date: 2016-06-30), 10-K (filing date: 2015-07-06), 10-K (filing date: 2014-07-03), 10-K (filing date: 2013-07-03).
2018 Calculations
1 Total asset turnover = Net sales ÷ Total assets
= ÷ =
2 Adjusted total asset turnover = Net sales ÷ Adjusted total assets
= ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted total asset turnover | An activity ratio calculated as total revenue divided by adjusted total assets. | General Mills Inc.’s adjusted total asset turnover deteriorated from 2016 to 2017 and from 2017 to 2018. |
Adjusted Financial Leverage
Based on: 10-K (filing date: 2018-06-29), 10-K (filing date: 2017-06-29), 10-K (filing date: 2016-06-30), 10-K (filing date: 2015-07-06), 10-K (filing date: 2014-07-03), 10-K (filing date: 2013-07-03).
2018 Calculations
1 Financial leverage = Total assets ÷ Stockholders’ equity
= ÷ =
2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted stockholders’ equity
= ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted financial leverage | A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income. |
General Mills Inc.’s adjusted financial leverage increased from 2016 to 2017 but then slightly declined from 2017 to 2018. |
Adjusted Return on Equity (ROE)
Based on: 10-K (filing date: 2018-06-29), 10-K (filing date: 2017-06-29), 10-K (filing date: 2016-06-30), 10-K (filing date: 2015-07-06), 10-K (filing date: 2014-07-03), 10-K (filing date: 2013-07-03).
2018 Calculations
1 ROE = 100 × Net earnings attributable to General Mills ÷ Stockholders’ equity
= 100 × ÷ =
2 Adjusted ROE = 100 × Adjusted net earnings attributable to General Mills ÷ Adjusted stockholders’ equity
= 100 × ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted ROE | A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. | General Mills Inc.’s adjusted ROE improved from 2016 to 2017 but then slightly deteriorated from 2017 to 2018 not reaching 2016 level. |
Adjusted Return on Assets (ROA)
Based on: 10-K (filing date: 2018-06-29), 10-K (filing date: 2017-06-29), 10-K (filing date: 2016-06-30), 10-K (filing date: 2015-07-06), 10-K (filing date: 2014-07-03), 10-K (filing date: 2013-07-03).
2018 Calculations
1 ROA = 100 × Net earnings attributable to General Mills ÷ Total assets
= 100 × ÷ =
2 Adjusted ROA = 100 × Adjusted net earnings attributable to General Mills ÷ Adjusted total assets
= 100 × ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted ROA | A profitability ratio calculated as adjusted net income divided by adjusted total assets. | General Mills Inc.’s adjusted ROA deteriorated from 2016 to 2017 and from 2017 to 2018. |