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General Mills Inc. (GIS)
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: 2019-06-28).
Inventory Disclosure
General Mills Inc., balance sheet: inventory
US$ in thousands
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Based on: 10-K (filing date: 2019-06-28), 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).
| 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 2017 to 2018 but then slightly declined from 2018 to 2019 not reaching 2017 level. |
Adjustment to Inventory: from LIFO to FIFO
Adjusting LIFO Inventory to FIFO (Current) Cost
US$ in thousands
Based on: 10-K (filing date: 2019-06-28), 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).
General Mills Inc.’s inventory value on May 26, 2019 would be $1,772,800 (in thousands) if the FIFO inventory method was used instead of LIFO. General Mills Inc.’s inventories, valued on a LIFO basis, on May 26, 2019 were $1,559,300 . General Mills Inc.’s inventories would have been $213,500 higher than reported on May 26, 2019 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: 2019-06-28), 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).
| 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 2017 to 2018 but then slightly improved from 2018 to 2019. |
| 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 2017 to 2018 but then deteriorated significantly from 2018 to 2019. |
| 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 2017 to 2018 but then slightly improved from 2018 to 2019. |
| 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 declined from 2017 to 2018 and from 2018 to 2019. |
| Adjusted ROE | A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. | General Mills Inc.’s adjusted ROE deteriorated from 2017 to 2018 and from 2018 to 2019. |
| Adjusted ROA | A profitability ratio calculated as adjusted net income divided by adjusted total assets. | General Mills Inc.’s adjusted ROA deteriorated from 2017 to 2018 and from 2018 to 2019. |
General Mills Inc., Ratios: Reported vs. Adjusted
Adjusted Current Ratio
Based on: 10-K (filing date: 2019-06-28), 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).
2019 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 2017 to 2018 but then slightly improved from 2018 to 2019. |
Adjusted Net Profit Margin
Based on: 10-K (filing date: 2019-06-28), 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).
2019 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 2017 to 2018 but then deteriorated significantly from 2018 to 2019. |
Adjusted Total Asset Turnover
Based on: 10-K (filing date: 2019-06-28), 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).
2019 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 2017 to 2018 but then slightly improved from 2018 to 2019. |
Adjusted Financial Leverage
Based on: 10-K (filing date: 2019-06-28), 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).
2019 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 declined from 2017 to 2018 and from 2018 to 2019. |
Adjusted Return on Equity (ROE)
Based on: 10-K (filing date: 2019-06-28), 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).
2019 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 deteriorated from 2017 to 2018 and from 2018 to 2019. |
Adjusted Return on Assets (ROA)
Based on: 10-K (filing date: 2019-06-28), 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).
2019 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 2017 to 2018 and from 2018 to 2019. |