Microsoft Excel LibreOffice Calc

Kimberly-Clark Corp. (KMB)


Analysis of Inventory

Difficulty: Advanced


Inventory Accounting Policy

Most U.S. inventories are valued at the lower of cost, using the Last-In, First-Out ("LIFO") method, or market. The balance of the U.S. inventories and inventories of consolidated operations outside the U.S. are valued at the lower of cost or net realizable value using either the First-In, First-Out ("FIFO") or weighted-average cost methods. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Distribution costs are classified as cost of products sold.

Source: 10-K (filing date: 2019-02-07).


Inventory Disclosure

Kimberly-Clark Corp., balance sheet: inventory

US$ in millions

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Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Raw materials 362  345  329  397  426 
Work in process 214  213  203  203  215 
Finished goods 1,153  1,105  1,030  1,214  1,183 
Supplies and other 275  303  280  278  288 
Inventories, determined on the FIFO or weighted-average cost methods 2,004  1,966  1,842  2,092  2,112 
Excess of FIFO or weighted-average cost over LIFO cost (191) (176) (163) (183) (220)
Inventories 1,813  1,790  1,679  1,909  1,892 

Based on: 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-08), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-18).

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. Kimberly-Clark Corp.’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

US$ in millions

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Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Adjustment to Inventories
Inventories at LIFO (as reported) 1,813  1,790  1,679  1,909  1,892 
Add: Inventory LIFO reserve 191  176  163  183  220 
Inventories at FIFO (adjusted) 2,004  1,966  1,842  2,092  2,112 
Adjustment to Current Assets
Current assets (as reported) 5,041  5,211  5,115  5,426  5,559 
Add: Inventory LIFO reserve 191  176  163  183  220 
Current assets (adjusted) 5,232  5,387  5,278  5,609  5,779 
Adjustment to Total Assets
Total assets (as reported) 14,518  15,151  14,602  14,842  15,526 
Add: Inventory LIFO reserve 191  176  163  183  220 
Total assets (adjusted) 14,709  15,327  14,765  15,025  15,746 
Adjustment to Total Kimberly-Clark Corporation Stockholders’ Equity
Total Kimberly-Clark Corporation stockholders’ equity (as reported) (287) 629  (102) (174) 729 
Add: Inventory LIFO reserve 191  176  163  183  220 
Total Kimberly-Clark Corporation stockholders’ equity (adjusted) (96) 805  61  949 
Adjustment to Net Income Attributable To Kimberly-Clark Corporation
Net income attributable to Kimberly-Clark Corporation (as reported) 1,410  2,278  2,166  1,013  1,526 
Add: Increase (decrease) in inventory LIFO reserve 15  13  (20) (37) (22)
Net income attributable to Kimberly-Clark Corporation (adjusted) 1,425  2,291  2,146  976  1,504 

Based on: 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-08), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-18).

Kimberly-Clark Corp.’s inventory value on Dec 31, 2018 would be $2,004  (in millions) if the FIFO inventory method was used instead of LIFO. Kimberly-Clark Corp.’s inventories, valued on a LIFO basis, on Dec 31, 2018 were $1,813 . Kimberly-Clark Corp.’s inventories would have been $191  higher than reported on Dec 31, 2018 if the FIFO method had been used instead.


Kimberly-Clark Corp., Financial Data: Reported vs. Adjusted


Adjusted Ratios: LIFO vs. FIFO (Summary)

Kimberly-Clark Corp., adjusted ratios

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Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Current Ratio
Reported current ratio (LIFO) 0.77 0.89 0.87 0.85 0.89
Adjusted current ratio (FIFO) 0.80 0.92 0.90 0.88 0.93
Net Profit Margin
Reported net profit margin (LIFO) 7.63% 12.48% 11.90% 5.45% 7.74%
Adjusted net profit margin (FIFO) 7.71% 12.55% 11.79% 5.25% 7.63%
Total Asset Turnover
Reported total asset turnover (LIFO) 1.27 1.21 1.25 1.25 1.27
Adjusted total asset turnover (FIFO) 1.26 1.19 1.23 1.24 1.25
Financial Leverage
Reported financial leverage (LIFO) 24.09 21.30
Adjusted financial leverage (FIFO) 19.04 242.05 1,669.44 16.59
Return on Equity (ROE)
Reported ROE (LIFO) 362.16% 209.33%
Adjusted ROE (FIFO) 284.60% 3,518.03% 10,844.44% 158.48%
Return on Assets (ROA)
Reported ROA (LIFO) 9.71% 15.04% 14.83% 6.83% 9.83%
Adjusted ROA (FIFO) 9.69% 14.95% 14.53% 6.50% 9.55%

Based on: 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-08), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-18).

Ratio Description The company
Adjusted current ratio A liquidity ratio calculated as adjusted current assets divided by current liabilities. Kimberly-Clark Corp.’s adjusted current ratio improved from 2016 to 2017 but then deteriorated significantly from 2017 to 2018.
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. Kimberly-Clark Corp.’s adjusted net profit margin improved from 2016 to 2017 but then deteriorated significantly from 2017 to 2018.
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Kimberly-Clark Corp.’s adjusted total asset turnover deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.
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.
Kimberly-Clark Corp.’s adjusted financial leverage declined from 2016 to 2017 and from 2017 to 2018.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. Kimberly-Clark Corp.’s adjusted ROE deteriorated from 2016 to 2017 and from 2017 to 2018.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Kimberly-Clark Corp.’s adjusted ROA improved from 2016 to 2017 but then deteriorated significantly from 2017 to 2018.

Kimberly-Clark Corp., Ratios: Reported vs. Adjusted


Adjusted Current Ratio

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (US$ in millions)
Current assets 5,041  5,211  5,115  5,426  5,559 
Current liabilities 6,536  5,858  5,846  6,349  6,226 
Ratio
Current ratio1 0.77 0.89 0.87 0.85 0.89
Adjusted: from LIFO to FIFO
Selected Financial Data (US$ in millions)
Adjusted current assets 5,232  5,387  5,278  5,609  5,779 
Current liabilities 6,536  5,858  5,846  6,349  6,226 
Ratio
Adjusted current ratio2 0.80 0.92 0.90 0.88 0.93

Based on: 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-08), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-18).

2018 Calculations

1 Current ratio = Current assets ÷ Current liabilities
= 5,041 ÷ 6,536 = 0.77

2 Adjusted current ratio = Adjusted current assets ÷ Current liabilities
= 5,232 ÷ 6,536 = 0.80

Ratio Description The company
Adjusted current ratio A liquidity ratio calculated as adjusted current assets divided by current liabilities. Kimberly-Clark Corp.’s adjusted current ratio improved from 2016 to 2017 but then deteriorated significantly from 2017 to 2018.

Adjusted Net Profit Margin

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Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to Kimberly-Clark Corporation 1,410  2,278  2,166  1,013  1,526 
Net sales 18,486  18,259  18,202  18,591  19,724 
Ratio
Net profit margin1 7.63% 12.48% 11.90% 5.45% 7.74%
Adjusted: from LIFO to FIFO
Selected Financial Data (US$ in millions)
Adjusted net income attributable to Kimberly-Clark Corporation 1,425  2,291  2,146  976  1,504 
Net sales 18,486  18,259  18,202  18,591  19,724 
Ratio
Adjusted net profit margin2 7.71% 12.55% 11.79% 5.25% 7.63%

Based on: 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-08), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-18).

2018 Calculations

1 Net profit margin = 100 × Net income attributable to Kimberly-Clark Corporation ÷ Net sales
= 100 × 1,410 ÷ 18,486 = 7.63%

2 Adjusted net profit margin = 100 × Adjusted net income attributable to Kimberly-Clark Corporation ÷ Net sales
= 100 × 1,425 ÷ 18,486 = 7.71%

Ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. Kimberly-Clark Corp.’s adjusted net profit margin improved from 2016 to 2017 but then deteriorated significantly from 2017 to 2018.

Adjusted Total Asset Turnover

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Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (US$ in millions)
Net sales 18,486  18,259  18,202  18,591  19,724 
Total assets 14,518  15,151  14,602  14,842  15,526 
Ratio
Total asset turnover1 1.27 1.21 1.25 1.25 1.27
Adjusted: from LIFO to FIFO
Selected Financial Data (US$ in millions)
Net sales 18,486  18,259  18,202  18,591  19,724 
Adjusted total assets 14,709  15,327  14,765  15,025  15,746 
Ratio
Adjusted total asset turnover2 1.26 1.19 1.23 1.24 1.25

Based on: 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-08), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-18).

2018 Calculations

1 Total asset turnover = Net sales ÷ Total assets
= 18,486 ÷ 14,518 = 1.27

2 Adjusted total asset turnover = Net sales ÷ Adjusted total assets
= 18,486 ÷ 14,709 = 1.26

Ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Kimberly-Clark Corp.’s adjusted total asset turnover deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.

Adjusted Financial Leverage

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (US$ in millions)
Total assets 14,518  15,151  14,602  14,842  15,526 
Total Kimberly-Clark Corporation stockholders’ equity (287) 629  (102) (174) 729 
Ratio
Financial leverage1 24.09 21.30
Adjusted: from LIFO to FIFO
Selected Financial Data (US$ in millions)
Adjusted total assets 14,709  15,327  14,765  15,025  15,746 
Adjusted total Kimberly-Clark Corporation stockholders’ equity (96) 805  61  949 
Ratio
Adjusted financial leverage2 19.04 242.05 1,669.44 16.59

Based on: 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-08), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-18).

2018 Calculations

1 Financial leverage = Total assets ÷ Total Kimberly-Clark Corporation stockholders’ equity
= 14,518 ÷ -287 =

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted total Kimberly-Clark Corporation stockholders’ equity
= 14,709 ÷ -96 =

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.
Kimberly-Clark Corp.’s adjusted financial leverage declined from 2016 to 2017 and from 2017 to 2018.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to Kimberly-Clark Corporation 1,410  2,278  2,166  1,013  1,526 
Total Kimberly-Clark Corporation stockholders’ equity (287) 629  (102) (174) 729 
Ratio
ROE1 362.16% 209.33%
Adjusted: from LIFO to FIFO
Selected Financial Data (US$ in millions)
Adjusted net income attributable to Kimberly-Clark Corporation 1,425  2,291  2,146  976  1,504 
Adjusted total Kimberly-Clark Corporation stockholders’ equity (96) 805  61  949 
Ratio
Adjusted ROE2 284.60% 3,518.03% 10,844.44% 158.48%

Based on: 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-08), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-18).

2018 Calculations

1 ROE = 100 × Net income attributable to Kimberly-Clark Corporation ÷ Total Kimberly-Clark Corporation stockholders’ equity
= 100 × 1,410 ÷ -287 =

2 Adjusted ROE = 100 × Adjusted net income attributable to Kimberly-Clark Corporation ÷ Adjusted total Kimberly-Clark Corporation stockholders’ equity
= 100 × 1,425 ÷ -96 =

Ratio Description The company
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. Kimberly-Clark Corp.’s adjusted ROE deteriorated from 2016 to 2017 and from 2017 to 2018.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to Kimberly-Clark Corporation 1,410  2,278  2,166  1,013  1,526 
Total assets 14,518  15,151  14,602  14,842  15,526 
Ratio
ROA1 9.71% 15.04% 14.83% 6.83% 9.83%
Adjusted: from LIFO to FIFO
Selected Financial Data (US$ in millions)
Adjusted net income attributable to Kimberly-Clark Corporation 1,425  2,291  2,146  976  1,504 
Adjusted total assets 14,709  15,327  14,765  15,025  15,746 
Ratio
Adjusted ROA2 9.69% 14.95% 14.53% 6.50% 9.55%

Based on: 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-08), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-18).

2018 Calculations

1 ROA = 100 × Net income attributable to Kimberly-Clark Corporation ÷ Total assets
= 100 × 1,410 ÷ 14,518 = 9.71%

2 Adjusted ROA = 100 × Adjusted net income attributable to Kimberly-Clark Corporation ÷ Adjusted total assets
= 100 × 1,425 ÷ 14,709 = 9.69%

Ratio Description The company
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Kimberly-Clark Corp.’s adjusted ROA improved from 2016 to 2017 but then deteriorated significantly from 2017 to 2018.