General Mills Inc. Understanding Financial Statements Essay

1710 Words Mar 9th, 2013 7 Pages
Introduction The case study General Mills Inc. - Understanding Financial Statements focuses on the most basic idea of finance analysis. This case is a brief look into the language that is used in the finance world and a start to interaction with auditors. In this case, KPMG LLP, the public accounting firm that was auditing their statements, had sent two opinion letters. The first letter was ensuring that both parties were aware that General Mills had internal control over financial reporting. The second opinion letter stated that to auditor’s knowledge, General Mills had correctly reported its financial statements. The statements given in this case study are known as the four general financial statements. Displayed in the case are the …show more content…
In the case of General Mills, the intangible assets could be patents, strong brand name, copyrights, franchises and goodwill.

iv. In 2006, General Mills was financed at a proportion of 62.06% by non-owners and at a proportion of 37.94% by owners.

i. General Mills recognizes sales revenues upon acceptance of the shipment by its customers. The promotions and estimated returns are not included in the reporting of sales. The coupons costs are registered when distributed and their amounts are based on estimated redemptions. As for trade promotions, they are expensed based on estimated participation and performance levels for offered programs. Concerning returns, the company has a new return policy. However, the company may allow few returns if the product is in good condition to be sold again. The company expenses returns as reduction of net sales. The company’s policy of registering revenues, promotions and estimated returns are conform with GAAP.

ii. The common-size income statement of 2006 reveals that General Mills’ major expenses are cost of sales with a proportion of 59.85%, followed by selling, general and administrative expenses with a proportion of 23.01%.

iii. Between 2005 and 2006:
The cost of sales and the selling went up by a small proportion, while selling, general and administrative expenses along with interest expenses went down by 0.57% and 0.54% respectively. However, selling, general and

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