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4. Determine FLEV and Spread and the noncontrolling interest ratio (if applicable). Show that: [RNOA + (FLEV x Spread)] x Noncontrolling interest ratio ROE Compare the components of the equation for each company over time and follow up on any differences. A В D Consolidated Balance Sheet USD ($) $ in Millions Dec. 31, 2018 1 increase or decrease % Current assets 2 $ 3,042 Cash and cash equivalents 3 0.88% Notes and accounts receivable, less estimated doubtful amounts 24,701 4 7.13% Inventories 5 Crude oil, products and merchandise 14,803 6 4.28% Materials and supplies 4,155 7 1.20% Other current assets 1,272 0.37% Total current assets Investments, advances and long-term receivables 40,790 10 11.78% Property, plant and equipment, at cost, less accumulated depreciation and depletion 247,101 11 71.38% 10,332 Other assets, including intangibles, net 12 2.98% Total assets 346,196 13 100.00% Current liabilities 14 Notes and loans payable 17,258 15 4.99% Accounts payable and accrued liabilities 37,268 16 10.77% Income taxes payable 2,612 17 0.75% Total current liabilities 18 Long-term debt 20,538 19 5.93% Postretirement benefits reserves 20,272 20 5.86% Deferred income tax liabilities 27,244 21 7.87% Long-term obligations to equity companies 4,382 22 1.27% Other long-term obligations 18,094 23 5.23% Total liabilities 147,668 24 42.65% Commitments and contingencies 25 Equity 26 Common stock without par value (9,000 million shares authorized, 8,019 million shares issued) 15,258 27 4.41% Earnings reinvested 421,653 28 121.80% Accumulated other comprehensive income (19,564) 29 -5.65% (225,553) Common stock held in treasury (3,782 million shares in 2018 and 3,780 million shares in 2017) 30 -65.15% ExxonMobil share of equity 31 Noncontrolling interests 6,734 32 1.95% Total equity 198,528 33 57.35% $ 346,196 Total liabilities and equity 34 100.00% 35 36

4. Determine FLEV and Spread and the noncontrolling interest ratio (if applicable). Show that: [RNOA + (FLEV x Spread)] x Noncontrolling interest ratio ROE Compare the components of the equation for each company over time and follow up on any differences. A В D Consolidated Balance Sheet USD ($) $ in Millions Dec. 31, 2018 1 increase or decrease % Current assets 2 $ 3,042 Cash and cash equivalents 3 0.88% Notes and accounts receivable, less estimated doubtful amounts 24,701 4 7.13% Inventories 5 Crude oil, products and merchandise 14,803 6 4.28% Materials and supplies 4,155 7 1.20% Other current assets 1,272 0.37% Total current assets Investments, advances and long-term receivables 40,790 10 11.78% Property, plant and equipment, at cost, less accumulated depreciation and depletion 247,101 11 71.38% 10,332 Other assets, including intangibles, net 12 2.98% Total assets 346,196 13 100.00% Current liabilities 14 Notes and loans payable 17,258 15 4.99% Accounts payable and accrued liabilities 37,268 16 10.77% Income taxes payable 2,612 17 0.75% Total current liabilities 18 Long-term debt 20,538 19 5.93% Postretirement benefits reserves 20,272 20 5.86% Deferred income tax liabilities 27,244 21 7.87% Long-term obligations to equity companies 4,382 22 1.27% Other long-term obligations 18,094 23 5.23% Total liabilities 147,668 24 42.65% Commitments and contingencies 25 Equity 26 Common stock without par value (9,000 million shares authorized, 8,019 million shares issued) 15,258 27 4.41% Earnings reinvested 421,653 28 121.80% Accumulated other comprehensive income (19,564) 29 -5.65% (225,553) Common stock held in treasury (3,782 million shares in 2018 and 3,780 million shares in 2017) 30 -65.15% ExxonMobil share of equity 31 Noncontrolling interests 6,734 32 1.95% Total equity 198,528 33 57.35% $ 346,196 Total liabilities and equity 34 100.00% 35 36

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Determine flev and spread and the non controling interest ratio(in aplicable)

show:

ROE=[ROA+(FLEV X SPREAD)] X noncontroling interest ratio

4. Determine FLEV and Spread and the noncontrolling interest ratio (if applicable). Show that: [RNOA + (FLEV x Spread)] x Noncontrolling interest ratio ROE Compare the components of the equation for each company over time and follow up on any differences.
Transcribed Image Text:4. Determine FLEV and Spread and the noncontrolling interest ratio (if applicable). Show that: [RNOA + (FLEV x Spread)] x Noncontrolling interest ratio ROE Compare the components of the equation for each company over time and follow up on any differences.
A В D Consolidated Balance Sheet USD ($) $ in Millions Dec. 31, 2018 1 increase or decrease % Current assets 2 $ 3,042 Cash and cash equivalents 3 0.88% Notes and accounts receivable, less estimated doubtful amounts 24,701 4 7.13% Inventories 5 Crude oil, products and merchandise 14,803 6 4.28% Materials and supplies 4,155 7 1.20% Other current assets 1,272 0.37% Total current assets Investments, advances and long-term receivables 40,790 10 11.78% Property, plant and equipment, at cost, less accumulated depreciation and depletion 247,101 11 71.38% 10,332 Other assets, including intangibles, net 12 2.98% Total assets 346,196 13 100.00% Current liabilities 14 Notes and loans payable 17,258 15 4.99% Accounts payable and accrued liabilities 37,268 16 10.77% Income taxes payable 2,612 17 0.75% Total current liabilities 18 Long-term debt 20,538 19 5.93% Postretirement benefits reserves 20,272 20 5.86% Deferred income tax liabilities 27,244 21 7.87% Long-term obligations to equity companies 4,382 22 1.27% Other long-term obligations 18,094 23 5.23% Total liabilities 147,668 24 42.65% Commitments and contingencies 25 Equity 26 Common stock without par value (9,000 million shares authorized, 8,019 million shares issued) 15,258 27 4.41% Earnings reinvested 421,653 28 121.80% Accumulated other comprehensive income (19,564) 29 -5.65% (225,553) Common stock held in treasury (3,782 million shares in 2018 and 3,780 million shares in 2017) 30 -65.15% ExxonMobil share of equity 31 Noncontrolling interests 6,734 32 1.95% Total equity 198,528 33 57.35% $ 346,196 Total liabilities and equity 34 100.00% 35 36
Transcribed Image Text:A В D Consolidated Balance Sheet USD ($) $ in Millions Dec. 31, 2018 1 increase or decrease % Current assets 2 $ 3,042 Cash and cash equivalents 3 0.88% Notes and accounts receivable, less estimated doubtful amounts 24,701 4 7.13% Inventories 5 Crude oil, products and merchandise 14,803 6 4.28% Materials and supplies 4,155 7 1.20% Other current assets 1,272 0.37% Total current assets Investments, advances and long-term receivables 40,790 10 11.78% Property, plant and equipment, at cost, less accumulated depreciation and depletion 247,101 11 71.38% 10,332 Other assets, including intangibles, net 12 2.98% Total assets 346,196 13 100.00% Current liabilities 14 Notes and loans payable 17,258 15 4.99% Accounts payable and accrued liabilities 37,268 16 10.77% Income taxes payable 2,612 17 0.75% Total current liabilities 18 Long-term debt 20,538 19 5.93% Postretirement benefits reserves 20,272 20 5.86% Deferred income tax liabilities 27,244 21 7.87% Long-term obligations to equity companies 4,382 22 1.27% Other long-term obligations 18,094 23 5.23% Total liabilities 147,668 24 42.65% Commitments and contingencies 25 Equity 26 Common stock without par value (9,000 million shares authorized, 8,019 million shares issued) 15,258 27 4.41% Earnings reinvested 421,653 28 121.80% Accumulated other comprehensive income (19,564) 29 -5.65% (225,553) Common stock held in treasury (3,782 million shares in 2018 and 3,780 million shares in 2017) 30 -65.15% ExxonMobil share of equity 31 Noncontrolling interests 6,734 32 1.95% Total equity 198,528 33 57.35% $ 346,196 Total liabilities and equity 34 100.00% 35 36
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RNOA + FLEV X Spread  X NCI Ratio = ROE 

 25.89% +FLEV X 24.37% X 1.0026 =50%

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Direct Computation of Nonoperating Return Balance sheets and income statements for 3M Company follow. зм СOMPANY Consolidated Statements of Income For Years Ended December 31 ($ millions) 2018 2017 Net sales $32,765 $31,657 Operating expenses Cost of sales 16,682 16,055 Selling, general and administrative expenses 7,602 6,626 Research, development and related expenses 1,821 1,870 Gain on sale of bus inesses (586) 25,558 23,965 (547) Total operating expenses Operating income 7,207 7,692 Other expense, net* 207 144 Income before income taxes 7,000 7,548 Provision for income taxes 1,637 2,679 Net income including noncontrolling interest 5,363 4,869 Less: Net income attributable to noncontrolling interest 14 11 Net income attributable to 3M $5,349 $4,858 * Interest expense, gross is $350 million in 2018 and $322 million in 2017.
Transcribed Image Text:Direct Computation of Nonoperating Return Balance sheets and income statements for 3M Company follow. зм СOMPANY Consolidated Statements of Income For Years Ended December 31 ($ millions) 2018 2017 Net sales $32,765 $31,657 Operating expenses Cost of sales 16,682 16,055 Selling, general and administrative expenses 7,602 6,626 Research, development and related expenses 1,821 1,870 Gain on sale of bus inesses (586) 25,558 23,965 (547) Total operating expenses Operating income 7,207 7,692 Other expense, net* 207 144 Income before income taxes 7,000 7,548 Provision for income taxes 1,637 2,679 Net income including noncontrolling interest 5,363 4,869 Less: Net income attributable to noncontrolling interest 14 11 Net income attributable to 3M $5,349 $4,858 * Interest expense, gross is $350 million in 2018 and $322 million in 2017.
зм СOMPANY Consolidated Balance Sheets At December 31 ($ millions) 2018 2017 Current assets Cash and cash equivalents $2,853 $3,053 380 Marketable securities 1,076 Accounts receivable 5,020 4,911 Total inventories 4,366 4,034 Prepaids 741 937 Other current assets 349 266 Total current assets 13,709 14,277 Property, plant and equipment, net 8,738 8,866 Goodwill 10,051 10,513 Intangible assets-net 2,657 2,936 Other assets 1,345 1,395 Total assets $36,500 $37,987 Current liabilities Short-term borrowings and current portion of long-term debt $1,211 $1,853 Accounts payable 2,266 1,945 Accrued payroll 749 870 Accrued income taxes 243 310 Other current li abilities 2,775 2,709 Total current liabilities 7,244 7,687 Long-term debt 13,411 12,096 Pension and postretirement benefits 2,987 3,620 Other liabilities 3,010 2,962 Total liabilities $26,652 $26,365 3M Company shareholders equity Common stock par value 9. Additional paid-in capital Retained earnings Treasury stock Accumulated other comprehensive income (loss) 5,643 5,352 40,636 39,115 (29,626) (25,887) (6,866) (7,026) 9,796 11,563 Total 3M Company shareholders equity Noncontralling interest 52 59 Total equity 9,848 11,622 Total liabilities and equity $36,500 $37,987 In 2018, 3M's return on equity (ROE) is 50.09% and its return on net operating assets (RNOA) is 25.89%.
Transcribed Image Text:зм СOMPANY Consolidated Balance Sheets At December 31 ($ millions) 2018 2017 Current assets Cash and cash equivalents $2,853 $3,053 380 Marketable securities 1,076 Accounts receivable 5,020 4,911 Total inventories 4,366 4,034 Prepaids 741 937 Other current assets 349 266 Total current assets 13,709 14,277 Property, plant and equipment, net 8,738 8,866 Goodwill 10,051 10,513 Intangible assets-net 2,657 2,936 Other assets 1,345 1,395 Total assets $36,500 $37,987 Current liabilities Short-term borrowings and current portion of long-term debt $1,211 $1,853 Accounts payable 2,266 1,945 Accrued payroll 749 870 Accrued income taxes 243 310 Other current li abilities 2,775 2,709 Total current liabilities 7,244 7,687 Long-term debt 13,411 12,096 Pension and postretirement benefits 2,987 3,620 Other liabilities 3,010 2,962 Total liabilities $26,652 $26,365 3M Company shareholders equity Common stock par value 9. Additional paid-in capital Retained earnings Treasury stock Accumulated other comprehensive income (loss) 5,643 5,352 40,636 39,115 (29,626) (25,887) (6,866) (7,026) 9,796 11,563 Total 3M Company shareholders equity Noncontralling interest 52 59 Total equity 9,848 11,622 Total liabilities and equity $36,500 $37,987 In 2018, 3M's return on equity (ROE) is 50.09% and its return on net operating assets (RNOA) is 25.89%.
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