Answers: Operating Income Changes in Net Operating Assets
Answers: Operating Income Changes in Net Operating Assets
Answers: Operating Income Changes in Net Operating Assets
Accounting Relations for Kimberly-Clark Corporation (Medium) Below are summary numbers from reformulated
balance sheets for 2007 and 2006 for Kimberly-Clark Corporation, the paper products company, along with
numbers from the reformulated income statement for 2007 (in millions).
c. Show that the accounting relation for change in net operating assets works for Kimberly-Clark.
Answers
a.
The exercise is best worked by setting up the reformulations balance sheet:
2007 2006
b.
Comprehensive income = 2,740.1 – 147.1 = 2,593 million
c.
The financial leveraging equation is:
= 38.45%
d.
15.00% × 1.68
= 25.2%
Q2.
Operating cash $ 60 50
Accounts receivable 940 790
Inventory 910 840
PPE 2,840 2,710
Operating assets 4,750 4,390
Operating liabilities:
Accounts payable $1,200 1,040
Accrued expenses 390 1,590 450 1,490
Net operating assets 3,160 2,900
Net financial obligations:
Short-term investments $( 550) ( 500)
Long-term debt 1,840 1,290 1,970 1,470
Common shareholders’ equity $1,870 1,430
Comprehensive income:
Net income $ 468
Unrealized gain on debt investments 50 518
Balance, end of 2009 $1,870
Revenue $3,726
Operating expenses, including taxes 3,204
Operating income after tax 522
After calculating the net financial expense, the bottom-up method is used to get
operating income after tax.
d. Ratio analysis
Profit Margin (PM) = 522/3,726 = 14.01%
Asset turnover (ATO) = 3,726/2,900 = 1.285
RNOA = 522/2,900 = 18%
Note: it is more likely that NBC will be at the core borrowing rate (that excludes
The unrealized gain of debt investments): Core NBC = 54/1,470 = 3.67%.
Chapter 12 identifies core borrowing costs.