3M Financial Outcomes

3M Financial Outcomes Anthony T. McNair, Gina Edwards, Isis Harvin, and Tonya Rogers FIN/419 April 5, 2012 Sherri Jenkins

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Working capital is the amount by which a firms current assets exceed its current liabilities. Herein, team B will review 3Ms financial reports, such as balance sheets, statements of cash flow, management comments, and footnotes to financial statements to explain how each current asset and liability account has affected cash management strategies. In addition, assuming that 3Ms next years forecasted revenues increase by 20%, the team will provide a detailed working capital recommendation to senior management based on next years increase in revenue. Finally, we will discuss the effect of this revenue increase on 3Ms working capital policy, identify lessons learned, and discuss areas for further development. 3M Co., the Minnesota-based multinational conglomerate, announced forecasted profits of 2013 toward high-end of Wall Street estimates, citing slow yet positive growth in the United States and expects to recover in the electronics markets around the world by the second half of 2012. 3M Co. forecasts a 6 percent to 10% growth in 2013 revenue as a result of steady gains in two of its major business, health care, and transportation and also due to strengthening environments in developing markets like China and Latin America. 3M Co., revenue in 2013 will be boosted by acquisitions, facilitating balancing negative impacts from foreign exchange and taxes. 3M Co. reaffirmed its next years guidance, calming bidder concerns following its profit declines below expectations in the third fiscal quarter amid difficulties in the electronics markets and Western Europe. Shares of 3M at the midday trade in New York Stock Exchange were up by 3.8% at $82.36 per piece, outstripping uncertain gains in the broader market. 3M expects revenue in 2013 to raise $7.25 to $8.50 per piece, up by 7 to 13% from 2012s forecasted results. Revenue in 2013

3M Financial Outcomes is expected to be $30.2 billion to $31.5 billion. 3Ms big portfolio includes Post it notes, Ace bandages, Scotch tape, adhesives, sand paper, and power lines, creating the firm a gauge for

industrial and consumer spending. 3M in the recent years has relied on introducing products and sales expansion in emerging economies to offset a more slowly growth in Europe and North America. The companys forecast exceeds analysts 2013 average expectations of $6.28 a share on revenue of $30.60 billion. Capital Recommendation Another name for 3Ms latest assets is working capital. The working capital policy is the level of the current assets and subsidy alternatives. The policy is developed through a set of plans that may be aggressive or customary. A customary capital policy organization will retain more money and subsidy short-term and long-term requirements with long-term debts. The customary policy is more expensive; however, the customary policy will condense risks and condense earnings. The aggressive policy offers the organization much more risks and more returns because the long term and short-term requirements are paid with the short-term debt of the organization. Fiscal atmosphere and the change in business signs can influence 3Ms working policy. In the event that 3Ms working capital is not controlled correctly, it may cause adverse outcomes. Organizations that have healthy operations can end up in bankruptcy because of incorrectly managing funds. Increase of the capital may become rough during the economic hardships because it leaves 3M searching and looking for alternatives way of receiving funds. A working capital should always be monitor with preparation of the economy recession. Working capitals and net liquids will require assistant when measuring the administration of the working capital, also make sure funs is on hand for the company to run.

3M Financial Outcomes

When the current assets level changes the end results can be bad or good. A higher level of current assets will cause a bad effect. Trying to repay debt may be difficult and a delay in the investment projects will occur, whereas lower levels of current assets may have a total opposite outcome. Current ratio, cash, stock turnovers, and quick ratio are used to find out changes in the working capital. Equilibrium within the parts of the working capital will help with withstanding productive daily operations. In February 8, 2011, 3M declared its desire to start a $7 billion share repurchase plan. This new plan will replace the plan for the previous year. If 3Ms revenue increases by 20% the company will not have to cancel the repurchase plan. The company will have the ability to enhance 3Ms investment and upcoming projects as long as the working capital is overseen correctly. Revenue Increase The effects of revenue increase on the firms working capital policy for 3M is a measurement of efficiency. A companys revenue affects many working capital accounts. Revenue increases may have a positive or negative outcome on the working capital. The working capital and current assets minus current liabilities along with the 20% increase should help 3M pay off any short-term debt it had retained. A company with a positive working has enough short-term debt to pay off any short-term debt retained. A company with a negative working capital would not be able to meet its short-term obligations. It is known that a company with a ratio greater than one is usually a positive for the company meeting its ability to manage their short-term debt. In 2011 3M working capital turnover improved from 2009 to 2010 and from 2010 to 2011. 3M financial conditions remain strong and the effect of the increase can either an advantage or disadvantage. According to balance sheets and income statements 3M should

3M Financial Outcomes benefit greatly by having the ability to fulfill its financial obligations. 3M can generate enough cash flow to satisfy the companys debt. The idea of working capital is to ensure the company has enough cash in the bank to back

them up as the financial statements for 3M shows a profitable company for many years to come. The 20% will help the company as a whole to pay off short-term debt. The overall insight at the effects of increasing or decreasing revenue on capital policy is not quite enough. One must look deeper into the companys portfolio to determine if it is hiding behind a financial makeup of the working capital, this is the financial well being of a company. Even though 3M is at its best more research and information can provide the best results for any company. The effect of this revenue increase appears to help 3M in the future as it continues to grow globally and reach other countries the lessons learned in this area of capital policy was very interesting to see how well the company looks to grow in the years to come. Identify Lessons Learned There are a few lesson learned that could help 3M bring in more profit value to the companys bottom line. A company can never do too much research into where and when the company would like to invest. Taking the company abroad is one of the examples in which more research can be done to ensure that money is not been lost. The shareholders expect a return on their investment not a loss. Projecting the future for a gain base off of pass sells can some time cause a negative outcome because some companies adds on a plus or minus to try to increase the sales from the year before. When a company projects that its sales are going to increase by a certain percent the shareholders makes plans to receive a big return on their investment. The lesson that can be learned here is that the better the, research the more sound the return result will be in the long run.

3M Financial Outcomes References Daley. W. (2011). 3M Approves $7 Billion Buyback. Retrieved on March 04, 2012 from http://www.bloomberg.com/news/2011-02-08/3m-approves-7-billion-share-buybackincreases-quarterly-dividendly -by-5-.html Gitman, L. J. (2009). Principles of managerial finance (12th ed.). Boston: Pearson Addison Wesley.