Case

Financial
Statement
Analysis
K R Subramanyam
John J Wild
McGraw-Hill/Irwin
Copyright 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
Case-2
Applying Financial Statement

Analysis
CC
CHAPTER
Case-3
Steps in Analyzing Financial Statements
Explicitly define the analysis

objectives
Formulate specific questions
and criteria consistent with the
analysis objectives
Identify the most effective and
efficient tools of analysis
Interpret the evidence
Case-4
Building Blocks of Financial Statement

Analysis
Six areas of inquirywith varying degrees of

importance:
1.
2.
3.
4.
5.
6.
Short-term liquidity.
Capital structure and solvency.
Return on invested capital.
Asset turnover.
Operating performance and profitability.
Forecasting and valuation.
Applying the building blocks to financial statement

analysis involves determining:
Objectives of the analysis.

Relative emphasis among the building blocks.
Case-5
Reporting on Financial Statement Analysis
A good analysis report typically contains at least six

sections devoted to:
Executive summary. Brief summary focused on important analysis

results; it launches the analysis report.
Analysis overview. Background material on the company, its
industry, and its economic environment.
Evidential matter. Financial statements and information used in the
analysis. Assumptions. Identification of important assumptions
regarding a companys industry and business environment, and
other important assumptions for estimates and forecasts, including
its business strategy.
Crucial factors. Listing of important favorable and unfavorable
factors, both quantitative and qualitative.
Inferences. Includes forecasts, estimates, interpretations, and
conclusions drawing on all prior sections of the report.
Case-6
Specialization in
Financial Statement Analysis
Analysis usually viewed from the perspective of a
typical company
Recognizing the existence of several distinct factors
Special industry conditions

Government regulations
Social concerns
Political visibility
Understanding accounting peculiarities
Case-7
Case: Campbell Soup Co.

Preliminary Financial Analysis
Case-8
Comparative Financial Statements

Exhibit CC.2
Year 11
Net sales
$ 6,204.1
Costs and expenses:
Cost of products sold
$ 4,095.5
Marketing and selling expenses
956.2
Administrative expenses
306.7
Research and development expenses
56.3
Interest expense
116.2
Interest income
(26.0)
Foreign exchange losses, net
0.8
Other expense (income)
26.2
Divestitures, restructuring, & unusual charges 0.0
Total costs and expenses
$ 5,531.9
Earnings before equity in affil. & M.I.
$ 672.2
Equity in earnings of affiliates
2.4
Minority interests
(7.2)
Earnings before taxes
$ 667.4
Taxes on earnings
265.9
Earnings before cumulative effect
$ 401.5
Cumulative effect of change for taxes
0
Net earnings
$ 401.5
Earnings per share
$
3.16
Weighted-average shares outstanding
127.00
CAMPBELL SOUP COMPANY

Income Statements (millions)
Year 10
Year 9
Year 8
Year 7
Year 6
$ 6,205.8
$ 5,672.1
$ 4,868.9
$ 4,490.4
$ 4,286.8
$ 4,258.2
980.5
290.7
53.7
111.6
(17.6)
3.3
14.7
339.1
$ 6,034.2
$ 171.6
13.5
(5.7)
$ 179.4
175.0
$
4.4
0
$
4.4
$
0.03
126.60
$ 4,001.6
818.8
252.1
47.7
94.1
(38.3)
19.3
32.4
343.0
$ 5,570.7
$
101.4
10.4
(5.3)
$
106.5
93.4
$
13.1
0
$
13.1
$
0.10
129.30
$ 3,392.8
733.3
232.6
46.9
53.9
(33.2)
16.6
(3.2)
40.6
$ 4,480.3
$ 388.6
6.3
(6.3)
$ 388.6
147.0
$ 241.6
32.5
$ 274.1
$
2.12*
$ 129.30
$ 3,180.5
626.2
213.9
44.8
51.7
(29.5)
4.8
(9.5)
0.0
$ 4,082.9
$ 407.5
15.1
(4.7)
$ 417.9
170.6
$ 247.3
0
$ 247.3
$
1.90
$ 129.90
$ 3,082.7
544.4
195.9
42.2
56.0
(27.4)
0.7
5.5
0.0
$ 3,900.0
$ 386.8
4.
(3.9)
$ 387.2
164.0
$ 223.2
0
$ 223.2
$
1.72
129.50
Case-9

Exhibit CC.3
Assets
Current assets:
Cash and cash equivalents
Other temporary investments
Accounts receivable
Inventories
Prepaid expenses
Total current assets
Plant assets, net of depreciation
Intangible assets, net of amortization
Other assets
Total assets
Liabilities and Shareowners Equity
Current liabilities:
Notes payable
Payable to suppliers and others
Accrued liabilities
Dividend payable
Accrued income taxes
Total current liabilities
Long-term debt
Other liabilities, mainly deferred tax
Shareowners equity:
Preferred stock; authorized 40,000,000 sh.;
none issued
Capital stock, $0.15 par value;
authorized 140,000,000 sh.;
issued 135,622,676 sh.
Capital surplus
Earnings retained in the business
Capital stock in treasury, at cost
Cumulative translation adjustments
Total shareowners equity
Total liabilities and shareowners equity

Balance Sheets
Year11
Year 10
Year 9
Year 8
120.90
26.20
538.00
816.00
100.40
1,601.50
1,540.60
466.90
323.10
3,932.10
85.80
35.00
486.90
664.70
90.50
$ 1,362.90
$ 1,508.90
496.60
241.20
$ 3,609.60
145.00
280.30
338.90
623.60
50.10
$ 1,437.90
$ 1,349.00
310.50
$ 3,097.40
271.50
508.20
392.60
29.70
30.10
1,232.10
629.20
292.50
178.90
12.80
527.40
706.70
92.70
$ 1,518.50
$ 1,790.40
435.50
404.60
$ 4,149.00
80.70
22.50
624.50
819.80
118.00
$ 1,665.50
$ 1,717.70
383.40
349.00
$ 4,115.60
282.20
482.40
408.70
37.00
67.70
$ 1,278.00
$ 772.60
305.00
202.30
525.20
491.90
32.30
46.40
$ 1,298.10
$ 805.80
319.90
20.30
107.30
1,912.60
(270.40)
23.60
$ 1,793.40
$ 4,149.00
20.30
61.90
1,653.30
(107.20)
63.50
$ 1,691.80
$ 4,115.60
$
$
$
$
$
$
$
20.30
50.80
1,775.80
(70.70)
2.10
1,778.30
3,932.10
$
$
138.00
446.70
236.90
41.70
863.30
525.80
325.50
Year 7
$
$
93.50
374.80
182.10
43.40
693.80
380.20
287.30
20.30
42.30
1,879.10
(75.20)
28.50
$ 1,895.00
$ 3,609.60
20.30
41.10
1,709.60
(46.80)
11.90
$ 1,736.10
$ 3,097.40
Year 6
155.10
238.70
299.00
610.50
31.50
$ 1,334.80
$ 1,168.10
259.90
$ 2,762.80
$
$
88.90
321.70
165.90
49.60
626.10
362.30
235.50
20.30
38.10
1,554.00
(48.40)
(25.10)
$ 1,538.90
$ 2,762.80
Case-10

Exhibit CC.4
Statements of Cash Flows
For Years 6 to 11 ($ millions)
Year 11 Year 10 Year 9
Year 8
Cash flows from operating activities:
Net earnings
$ 401.5
$
4.4
To reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization
208.6
200.9
Divestitures and restructuring provisions
339.1
Deferred taxes
35.5
3.9
Other, net
63.2
18.6
Cumulative effect of accounting change
(Increase) decrease in accounts receivable

17.1
(60.4)
(Increase) decrease in inventories
48.7
10.7
Net change in other current assets and liabilities
30.6
(68.8)
Net cash provided by operating activities
$ 805.2
$ 448.4
Cash flows from investing activities:
Purchases of plant assets
$(361.1)
$ (387.6)
Sale of plant assets
43.2
34.9
Businesses acquired
(180.1)
(41.6)
Sale of businesses
67.4
21.7
Increase in other assets
(57.8)
(18.6)
Net change in other temporary investments
9.7
3.7
Net cash used in investing activities
$(478.7)
$ (387.5)
Cash flows from financing activities:
Long-term borrowings
$ 402.8
$ 12.6
Repayments of long-term borrowings
(129.9)
(22.5)
Increase (decrease) in short-term borrowings*
(137.9)
(2.7)
Other short-term borrowings
117.3
153.7
Repayments of other short-term borrowings
(206.4)
(89.8)
Dividends paid
(137.5)
(124.3)
Treasury stock purchases
(175.6)
(41.1)
Treasury stock issued
47.7
12.4
Other, net
(0.1)
(0.1)
Net cash provided (used in) financing activities
$(219.6)
$ (101.8)
Effect of exchange rate change on cash
$ (8.7)
$
0.7
Net increase (decrease) in cash and cash equivalents
98.2
(40.2)
Cash and cash equivalents at the beginning of year
80.7
120.9
Cash and cash equivalents at end of year
$ 178.9
$ 80.7
Year 7
Year 6
Total
$ 274.1
$ 247.3
$ 223.2
$ 1,163.6
192.3
343.0
(67.8)
37.3
(46.8)
(113.2)
(0.6)
$ 357.3
170.9
17.6
13.4
43.0
(32.5)
(104.3)
54.2
30.2
$ 466.6
144.6
45.7
28.0
(36.3)
(3.9)
42.9
$ 468.3
126.8
29.0
16.6
(3.6)
23.1
48.7
$ 463.8
1,044.1
699.7
59.7
206.7
(32.5)
(234.3)
19.6
83.0
$ 3,009.6
$(284.1)
39.8
(135.8)
4.9
(107.0)
9.0
$ (473.2)
$ (245.3)
22.6
(471.9)
23.5
(40.3)
249.2
$ (462.2)
$(303.7)
(7.3)
20.8
(50.1)
(60.7)
$(401.0)
$ (235.3)
29.8
(20.0)
(18.0)
(144.1)
$ (387.6)
$ (1,817.1)
170.3
(856.7)
138.3
(291.8)
66.8
$ (2,590.2)
$ 126.5
(53.6)
108.2
227.1
(192.3)
(86.7)
(8.1)
18.5
23.5
$ 163.1
$ (12.1)
35.1
85.8
$ 120.9
$ 103.0
(22.9)
8.4
77.0
(87.6)
(104.6)
(29.3)
0.9
2.3
$ (52.8)
$ (10.8)
(59.2)
145.0
$ 85.8
$ 203.9
(164.7)
4.6
72.9
(88.5)
(104.6)
4.0
17.9
$ (54.5)
$ (3.7)
18.0
155.1
$ 173.1
13.1
4.8
(23.9)
(20.7)
89.3
(66.3)
(91.7)
1.6
18.6
$ (88.3)
$ (7.1)
(28.1)
173.1
$ 145.0
$
$
$
853.6
(417.5)
(40.1)
737.3
(730.9)
(649.4)
(254.1)
85.1
62.1
(353.9)
(41.7)
23.8
155.1
178.9
Case: Campbell Soup Co. - Comparative Financial

Statements
Case-11
Case: Campbell Soup Co. - Further Analysis
Case-12
Case-13
Case: Campbell Soup Co. -- Further Analysis
Exhibit CC.6
Common-Size Income Statements
Year 11
Year 10
Year 9
Net sales
Costs and expenses:
Marketing and selling expenses
Administrative expenses
Research and development expenses
Interest expense
Interest income
Foreign exchange losses, net
Other expense (income)
Divestitures, restructuring & unusual charges
Earnings before equity in earnings of
affiliates and minority interests
Equity in earnings of affiliates
Minority interests
Taxes on earnings
Earnings before cumulative effect
of accounting change
Cumulative effect of change in
accounting for income taxes
Net earnings
100.00%
100.00%
100.00%
Year 8
Year 7
Year 6
100.00%
100.00%
100.00%
66.01%
15.41
4.94
0.91
1.87
(0.42)
0.01
0.42
89.17%
68.62%
15.80
4.68
0.87
1.80
(0.28)
0.05
0.24
5.46
97.23%
70.55%
14.44
4.44
0.84
1.66
(0.68)
0.34
0.57
6.05
98.21%
69.68%
15.06
4.78
0.96
1.11
(0.68)
0.34
(0.07)
0.83
92.02%
70.83%
13.95
4.76
1.00
1.15
(0.66)
0.11
(0.21)
90.93%
71.91%
12.70
4.57
0.98
1.31
(0.64)
0.02
0.13
90.98%
10.83%
0.04
(0.12)
10.76%
4.29
2.77%
0.22
(0.09)
2.89%
2.82
1.79%
0.18
(0.09)
1.88%
1.65
7.98%
0.13
(0.13)
7.98%
3.02
9.07%
0.34
(0.10)
9.31%
3.80
9.02%
0.10
(0.09)
9.03%
3.83
6.47%
0.07%
0.23%
4.96%
5.51%
5.21%
6.47%
0.07%
0.23%
0.67
5.63%
5.51%
5.21%
Case-14

Exhibit CC.7

Common-Size Balance Sheets
Year 11
Year 10 Year 9
Year 8
Year 7
Year 6
Industry Composite
Year 11
Current assets:
4.31%
1.96%
3.07%
2.38%
4.69%
5.61%
3.4%
0.31
0.55
0.67
0.97
9.05
8.64
Accounts receivable
12.71
15.17
13.68
13.49
10.94
10.82
16.5
Inventories
17.03
19.92
20.75
18.41
20.13
22.10
38.6
Prepaid expenses
2.23
2.87
2.55
2.51
1.62
1.14
2.2
36.60%
40.47% 40.73% 37.76% 46.43% 48.31% 60.70%
Plant assets, net of depreciation
43.15%
41.74% 39.18% 41.80% 43.55% 42.28% 21.0%
Intangible assets, net of amortization
10.50
9.32
11.87
13.76
Other assets
9.75
8.48
8.22
6.68
10.02
9.41
18.3
Total assets
100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Notes payable
6.80%
4.92%
6.90%
3.82%
3.02%
3.22%
6.7%
11.63
12.76
12.92
12.38
12.10
11.64
10.2
Accrued liabilities
9.85
11.95
9.98
6.56
5.88
6.00
15.8
Dividend payable
0.89
0.78
0.76

1.63
1.13
0.77
1.16
1.40
1.80
30.80%
31.54% 31.33% 23.92% 22.40% 22.66% 32.70%
Long-term debt
18.62%
19.58% 16.00% 14.57% 12.27% 13.11% 19.7%
Other liabilities, mainly deferred taxes
7.35
7.77
7.44
9.02
9.28
8.52
1.5
Shareowners equity:
Preferred stock; auth 40,000,000 sh.; none issued
Capital stock, $0.15 par value; authorized 140,000,000 sh.;

issued 135,622,676 sh.
0.49
0.49
0.52
0.56
0.66
0.73
Capital surplus
2.59
1.50
1.29
1.17
1.33
1.38
Earnings retained in the business
46.10
40.17
45.16
52.06
55.19
56.25
Capital stock in treasury, at cost
6.52
2.60
1.80
2.08
1.51
1.75
Cumulative translation adjustments
0.57
1.54
0.05
0.79
0.38
0.91
Total shareowners equity
43.22%
41.11% 45.23% 52.50% 56.05% 55.70% 46.10%
Total liabilities and equity
100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Case-15

Exhibit CC.8

Accounts receivable
Temporary investments
Inventory
Working capital
Plant assets, net
Other assets
Long-term debt
Total liabilities
Shareowners equity
Net sales
Admin. and research expenses
Marketing and sales expenses
Interest expense
Net income

Trend Index of Selected Accounts
(Year 6 = 100)
Year 11
Year 10
Year 9
Year 8
Year 7
Year 6
115%
176
5
116
114
204
34
153
156
213
192
117
145
133
157
176
199
142
172
180
93%
113
117
102
108
111
105
115
119
105
111
113
105
103
109
115
101
105
108
111
$ 155.1
299.0
238.7
610.5
1,334.8
626.1
708.7
1,168.1
259.9
362.3
1,223.9
1,538.9
4,268.8
3,082.7
195.9
544.4
58.5
3,900.0
387.2
223.2
52%
209
9
134
125
207
52
147
134
222
198
110
145
138
148
180
191
155
46
2*
78%
180
11
134
120
197
52
132
124
174
176
116
132
130
129
150
161
143
28
6*
55%
163
15
109
102
138
70
129
93
145
140
123
114
110
119
135
104
115
100
123
Case-16
Exhibit CC.9
Per Share Results
Year 11 Year 10 Year 9 Year 8
Year 7
Year 6
Sales
Net income
Dividends
Book value
$48.85
3.16
1.12
14.12
$47.88
0.03
0.98
13.09
$43.87 $37.63 $34.57 $33.10

0.10
2.12
1.90
1.72
0.90
0.81
0.71
0.65
13.76 14.69 13.35 11.86
Average shares
outstanding (mil)
127.0
129.6
129.3
129.4
129.9
129.5
Case-17
Exhibit CC.10
Common-Size Statements of Cash Flows*
Year 11
Year 10
Year 9
Year 8
Cash flows from operating activities:
Net earnings
26.89%
0.54%
To reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization
13.97
24.58
Divestitures and restructuring provisions
41.49
Deferred taxes
2.38
0.48
Other, net
4.23
2.28
Cumulative effect of accounting change
(Increase) decrease in accounts receivable

1.15
(7.39)
(Increase) decrease in inventories
3.26
1.31
Net change in other current assets & liabilities
2.05
(8.42)
Net cash provided by operating activities
53.92%
54.86%
Cash flows from investing activities:
Purchase of plant assets
(24.18)% (47.42)%
Sale of plant assets
2.89
4.27
Businesses acquired
(12.06)
(5.09)
Sale of businesses
4.51
2.66
Increase in other assets
(3.87)
(2.28)
Net change in other temporary investments
0.65
0.45
Net cash used in investing activities
(32.06)% (47.41)%
Cash flows from financing activities:
Long-term borrowings
26.97%
1.54%
Repayments of long-term borrowings
(8.70)
(2.75)
Increase (decrease) in short-term borrowings
(9.23)
(0.33)
Other short-term borrowings
7.86
18.81
Repayments of other short-term borrowings
(13.82)
(10.99)
Dividends paid
(9.21)
(15.21)
Treasury stock purchases
(11.76)
(5.03)
Treasury stock issued
3.19
1.52
Other, net
(0.01)
(0.01)
Net cash provided (used in) financing activities
(14.71)% (12.46)%
Effect of exchange rate change on cash
(0.58)%
0.09%
Net increase (decrease) in cash & equivalents
6.58
(4.92)
Year 7
Year 6
Total
1.15%
25.14%
38.42%
27.88%
21.54%
16.82
30.00
(5.93)
3.26
(4.09)
(9.90)
(0.05)
31.25%
15.67
1.61
1.23
3.94
(2.98)
(9.57)
4.97
2.77
42.80%
22.47
7.10
4.35
(5.64)
(0.61)
6.67
72.76%
15.84
3.62
2.07
(0.45)
2.89
6.08
57.94%
19.33
12.95
1.11
3.83
(0.60)
(4.34)
0.36
1.54
55.72%
(24.85)%
3.48
(11.88)
0.43
(9.36)
0.79
(41.39)%
(22.50)%
2.07
(43.28)
2.16
(3.70)
22.86
(42.39)%
(47.19)%
(1.13)
3.23
(7.78)
(9.43)
(62.31)%
(29.39)%
3.72
(2.50)
(2.25)
(18.00)
(48.42)%
(33.64)%
3.15
(15.86)
2.56
(5.40)
1.24
(47.95)%
11.07%
(4.69)
9.46
19.87
(16.82)
(7.58)
(0.71)
1.62
2.06
14.27%
(1.06)%
3.07
9.45%
(2.10)
0.77
7.06
(8.03)
(9.59)
(2.69)
0.08
0.21
(4.84)%
(0.99)%
(5.43)
0.75%
(3.71)
(3.22)
13.88
(10.30)
(14.25)
0.25
2.89
(13.72)%
(1.10)%
(4.37)
25.47%
(20.57)
0.57
9.11
(11.06)
(13.07)
0.50
2.24
(6.81)%
(0.46)%
2.25
15.80%
(7.73)
(0.74)
13.65
(13.53)
(12.02)
(4.70)
1.58
1.15
(6.55)%
(0.77)%
0.44
Case-18

Cash Flow Analysis and Forecasting
Chart of summary cash inflows and cash outflows:

Cash Flow Analysis and Forecasting
Exhibit CC.11
Analysis of Cash Flow Ratios ($ millions)
6 - year sum of sources of cash from operations
6 - year sum of capital expenditures, inventory additions, and cash dividends
3,009.6
(1,817.1 856.7) (113.2 3.9) 649.4

0.875
Cash provided by operations - Dividends
Cash reinvestment ratio
Gross PPE Investments Other
assets Working capital
3,009.6 - 649.4
(2) Year 6 to Year 11 average
11.8%
15,183.7 1,888.3 2,929.7
805.2 - 137.5
Year 11
18.7%
2,921.9 404.6 240.5
448.4 - 124.3
Year 10
9.4%
2,734.9 349.0 367.4
357.3 - 86.7
Year 9
8.4%
2,543.0 323.1 369.4
466.6 - 104.6
Year 8
11.0%
2,539.7 241.2 499.6
468.3 - 91.7
Year 7
11.0%
*All amounts are from the statement of cash flows.
2,355.1 310.5 744.1
Numerator amounts are form the statement of cash flows and
463.8 - 104.6
denominator amounts are from the balance sheet
Year 6
11.7%
2,089.1 259.9 708.7
(1) Cash flow adequacy ratio *
Case-19
Case-20

Short-term Liquidity Analysis
Exhibit CC.12
Units

Short-Term Liquidity Analysis
Measure Year 11 Year 10 Year 9
Year 8
Year 7
Year 6
Year 11
Industry
Composite
1. Ratio
Current ratio
1.19
1.28
1.30
1.58
2.07
2.13
1.86
2. Ratio
Acid-test ratio
0.56
0.56
0.56
0.70
1.10
1.11
0.61
3. Times
Accounts receivable turnover 10.77
10.68
11.07
11.79
14.08
15.13
8.37
4. Times
Inventory turnover
5.37
5.21
5.41
5.27
5.15
5.14
2.53
5. Days
Days sales in receivables 30.60
36.23
34.15
36.00
27.17
25.11
43.01
6. Days
Days sales in inventory 62.12
69.31
73.41
70.53
70.59
71.29 142.03
7. Days
Approximate conversion period 92.72
105.54
107.56 106.53
97.76
96.40 185.32
8. Percent
Cash to current assets
11.78%
4.84%
7.55% 6.30% 10.14%
11.62%
5.60%
9. Percent
Cash to current liabilities 14.00%
6.22%
9.81% 9.94% 20.90% 24.77% 10.40%
10. Days
Liquidity index 59.87
72.62
72.55
71.46
52.29
52.07 130.62
11. M$s
Working capital 240.50
367.40
369.40 499.60
744.10
708.70
54.33
12. Days Days purchases in accounts payable
46.03
46.56
46.20
49.30
44.25
39.33
13. Days
Average net trade cycle 46.69
58.98
61.36
57.23
53.51
57.07
14. Percent CFO to average current liabilities 62.51% 35.44% 34.10% 60.22% 71.36% 77.34%
Case-21

Short-term Liquidity Analysis
Exhibit CC.13
Current assets:
Accounts receivable
Inventories
Prepaid expenses
Notes payable
Accrued liabilities
Dividend payable

Common-Size Analysis of
Current Assets and Current Liabilities
Year 11
Year 10 Year 9
Year 8
11.78%
0.84
34.73
46.54
6.11
100.00%
22.08%
37.75
31.98
2.89
5.30
4.85%
1.35
37.50
49.22
7.08
7.55%
1.64
33.59
50.95
6.27
6.30%
2.57
35.72
48.77
6.64
Year 7
Year 6
Year 11
Industry
Composite
10.09%
19.49
23.57
43.37
3.48
11.62%
17.88
22.40
45.74
2.36
5.60%
27.18
63.60
3.62
100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

15.58%
40.46
37.89
2.49
3.58
22.04% 15.99% 13.48% 14.20%

41.25
51.74
54.02
51.38
31.86
27.44
26.25
26.50
2.41
2.44
4.83
6.25
7.92
20.49%
31.19
=48.32
100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

Inventory Data
Case-22
Case-23

Inventory Data
Exhibit CC.15

Inventory Data Using FIFO versus LIFO ($ mil.)
Year 11
Year 10
Year 9
Year 8
Year 7
Year 6
Beginning inventory
Production inputs (same as LIFO)
$ 904.4
3,982.4
$ 904.0
4,262.0
$ 745.9
4,152.9
$ 706.0
3,433.9
$ 688.5
3,193.6
$ 707.0
3,070.1
Goods available for sale

Less: Ending inventory
$ 4,886.8
796.3
$5,166.0
904.4
$4,898.8
904.0
$4,139.9 $3,882.1
745.9
706.0
$3,777.1
688.5
Cost of products sold (FIFO)
$ 4,090.5
$4,261.6
$3,994.8
$3,394.0 $3,176.1
$3,088.6
Cost of products sold (LIFO)
$ 4,095.5
$4,258.2
$4,001.6
$3,392.8 $3,180.5
$3,082.7
Effect of restatement to FIFO

increases (decreases) cost of
products sold by:
(5.0)
3.4
(6.8)
1.2
(4.4)
5.9
Net of tax* effect of restatement

to FIFO decreases (increases)
net income by:
(3.3)
2.2
(4.5)
0.8
(2.4)
3.2
Case-24

Capital Structure and Solvency
Exhibit CC.16
Analysis of Capital Structure (mil.)
Year 11
Year 10
Year 9
Year 8
Year 7
Year 6
$ 757.8
14.8
$ 792.9
12.9
$ 610.3
18.9
$ 507.1
18.7
$ 358.8
21.4
$ 346.7
15.6
Total long-term debt

Deferred income taxes*
Other long-term liabilities
$ 772.6
129.3
23.0
$ 805.8
117.6
28.5
$ 629.2
109.0
19.6
$ 525.8
140.3
15.6
$ 380.2
124.0
15.8
$ 362.3
99.6
16.3
Total long-term liabilities

Current liabilities
$ 924.9
1,278.0
$ 951.9
1,298.1
$ 757.8
1,232.1
$ 681.7
863.3
$ 520.0
693.8
$ 478.2
626.1
$2,202.9
$2,250.0
$1,989.9
$1,545.0
$1,213.8
$1,104.3
$1,793.4
23.5
129.2
$1,691.8
56.3
117.5
$1,778.3
54.9
109.0
$1,895.0
29.3
140.3
$1,736.1
23.5
124.0
$1,538.9
20.1
99.5
Total equity capital
$1,946.1
$1,865.6
$1,942.2
$2,064.6
$1,883.6
$1,658.5
$4,149.0
$4,115.6
$3,932.1
$3,609.6
$2,097.4
$2,762.8
Long-term liabilities:
Notes payable
Capital lease obligation
Total liabilities
Equity capital:
Common shareholders equity
Minority interests

Case-25
Case-26

Exhibit CC.17
Long-term liabilities:
Notes payable
Capital lease obligation

Common-Size Analysis of Capital Structure
Year 11
Year 10
Year 9
Year 8
Year 7
Year 6
18.26%
0.36
19.27%
0.31
15.52%
0.48
14.05%
0.52
11.59%
0.69
12.55%
0.56
Total long-term debt

Other long-term liabilities
Total long-term liabilities
Current liabilities
Total liabilities
18.62%
3.12
0.55
22.29%
30.80
53.09%
19.58%
2.86
0.69
23.13%
31.54
54.67%
16.00%
2.77
0.50
19.27%
31.34
50.61%
14.57%
3.88
0.43
18.88%
23.92
42.80%
12.28%
4.00
0.51
16.79%
22.40
39.19%
13.11%
3.61
0.59
17.31%
22.66
39.97%
Equity capital:
Common shareholders equity
Minority interests
43.22%
0.57
3.12
41.11%
1.37
2.85
45.22%
1.40
2.77
52.50%
0.81
3.89
56.05%
0.76
4.00
55.70%
0.73
3.60
Total equity capital
46.91%
45.33%
49.39%
57.20%
60.81%
60.03%
100.00%
100.00%
100.00%
100.00% 100.00%
100.00%
Case-27

Exhibit CC.18
Capital Structure and Solvency Ratios
Year 11 Year 10 Year 9 Year 8 Year 7
1.Total debt to equity

1.13
2.Total debt ratio
0.53
3.Long-term debt to equity
0.48
4.Adjusted long-term debt to equity 0.49
5.Equity to total debt
0.88
6.Fixed assets to equity
0.92
7.Current liabilities to total liabilities 0.58
8.Earnings to fixed charges
5.16
9.Cash flow to fixed charges
7.47
1.21
0.55
0.51
0.50
0.83
0.92
0.58
2.14
5.27
1.02
0.51
0.39
0.38
0.98
0.79
0.62
1.84
5.38
0.75
0.43
0.33
0.33
1.34
0.73
0.56
6.06
8.94
0.64
0.39
0.28
0.27
1.56
0.72
0.58
6.41
8.69
Year 6 Year 11
Industry
Composite
0.67
0.40
0.29
0.28
1.50
0.70
0.57
6.28
9.26
1.17
0.54
0.43
0.86
0.46
0.61
Case-28
(continued)
Case: Campbell Soup Co. Financial Leverage
Case-29
Case: Campbell Soup Co. -- Analysis of Asset Utilization
Case-30
Exhibit CC.20
Asset Utilization Ratios
Year 11 Year 10 Year 9 Year 8
1.Sales to cash and equivalents

2.Sales to receivables
3.Sales to inventories
4.Sales to working capital
5.Sales to fixed assets
6.Sales to other assets*
7.Sales to total assets
8.Sales to short-term liabilities
Year 7
Year 6
Year 11
Industry
Composite
34.7
11.8
8.8
25.8
3.5
7.4
1.5
76.9
9.9
7.6
16.9
3.6
8.5
1.5
46.9
10.5
7.0
15.4
3.7
7.2
1.4
56.8
10.0
7.3
9.8
3.2
6.6
1.4
31.0
13.2
7.2
6.0
3.3
14.5
1.5
27.6
14.3
7.0
6.1
3.7
16.5
1.6
40.6
8.4
3.6
4.9
6.6
7.5
1.4
4.9
4.8
4.6
5.6
6.5
6.9
4.2
Case-31
Analysis of Operating Performance and Profitability
Exhibit CC.21
Profit margins
1.Gross profit margin

2.Operating profit margin
3.Net profit margin

Analysis of Profit Margin Ratios
Year 11
Year 10
Year 9
Year 8
34.00%
12.63%
31.38%
4.69%
29.45%
3.54%
6.47%
0.07%
0.23%
Year 7
30.32% 29.17%
9.09% 10.46%
5.63%
5.51%
Year 6
Year 11
Industry
Composite
28.09%
10.34%
29.30%
5.21%
6.60%
Case-32
Case-33
Exhibit CC.22
Analysis of Depreciation
Year 11 Year 10 Year 9
Year 8
1.Accumulated depreciation as a percent of gross plant assets*
44.6% 42.3%
43.1%
43.7%
2.Annual depreciation expenses as a percent of gross plant
7.7%
7.7%
7.6%
6.9%
3.Annual depreciation expenses as a percent of sales
3.1%
3.0%
3.1%
3.3%
Year 7
Year 6
46.6%
48.6%
6.4%
6.4%
3.1%
2.8%
Case-34
Exhibit CC.23
Analysis of Discretionary Expenditures ($ mil.)
Year 11
Year 10 Year 9
Year 8
Year 7
Net sales
$ 6,204.1 $6,205.8 $ 5,672.1 $4,868.9
$4,490.4
Plant assets (net)*
1,406.5
1,386.9
1,322.6
1,329.1
1,152.0
Maintenance and repairs
173.9
180.6
173.9
155.6
148.8
Advertising
195.4
220.4
212.9
219.1
203.5
Research & development (R&D)
56.3
53.7
47.7
46.9
44.8
Maintenance and repairs sales
2.8%
2.9%
3.1%
3.2%
3.3%
Maintenance and repairs plant
12.4
13.0
13.1
11.7
12.9
Advertising sales
3.1
3.6
3.8
4.5
4.5
R&D sales
0.9
0.9
0.8
1.0
1.0
Year 6
$4,286.8
974.1
144.0
181.4
42.2
3.4%
14.8
4.2
1.0
Case-35
Forecasting and Valuation Income Statement

Year 12
estimate
Year 11
Year 10
Year 9
Year 8
Year 7
Year 6
NET SALES
6514.3
6204.1
6205.8
5672.1
4868.9
4490.4
4286.8
COST OF GOODS
4494.9
4095.5
4258.2
4001.6
3392.8
3180.5
3082.7
GROSS PROFIT
2019.4
2108.6
1947.6
1670.5
1476.1
1309.9
1204.1
1385.2
1319.2
1324.9
1118.6
1012.8
884.9
782.5
INTEREST & OTHER

EXPENSE
128.1
122.0
443.3
445.4
74.7
7.1
34.4
INCOME BEFORE TAX
506.2
667.4
179.4
106.5
388.6
417.9
387.2
INCOME TAX EXPENSE
201.7
265.9
175.0
93.4
147
170.6
164
0.0
0.0
0.0
0.0
-32.5
NET INCOME
304.5
401.5
4.4
13.1
274.1
247.3
223.2
OUTSTANDING SHARES
127.0
127.0
126.6
129.3
129.3
129.9
129.5
INCOME STATEMENT
SELLING GENERAL &

ADMINISTRATIVE
EXPENSE
CUMULATIVE EFFECT
OF ACCOUNTING
CHANGE
Forecasting and Valuation Balance Sheet
Case-36
Forecasting and Valuation
Case-37
Forecasting and Valuation
Case-38
Market Measures
Case-39

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Financial

Copyright 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

Applying Financial Statement

Steps in Analyzing Financial Statements

Explicitly define the analysis

Building Blocks of Financial Statement

Six areas of inquirywith varying degrees of

Applying the building blocks to financial statement

Objectives of the analysis.

Reporting on Financial Statement Analysis

A good analysis report typically contains at least six

Executive summary. Brief summary focused on important analysis

Special industry conditions

Case: Campbell Soup Co.

Case: Campbell Soup Co.

Comparative Financial Statements

CAMPBELL SOUP COMPANY

Case: Campbell Soup Co.

Comparative Financial Statements

CAMPBELL SOUP COMPANY

Case: Campbell Soup Co.

Comparative Financial Statements

(Increase) decrease in accounts receivable

Case: Campbell Soup Co. - Comparative Financial

Case: Campbell Soup Co. - Further Analysis

Case: Campbell Soup Co. -- Further Analysis

Case: Campbell Soup Co. -- Further Analysis

CAMPBELL SOUP COMPANY

Accrued income taxes

Capital stock, $0.15 par value; authorized 140,000,000 sh.;

Case: Campbell Soup Co. -- Further Analysis

Cash and cash equivalents

CAMPBELL SOUP COMPANY

Case: Campbell Soup Co. -- Further Analysis

$43.87 $37.63 $34.57 $33.10

Case: Campbell Soup Co. -- Further Analysis

(Increase) decrease in accounts receivable

Case: Campbell Soup Co.

Chart of summary cash inflows and cash outflows:

Case: Campbell Soup Co.

(1,817.1 856.7) (113.2 3.9) 649.4

(1) Cash flow adequacy ratio *

Case: Campbell Soup Co.

CAMPBELL SOUP COMPANY

Case: Campbell Soup Co.

CAMPBELL SOUP COMPANY

100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

22.04% 15.99% 13.48% 14.20%

100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

Case: Campbell Soup Co.

Case: Campbell Soup Co.

CAMPBELL SOUP COMPANY

Goods available for sale

Cost of products sold (FIFO)

Cost of products sold (LIFO)

Effect of restatement to FIFO

Net of tax* effect of restatement

Case: Campbell Soup Co.

Total long-term debt

Total long-term liabilities

Total equity capital

Total liabilities and equity

Case: Campbell Soup Co.

Case: Campbell Soup Co.