Case Study-General Mills Inc.

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Case Study 1: General Mills Inc.
Understanding Financial Statements
Group 5

Summary

This case overall probes into 3 basic financial statements of the company and management’s view as well as auditors comments on it. It teaches about how business ethics and corporate governance works. Case study encouraged us to closely probe into each statements and line items and make us understand it. Few highlighted learning’s are preparation of common-size financial statements, understanding of footnotes, eye opening fact about use of estimates in preparation of financial statement, etc. Overall it was good exercise accomplished with great team efforts.

Concepts
a.
General Mills is one of the largest food companies in the world. The company has 3 segments U.S. Retail, International, and Bakeries and Food service. They produce and sell pre-packaged food, including cereal, snack bar, chex mix, Pillsbury bakery product to the general market. Also, they provide those supplies to cafeteria, vending machine and convenient stores (company, 2012). Company makes money by selling products to wholesale and retail market and also through joint ventures. Industry is very competitive and profit margin is very thin. To keep itself viable, company relies heavily on new product development and aggressive marketing.

b.
The financial statements commonly prepared for external reporting purposes which are included in the company’s 10-K include the following: 1) statements of earnings, 2) balance sheets, 3) stockholders equity and comprehensive income and cash flows. General Mills refer to each financial statement as such: 1) General Mills, Inc. And Subsidiaries Consolidated Statements of Earnings, 2) General Mills, Inc. And Subsidiaries Consolidated Balance Sheets, 3) General Mills, Inc. And Subsidiaries Consolidated Statements of Stockholders’ Equity and Comprehensive Income The term “consolidated” means that General Mills financial statement includes that of its parent company and any other subsidiaries companies that the parent company owns. c.

Typically, a publicly traded corporation will prepare financial statements to be used for external purposes once per quarter and at the end of the fiscal year. The quarterly reports are released every three months and show a snapshot of business within that time frame. The annual reports are more comprehensive and offer a better view of the overall well-being of the corporation. Requirements for how often financial reports are necessary have been established by regulatory agencies including the U.S. Securities and Exchange Commission. A resource for any individual, agency, or company to find these public documents is the S.E.C’s website, sec.gov (2009). No matter the agency or timing, financial reports are crucial for numerous parties, whether on the board of directors or an independent investor.

d.
The management of General Mills, Inc. produces the financial statements and is responsible for its financial statements. The financial statements show the result of General Mills’ financial position and operations. Potential users of the General Mills financials can be both inside and outside the business. Potential users outside the company would be potential investors, lenders, government, and competitors. Investors use financial statement to make investment decisions, see if this company is worthwhile to invest. Lenders, such as banks, lending institutions, use financial statements to decide whether or not to give a loan or credit to this company. Competitors use other companies’ financial to compare their performance and see whether they need to improve or not in order to increase their competitiveness. Government agencies such as tax authorities and SEC too require these statements. Potential users inside the company would be managers, owners, boards of directors, and employees. Managers and owners evaluate the performance of the company. They also need financial reports...
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