Taina Hogu Interim Report
Taina Hogu
Project Interim Report
Accounting 540
Dr. Yan Bao
Comparison of General Mills, Inc. (GIS) and Kellogg Company (K) Financials
1. Return on Assets
2014*
2013*
General Mills
8.84%
9.51%
Kellogg
13.19%
8.65%
*Kellogg most current year is 2013 and prior year is 2012
The return on assets ratio (ROA) proves how profitable a company is comparative to its total assets. The ROA shows how efficient management is at using its assets to generate earnings. The higher the ROA, the more likely a company can efficiently use assets to generate income. For reporting year June 2013-May 2014, General Mills was less efficient than Kellogg (January 2012-December 2013 FY) in generating income from total assets. Comparing just General Mills 2014 ROA to prior year, it decreased its’ ability to generate earnings by 67%. This shows that General Mills could not convert investments into net income better than prior year. By contrast, Kellogg’s ROA went up in 2014 by 4.5 points mainly by almost doubling its’ net income from the prior year. This can be explained by Kellogg’s pension obligation declining which had a positive impact on net income. The reason why General Mills’ ROA declined is due to the erosion in net earnings. The better investment in terms of ROA is Kellogg.
2. Return on Equity
2014*
2013*
General Mills
27.63%
28.34%
Kellogg
59.4%
45.3%
*Kellogg most current year is 2013 and prior year is 2012 The return on equity ratio (ROE) proves how much a company income a company made relative to the investment made by owners. General Mills had more long-term debt in 2014 which caused a 0.71% decline in ROE exacerbated by a decrease in net income (1824 vs. 1855). By contrast, Kellogg’s increased its’ stockholder’s equity but since it’s net income almost doubled due to less expense pay-out in pensions, it significantly increased the ROE (59.4 vs. 45.3). Kellogg also had over twice General Mill’s ROE percent in 2014 making it the better investment.
3. Financial Leverage
Project Interim Report
Accounting 540
Dr. Yan Bao
Comparison of General Mills, Inc. (GIS) and Kellogg Company (K) Financials
1. Return on Assets
2014*
2013*
General Mills
8.84%
9.51%
Kellogg
13.19%
8.65%
*Kellogg most current year is 2013 and prior year is 2012
The return on assets ratio (ROA) proves how profitable a company is comparative to its total assets. The ROA shows how efficient management is at using its assets to generate earnings. The higher the ROA, the more likely a company can efficiently use assets to generate income. For reporting year June 2013-May 2014, General Mills was less efficient than Kellogg (January 2012-December 2013 FY) in generating income from total assets. Comparing just General Mills 2014 ROA to prior year, it decreased its’ ability to generate earnings by 67%. This shows that General Mills could not convert investments into net income better than prior year. By contrast, Kellogg’s ROA went up in 2014 by 4.5 points mainly by almost doubling its’ net income from the prior year. This can be explained by Kellogg’s pension obligation declining which had a positive impact on net income. The reason why General Mills’ ROA declined is due to the erosion in net earnings. The better investment in terms of ROA is Kellogg.
2. Return on Equity
2014*
2013*
General Mills
27.63%
28.34%
Kellogg
59.4%
45.3%
*Kellogg most current year is 2013 and prior year is 2012 The return on equity ratio (ROE) proves how much a company income a company made relative to the investment made by owners. General Mills had more long-term debt in 2014 which caused a 0.71% decline in ROE exacerbated by a decrease in net income (1824 vs. 1855). By contrast, Kellogg’s increased its’ stockholder’s equity but since it’s net income almost doubled due to less expense pay-out in pensions, it significantly increased the ROE (59.4 vs. 45.3). Kellogg also had over twice General Mill’s ROE percent in 2014 making it the better investment.
3. Financial Leverage