Financial Statement Analysis

This assignment focuses on financial statement analysis, specifically applying discounted cash flow (DCF) valuation to two companies: General Mills and Kimberly-Clark Corporation. It includes calculations of free cash flow (FCF), present value (PV), and the terminal value (CV). Part A analyzes General Mills with a constant FCF growth rate after 2009, while Part B considers a 3% growth rate. The assignment then applies these concepts to Kimberly-Clark Corporation, detailing the reformulation of the balance sheet for FCF calculations.

Running head: FINANCIAL STATEMENT ANALYSIS
Financial Statement Analysis
Name of the Student:
Name of the University:
Author’s Note:
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1FINANCIAL STATEMENT ANALYSIS
Table of Contents
Chapter 4: A Discounted Cash Flow Valuation: General Mills, Inc..........................................2
Part A:....................................................................................................................................2
Part B:.....................................................................................................................................3
Chapter 11: Free Cash Flow for Kimberly-Clark Corporation..................................................4
Part A:....................................................................................................................................4
Part B:.....................................................................................................................................5
References:.................................................................................................................................6

2FINANCIAL STATEMENT ANALYSIS
Chapter 4: A Discounted Cash Flow Valuation: General Mills, Inc
Part A:
In this scenario, the FCF has no growth rate after 2009. The FCF is calculated by
obtaining the difference between operating cash flows and investing cash flows for the
provided years. With the help of this calculation, it is possible to compute the discounting
factor values and after that, discount rate is multiplied for obtaining the PV until 2009. In
order to compute CV, FCF obtained for 2009 is divided by the rate of discount. This value
has helped in calculating PV of CV by the value of the discounting factor for the last year.
Depending on this, the EV is calculated by dividing the value of FCF per year and then, CV
is added together divided by the value of discounting factor after 2009.
As the value of total debt is provided, it is deducted from EV in order to derive the
equity value. In addition, the case study provides both market price per share and number of
outstanding shares. Based on this information, the value of equity is divided by outstanding
shares providing the book value per share. Finally, the book value per share is divided by the
market value per share to obtain the value-to-price ratio (Chong et al., 2017).

3FINANCIAL STATEMENT ANALYSIS
Part B:
In this scenario, the FCF has growth rate of 3% after 2009. Thus, for this problem, the
CV and PV from the previous part are considered. This signifies that the CV value is
anticipated to rise. The computation of the new CV is computed by multiplying the CV
computed in the past part with addition in the growth rate of CV divided by the rate of
discount minus the growth rate in CV (Jafari, Mohammadi & Rakhshani, 2017). The value-
to-price ratio and the book value per share is calculated with the application of the above-
used formula.

4FINANCIAL STATEMENT ANALYSIS
Chapter 11: Free Cash Flow for Kimberly-Clark Corporation
Part A:
For computing FCF, there is reformulation of balance sheet statement. After thus, the
two calculations are carried out, which are described as follows:
 Net operating assets = Operating assets – Operating liabilities
 Financial assets – Financial obligations

5FINANCIAL STATEMENT ANALYSIS
Part B:
In this situation, FCF is calculated with the help of the following formula:

6FINANCIAL STATEMENT ANALYSIS
References:
Chong, W. L., Chong, W. L., Ting, K. H., Ting, K. H., Cheng, F. F., & Cheng, F. F. (2017).
The performance of externally managed REITs in Asia: Further evidence from free cash flow
and agency costs. Journal of Property Investment & Finance, 35(2), 200-227.
Jafari, F., Mohammadi, H., & Rakhshani, M. (2017). The impact of free cash flow on
forecasted earning success in companies listed in tehran stock exchange. Revista QUID, 1(1),
2182-2191.