Financial Statement Analysis Report - Finance Module, Semester 1

This report presents a financial statement analysis focusing on General Mills, Inc. and Kimberly-Clark Corporation. The analysis includes detailed calculations of book value per share, value-to-price ratio, and free cash flow (FCF) using two distinct methods. The report outlines the steps involved in determining enterprise value (EV) and the impact of growth rates on continuing value (CV). The methodology involves calculating discounted cash flows and incorporating operating assets, liabilities, financial assets, and financial obligations. The report also references academic sources to support the analysis, providing a comprehensive understanding of financial statement analysis techniques and their application to real-world companies. The analysis covers key financial metrics, valuation methods, and their practical application.

Running head: FINANCIAL STATEMENT ANALYSIS
Financial Statement Analysis
Name of the Student:
Name of the University:
Author’s Note:
Course ID:

1FINANCIAL STATEMENT ANALYSIS
Table of Contents
Question I: General Mills, Inc.........................................................................................................2
Part A:..........................................................................................................................................2
Part B:..........................................................................................................................................3
Question II: Kimberly-Clark Corporation.......................................................................................4
Part A:..........................................................................................................................................4
Part B:..........................................................................................................................................5
References:......................................................................................................................................6

2FINANCIAL STATEMENT ANALYSIS
Question I: General Mills, Inc
Part A:
The following steps are followed to compute the book value per share and value-to-price
ratio:
 There is no growth in free cash flow (FCF) after 2009.
 The subtraction between operating cash flows and investing cash flows is made for c
computing FCF.
 Values of discounting factor are calculated and they are multiplied with the discount rate
for obtaining the present value (PV) until 2009.
 The FCF of 2009 is divided by the rate of discount for deriving the continuing value
(CV).
 Accordingly, the enterprise value (EV) is obtained by dividing the FCF of each year by
the values of the discount rate and then addition is made with CV divided by the
discounting factor value of 2009.
 Equity value is derived by deducting total debt from EV.
 Equity value is divided by outstanding shares to obtain book value per share (Astami et
al. 2017)

3FINANCIAL STATEMENT ANALYSIS
 The book value per share is divided by market price per share to obtain value-to-price
ratio
Part B:
The following series of steps are carried out to solve this problem:
 The CV is expected to rise by 3% after 2009.
 The previously-calculated CV and 3% growth rate are added and then the remainder is
divided by the discount rate minus growth rate in CV.
 All the above-discussed steps are followed thereafter.

4FINANCIAL STATEMENT ANALYSIS
Question II: Kimberly-Clark Corporation
Part A:
 Balance sheet is reformulated
 Operating assets and operating liabilities are subtracted to arrive at operating assets
 Financial assets and financial obligations are deducted from each other
 FCF (Method 1) = Operating profit – Change in operating assets (Toumeh and Yahya
2017)
 FCF (Method 2) = Financial assets – Financial expense + Payment to shareholders

5FINANCIAL STATEMENT ANALYSIS
Part B:

6FINANCIAL STATEMENT ANALYSIS
References:
Astami, E.W., Rusmin, R., Hartadi, B. and Evans, J., 2017. The role of audit quality and culture
influence on earnings management in companies with excessive free cash flow: Evidence from
the Asia-Pacific region. International Journal of Accounting & Information Management, 25(1),
pp.21-42.
Toumeh, A.A. and Yahya, S., 2017. Stock Market Segmentations, Free Cash Flow and Earnings
Management: The Roles of Moderating Independent Audit Committee and Audit Quality (The
Case of Jordan from an Agency Theory Perspective). Global Business and Management
Research, 9(4), pp.1-16.