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

2. Case-2 CC CHAPTER Applying Financial Statement Analysis

3. 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

4. Case-4 Building Blocks of Financial Statement Analysis Six areas of inquiry—with varying degrees of importance: 1.Short-term liquidity. 2.Capital structure and solvency. 3.Return on invested capital. 4.Asset turnover. 5.Operating performance and profitability. 6.Forecasting and valuation. Applying the building blocks to financial statement analysis involves determining: Objectives of the analysis. Relative emphasis among the building blocks.

5. 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 company’s 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.

6. 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

7. Case-7 Case: Campbell Soup Co. Preliminary Financial Analysis

8. Case-8 Comparative Financial Statements Exhibit CC.2 CAMPBELL SOUP COMPANY Income Statements (millions) Year 11Year 10Year 9Year 8Year 7Year 6 Net sales$6,204.1$6,205.8$5,672.1$4,868.9$4,490.4$4,286.8 Costs and expenses: Cost of products sold$4,095.5$4,258.2$4,001.6$3,392.8$3,180.5$3,082.7 Marketing and selling expenses956.2980.5818.8733.3626.2544.4 Administrative expenses306.7290.7252.1232.6213.9195.9 Research and development expenses56.353.747.746.944.842.2 Interest expense116.2111.694.153.951.756.0 Interest income(26.0)(17.6)(38.3)(33.2)(29.5)(27.4) Foreign exchange losses, net0.83.319.316.64.80.7 Other expense (income)26.214.732.4(3.2)(9.5)5.5 Divestitures, restructuring, & unusual charges0.0339.1343.040.60.00.0 Total costs and expenses$5,531.9$6,034.2$5,570.7$4,480.3$4,082.9$3,900.0 Earnings before equity in affil. & M.I.$672.2$171.6$101.4$388.6$407.5$386.8 Equity in earnings of affiliates2.413.510.46.315.14. Minority interests(7.2)(5.7)(5.3)(6.3)(4.7)(3.9) Earnings before taxes$667.4$179.4$106.5$388.6$417.9$387.2 Taxes on earnings265.9175.093.4147.0170.6164.0 Earnings before cumulative effect$401.5$4.4$13.1$241.6$247.3$223.2 Cumulative effect of change for taxes00032.500 Net earnings$401.5$4.4$13.1$274.1$247.3$223.2 Earnings per share$3.16$0.03$0.10$2.12*$1.90$1.72 Weighted-average shares outstanding127.00126.60129.30$129.30$129.90129.50 Case: Campbell Soup Co.

9. Case-9 Comparative Financial Statements Case: Campbell Soup Co. Exhibit CC.3 CAMPBELL SOUP COMPANY Balance Sheets Year11Year 10Year 9Year 8Year 7Year 6 Assets Current assets: Cash and cash equivalents$178.90$80.70$120.90$85.80$145.00$155.10 Other temporary investments12.8022.5026.2035.00280.30238.70 Accounts receivable527.40624.50538.00486.90338.90299.00 Inventories706.70819.80816.00664.70623.60610.50 Prepaid expenses92.70118.00100.4090.5050.1031.50 Total current assets$1,518.50$1,665.50$1,601.50$1,362.90$1,437.90$1,334.80 Plant assets, net of depreciation$1,790.40$1,717.70$1,540.60$1,508.90$1,349.00$1,168.10 Intangible assets, net of amortization435.50383.40466.90496.60— — Other assets404.60349.00323.10241.20310.50259.90 Total assets$4,149.00$4,115.60$3,932.10$3,609.60$3,097.40$2,762.80 Liabilities and Shareowners’ Equity Current liabilities: Notes payable$282.20$202.30$271.50$138.00$93.50$88.90 Payable to suppliers and others482.40525.20508.20446.70374.80321.70 Accrued liabilities408.70491.90392.60236.90182.10165.90 Dividend payable37.0032.3029.70— — — Accrued income taxes67.7046.4030.1041.7043.4049.60 Total current liabilities$1,278.00$1,298.10$1,232.10$863.30$693.80$626.10 Long-term debt$772.60$805.80$629.20$525.80$380.20$362.30 Other liabilities, mainly deferred tax305.00319.90292.50325.50287.30235.50 Shareowner’s 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.20.3020.3020.3020.30 20.3020.30 Capital surplus107.3061.9050.8042.3041.1038.10 Earnings retained in the business1,912.601,653.301,775.801,879.101,709.601,554.00 Capital stock in treasury, at cost(270.40)(107.20)(70.70)(75.20)(46.80)(48.40) Cumulative translation adjustments23.6063.502.1028.5011.90(25.10) Total shareowner’s equity$1,793.40$1,691.80$1,778.30$1,895.00$1,736.10$1,538.90 Total liabilities and shareowners’ equity$4,149.00$4,115.60$3,932.10$3,609.60$3,097.40$2,762.80

10. Case-10 Comparative Financial Statements Case: Campbell Soup Co. Exhibit CC.4 CAMPBELL SOUP COMPANY Statements of Cash Flows For Years 6 to 11 ($ millions) Year 11Year 10Year 9Year 8Year 7Year 6Total Cash flows from operating activities: Net earnings$401.5$4.4$13.1$274.1$247.3$223.2$1,163.6 To reconcile net earnings to net cash provided by operating activities: Depreciation and amortization208.6200.9192.3170.9144.6126.81,044.1 Divestitures and restructuring provisions— 339.1343.017.6— —699.7 Deferred taxes35.53.9(67.8)13.445.729.059.7 Other, net63.218.637.343.028.016.6206.7 Cumulative effect of accounting change— — — (32.5)— —(32.5) (Increase) decrease in accounts receivable17.1(60.4)(46.8)(104.3)(36.3)(3.6)(234.3) (Increase) decrease in inventories48.710.7(113.2)54.2(3.9)23.119.6 Net change in other current assets and liabilities30.6(68.8)(0.6)30.242.948.783.0 Net cash provided by operating activities$805.2$448.4$357.3$466.6$468.3$463.8$3,009.6 Cash flows from investing activities: Purchases of plant assets$(361.1)$(387.6)$(284.1)$(245.3)$(303.7)$(235.3)$(1,817.1) Sale of plant assets43.234.939.822.6— 29.8170.3 Businesses acquired(180.1)(41.6)(135.8)(471.9)(7.3)(20.0)(856.7) Sale of businesses67.421.74.923.520.8— 138.3 Increase in other assets(57.8)(18.6)(107.0)(40.3)(50.1)(18.0)(291.8) Net change in other temporary investments9.73.79.0249.2(60.7)(144.1)66.8 Net cash used in investing activities$(478.7)$(387.5)$(473.2)$(462.2)$(401.0)$(387.6) $(2,590.2) Cash flows from financing activities: Long-term borrowings$402.8$12.6$126.5$103.0$4.8$203.9$853.6 Repayments of long-term borrowings(129.9)(22.5)(53.6)(22.9)(23.9)(164.7)(417.5) Increase (decrease) in short-term borrowings*(137.9)(2.7)108.28.4(20.7)4.6(40.1) Other short-term borrowings117.3153.7227.177.089.372.9737.3 Repayments of other short-term borrowings(206.4)(89.8)(192.3)(87.6)(66.3)(88.5)(730.9) Dividends paid(137.5)(124.3)(86.7)(104.6)(91.7)(104.6)(649.4) Treasury stock purchases(175.6)(41.1)(8.1)(29.3)— — (254.1) Treasury stock issued47.712.418.50.91.64.0†85.1 Other, net(0.1)(0.1)23.52.318.617.962.1 Net cash provided (used in) financing activities$(219.6)$(101.8)$163.1$(52.8)$(88.3)$(54.5)$(353.9) Effect of exchange rate change on cash$(8.7)$0.7$(12.1)$(10.8)$(7.1)$(3.7)$(41.7) Net increase (decrease) in cash and cash equivalents98.2(40.2)35.1(59.2)(28.1)18.023.8 Cash and cash equivalents at the beginning of year80.7120.985.8145.0173.1155.1155.1 Cash and cash equivalents at end of year$178.9$80.7$120.9$85.8$145.0$173.1$178.9

11. Case-11 Case: Campbell Soup Co. - Comparative Financial Statements

12. Case-12 Case: Campbell Soup Co. - Further Analysis

13. Case-13 Case: Campbell Soup Co. -- Further Analysis Exhibit CC.6 CAMPBELL SOUP COMPANY Common-Size Income Statements Year 11Year 10Year 9Year 8Year 7Year 6 Net sales 100.00%100.00%100.00%100.00%100.00%100.00% Costs and expenses: Cost of products sold 66.01%68.62%70.55%69.68%70.83%71.91% Marketing and selling expenses 15.4115.8014.4415.0613.9512.70 Administrative expenses4.944.684.444.784.764.57 Research and development expenses 0.910.870.840.961.000.98 Interest expense1.871.801.661.111.151.31 Interest income (0.42)(0.28)(0.68)(0.68)(0.66)(0.64) Foreign exchange losses, net 0.010.050.340.340.110.02 Other expense (income) 0.420.240.57(0.07)(0.21)0.13 Divestitures, restructuring & unusual charges — 5.466.050.83 — — Total costs and expenses 89.17%97.23%98.21%92.02%90.93%90.98% Earnings before equity in earnings of affiliates and minority interests 10.83%2.77%1.79%7.98%9.07%9.02% Equity in earnings of affiliates 0.04 0.220.180.130.340.10 Minority interests(0.12)(0.09)(0.09)(0.13)(0.10)(0.09) Earnings before taxes10.76%2.89%1.88%7.98%9.31%9.03% Taxes on earnings4.292.821.653.023.803.83 Earnings before cumulative effect of accounting change6.47%0.07%0.23%4.96%5.51%5.21% Cumulative effect of change in accounting for income taxes — — — 0.67 — — Net earnings6.47%0.07%0.23%5.63%5.51%5.21%

14. Case-14 Case: Campbell Soup Co. -- Further Analysis Exhibit CC.7 CAMPBELL SOUP COMPANY Common-Size Balance Sheets Year 11Year 10Year 9Year 8Year 7Year 6Industry Composite Year 11 Current assets: Cash and cash equivalents4.31%1.96%3.07%2.38%4.69%5.61%3.4% Other temporary investments0.310.550.670.979.058.64 Accounts receivable12.7115.1713.6813.4910.9410.8216.5 Inventories17.0319.9220.7518.4120.1322.1038.6 Prepaid expenses2.232.872.552.511.621.142.2 Total current assets36.60%40.47%40.73%37.76%46.43%48.31%60.70% Plant assets, net of depreciation43.15%41.74%39.18%41.80%43.55%42.28%21.0% Intangible assets, net of amortization10.509.3211.8713.76 — — Other assets9.758.488.226.6810.029.4118.3 Total assets100.00%100.00%100.00%100.00%100.00%100.00%100.00% Current liabilities: Notes payable6.80%4.92%6.90%3.82%3.02%3.22%6.7% Payable to suppliers and others11.6312.7612.9212.3812.1011.6410.2 Accrued liabilities9.8511.959.986.565.886.0015.8 Dividend payable0.890.780.76 — — — Accrued income taxes1.631.130.771.161.401.80 Total current liabilities30.80%31.54%31.33%23.92%22.40%22.66%32.70% Long-term debt18.62%19.58%16.00%14.57%12.27%13.11%19.7% Other liabilities, mainly deferred taxes7.357.777.449.029.288.521.5 Shareowner’s 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.0.490.490.520.56 0.660.73 Capital surplus2.591.501.291.171.331.38 Earnings retained in the business46.1040.1745.1652.0655.1956.25 Capital stock in treasury, at cost6.522.601.80 2.081.511.75 Cumulative translation adjustments0.571.540.050.790.380.91 Total shareowner’s equity43.22%41.11%45.23%52.50%56.05%55.70%46.10% Total liabilities and equity100.00%100.00%100.00%100.00%100.00%100.00%100.00%

15. Case-15 Case: Campbell Soup Co. -- Further Analysis Exhibit CC.8 CAMPBELL SOUP COMPANY Trend Index of Selected Accounts (Year 6 = 100) Year 11Year 10Year 9Year 8Year 7Year 6 Cash and cash equivalents115%52%78%55%93%$155.1 Accounts receivable176209180163113299.0 Temporary investments591115117238.7 Inventory116134134109102610.5 Total current assets1141251201021081,334.8 Total current liabilities204207197138111626.1 Working capital34525270105708.7 Plant assets, net1531471321291151,168.1 Other assets15613412493119259.9 Long-term debt213222174145105362.3 Total liabilities1921981761401111,223.9 Shareowners’ equity1171101161231131,538.9 Net sales1451451321141054,268.8 Cost of products sold1331381301101033,082.7 Admin. and research expenses157148129119109195.9 Marketing and sales expenses176180150135115544.4 Interest expense19919116110410158.5 Total costs and expenses1421551431151053,900.0 Earnings before taxes1724628100108387.2 Net income1802*6*123111223.2

16. Case-16 Case: Campbell Soup Co. -- Further Analysis Exhibit CC.9 CAMPBELL SOUP COMPANY Per Share Results Year 11Year 10Year 9Year 8Year 7Year 6 Sales$48.85$47.88$43.87$37.63$34.57$33.10 Net income3.160.030.102.121.901.72 Dividends1.120.980.900.810.710.65 Book value14.1213.0913.7614.6913.3511.86 Average shares 127.0129.6129.3129.4129.9129.5 outstanding (mil)

17. Case-17 Case: Campbell Soup Co. -- Further Analysis Exhibit CC.10 CAMPBELL SOUP COMPANY Common-Size Statements of Cash Flows* Year 11Year 10Year 9Year 8Year 7Year 6Total Cash flows from operating activities: Net earnings26.89%0.54%1.15%25.14%38.42%27.88%21.54% To reconcile net earnings to net cash provided by operating activities: Depreciation and amortization13.9724.5816.8215.6722.4715.8419.33 Divestitures and restructuring provisions — 41.4930.001.61 — — 12.95 Deferred taxes2.380.48(5.93)1.237.103.621.11 Other, net4.232.283.263.944.352.073.83 Cumulative effect of accounting change — — — (2.98) — — (0.60) (Increase) decrease in accounts receivable 1.15(7.39)(4.09)(9.57)(5.64)(0.45)(4.34) (Increase) decrease in inventories3.261.31(9.90)4.97(0.61)2.890.36 Net change in other current assets & liabilities 2.05 (8.42) (0.05) 2.776.676.081.54 Net cash provided by operating activities 53.92%54.86% 31.25%42.80% 72.76%57.94% 55.72% Cash flows from investing activities: Purchase of plant assets(24.18)% (47.42)%(24.85)%(22.50)%(47.19)%(29.39)%(33.64)% Sale of plant assets2.894.273.482.07 — 3.723.15 Businesses acquired(12.06)(5.09)(11.88)(43.28)(1.13)(2.50)(15.86) Sale of businesses4.512.660.432.163.23 — 2.56 Increase in other assets(3.87)(2.28)(9.36)(3.70)(7.78)(2.25)(5.40) Net change in other temporary investments 0.650.45 0.7922.86 (9.43)(18.00) 1.24 Net cash used in investing activities (32.06)% (47.41)% (41.39)% (42.39)% (62.31)% (48.42)% (47.95)% Cash flows from financing activities: Long-term borrowings26.97%1.54%11.07%9.45%0.75%25.47%15.80% Repayments of long-term borrowings(8.70)(2.75)(4.69)(2.10)(3.71)(20.57)(7.73) Increase (decrease) in short-term borrowings(9.23)(0.33)9.460.77(3.22)0.57(0.74) Other short-term borrowings7.8618.8119.877.0613.889.1113.65 Repayments of other short-term borrowings(13.82)(10.99)(16.82)(8.03)(10.30)(11.06)(13.53) Dividends paid(9.21)(15.21)(7.58)(9.59)(14.25)(13.07)(12.02) Treasury stock purchases(11.76)(5.03)(0.71)(2.69) — — (4.70) Treasury stock issued3.191.521.620.080.250.501.58 Other, net (0.01) (0.01) 2.06 0.21 2.89 2.24 1.15 Net cash provided (used in) financing activities (14.71)% (12.46)% 14.27% (4.84)% (13.72)% (6.81)% (6.55)% Effect of exchange rate change on cash (0.58)% 0.09% (1.06)% (0.99)% (1.10)% (0.46)% (0.77)% Net increase (decrease) in cash & equivalents6.58(4.92)3.07(5.43)(4.37)2.250.44

18. Case-18 Case: Campbell Soup Co. Chart of summary cash inflows and cash outflows: Cash Flow Analysis and Forecasting

19. Case-19 Case: Campbell Soup Co. – Cash Flow Analysis and Forecasting Exhibit CC.11 CAMPBELL SOUP COMPANY Analysis of Cash Flow Ratios ($ millions) (1) (2) *All amounts are from the statement of cash flows. † Numerator amounts are form the statement of cash flows and denominator amounts are from the balance sheet

20. Case-20 Case: Campbell Soup Co. – Short-term Liquidity Analysis Exhibit CC.12 CAMPBELL SOUP COMPANY Short-Term Liquidity Analysis UnitsMeasure Year 11Year 10Year 9Year 8Year 7Year 6Year 11 Industry Composite 1. RatioCurrent ratio1.191.28 1.301.582.072.131.86 2. RatioAcid-test ratio0.560.56 0.560.701.101.110.61 3. TimesAccounts receivable turnover10.7710.68 11.0711.7914.0815.138.37 4. TimesInventory turnover5.375.21 5.415.275.155.142.53 5. DaysDays’ sales in receivables30.6036.23 34.1536.0027.1725.1143.01 6. DaysDays’ sales in inventory62.1269.31 73.4170.5370.5971.29142.03 7. DaysApproximate conversion period 92.72105.54107.56106.5397.7696.40185.32 8. PercentCash to current assets11.78%4.84% 7.55%6.30%10.14%11.62%5.60% 9. PercentCash to current liabilities14.00%6.22% 9.81%9.94%20.90%24.77%10.40% 10. DaysLiquidity index59.8772.62 72.5571.4652.2952.07130.62 11. M$’sWorking capital240.50367.40 369.40499.60744.10708.7054.33 12. DaysDays’ purchases in accounts payable 46.0346.5646.20 49.3044.2539.33 13. DaysAverage net trade cycle46.6958.98 61.3657.2353.5157.07 14. PercentCFO to average current liabilities 62.51%35.44%34.10%60.22%71.36%77.34%

21. Case-21 Case: Campbell Soup Co. – Short-term Liquidity Analysis Exhibit CC.13 CAMPBELL SOUP COMPANY Common-Size Analysis of Current Assets and Current Liabilities Year 11Year 10Year 9Year 8Year 7Year 6Year 11 Industry Composite Current assets: Cash and cash equivalents11.78%4.85%7.55%6.30%10.09%11.62%5.60% Other temporary investments0.841.351.642.5719.4917.88 — Accounts receivable34.7337.5033.5935.7223.5722.4027.18 Inventories46.5449.2250.9548.7743.3745.7463.60 Prepaid expenses6.117.086.276.643.482.363.62 Total current assets100.00%100.00%100.00%100.00%100.00%100.00%100.00% Current liabilities: Notes payable22.08%15.58%22.04%15.99%13.48%14.20%20.49% Payable to suppliers and others37.7540.4641.2551.7454.0251.3831.19 Accrued liabilities31.9837.8931.8627.4426.2526.50 Dividend payable2.892.492.41 — — — =48.32 Accrued income taxes5.303.582.444.836.257.92 Total current liabilities100.00%100.00%100.00%100.00%100.00%100.00%100.00%

22. Case-22 Case: Campbell Soup Co. – Inventory Data

23. Case-23 Case: Campbell Soup Co. – Inventory Data Exhibit CC.15 CAMPBELL SOUP COMPANY Inventory Data Using FIFO versus LIFO ($ mil.) Year 11Year 10Year 9Year 8Year 7Year 6 Beginning inventory$904.4$904.0$745.9$706.0$688.5$707.0 Production inputs (same as LIFO)3,982.44,262.04,152.93,433.93,193.63,070.1 Goods available for sale$4,886.8$5,166.0$4,898.8$4,139.9$3,882.1$3,777.1 Less: Ending inventory796.3904.4904.0745.9706.0688.5 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

24. Case-24 Case: Campbell Soup Co. – Capital Structure and Solvency Exhibit CC.16 CAMPBELL SOUP COMPANY Analysis of Capital Structure (mil.) Year 11Year 10Year 9Year 8Year 7Year 6 Long-term liabilities: Notes payable$757.8$792.9$610.3$507.1$358.8$346.7 Capital lease obligation14.812.918.918.721.415.6 Total long-term debt$772.6$805.8$629.2$525.8$380.2$362.3 Deferred income taxes*129.3117.6109.0140.3124.099.6 Other long-term liabilities23.028.519.615.615.816.3 Total long-term liabilities$924.9$951.9$757.8$681.7$520.0$478.2 Current liabilities†1,278.01,298.11,232.1863.3693.8626.1 Total liabilities$2,202.9$2,250.0$1,989.9$1,545.0$1,213.8$1,104.3 Equity capital: Common shareholders’ equity$1,793.4$1,691.8$1,778.3$1,895.0$1,736.1$1,538.9 Minority interests23.556.354.929.323.520.1 Deferred income taxes*129.2117.5109.0140.3124.099.5 Total equity capital$1,946.1$1,865.6$1,942.2$2,064.6$1,883.6$1,658.5 Total liabilities and equity$4,149.0$4,115.6$3,932.1$3,609.6$2,097.4$2,762.8

25. Case-25 Case: Campbell Soup Co. – Capital Structure and Solvency

26. Case-26 Case: Campbell Soup Co. – Capital Structure and Solvency Exhibit CC.17 CAMPBELL SOUP COMPANY Common-Size Analysis of Capital Structure Year 11Year 10Year 9Year 8Year 7Year 6 Long-term liabilities: Notes payable18.26%19.27%15.52%14.05%11.59%12.55% Capital lease obligation0.360.310.480.520.690.56 Total long-term debt18.62%19.58%16.00%14.57%12.28%13.11% Deferred income taxes*3.122.862.773.884.003.61 Other long-term liabilities0.550.690.500.430.510.59 Total long-term liabilities22.29%23.13%19.27%18.88%16.79%17.31% Current liabilities†30.8031.5431.3423.9222.4022.66 Total liabilities53.09%54.67%50.61%42.80%39.19%39.97% Equity capital: Common shareholders’ equity43.22%41.11%45.22%52.50%56.05%55.70% Minority interests0.571.371.400.810.760.73 Deferred income taxes*3.122.852.773.894.003.60 Total equity capital46.91%45.33%49.39%57.20%60.81%60.03% Total liabilities and equity100.00%100.00%100.00%100.00%100.00%100.00%

27. Case-27 Case: Campbell Soup Co. – Capital Structure and Solvency Exhibit CC.18 CAMPBELL SOUP COMPANY Capital Structure and Solvency Ratios Year 11Year 10Year 9Year 8Year 7Year 6Year 11 Industry Composite 1.Total debt to equity1.131.211.020.750.640.671.17 2.Total debt ratio0.530.550.510.430.390.400.54 3.Long-term debt to equity0.480.510.390.330.280.290.43 4.Adjusted long-term debt to equity0.490.500.380.330.270.28— 5.Equity to total debt0.880.830.981.341.561.500.86 6.Fixed assets to equity0.920.920.790.730.720.700.46 7.Current liabilities to total liabilities0.580.580.620.560.580.570.61 8.Earnings to fixed charges5.162.141.846.066.416.28— 9.Cash flow to fixed charges7.475.275.388.948.699.26—

28. Case-28 (continued)

29. Case-29 Case: Campbell Soup Co. – Financial Leverage

30. Case-30 Case: Campbell Soup Co. -- Analysis of Asset Utilization Exhibit CC.20 CAMPBELL SOUP COMPANY Asset Utilization Ratios Year 11Year 10Year 9Year 8Year 7Year 6Year 11 Industry Composite 1.Sales to cash and equivalents34.776.946.956.831.027.640.6 2.Sales to receivables11.89.910.510.013.214.38.4 3.Sales to inventories8.87.67.07.37.27.03.6 4.Sales to working capital25.816.915.49.86.06.14.9 5.Sales to fixed assets3.53.63.73.23.33.76.6 6.Sales to other assets*7.48.57.26.614.516.57.5 7.Sales to total assets1.51.51.41.41.51.61.4 8.Sales to short-term liabilities4.94.84.65.66.56.94.2

31. Case-31 Analysis of Operating Performance and Profitability Exhibit CC.21 CAMPBELL SOUP COMPANY Analysis of Profit Margin Ratios Profit margins Year 11Year 10Year 9Year 8Year 7Year 6Year 11 Industry Composite 1.Gross profit margin34.00%31.38%29.45%30.32%29.17%28.09%29.30% 2.Operating profit margin12.63%4.69%3.54%9.09%10.46%10.34% — 3.Net profit margin6.47%0.07%0.23%5.63%5.51%5.21%6.60%

32. Case-32 Analysis of Operating Performance and Profitability

33. Case-33 Analysis of Operating Performance and Profitability Exhibit CC.22 CAMPBELL SOUP COMPANY Analysis of Depreciation Year 11Year 10Year 9Year 8Year 7Year 6 1.Accumulated depreciation as a percent of gross plant assets* 44.6%42.3%43.1%43.7%46.6%48.6% 2.Annual depreciation expenses as a percent of gross plant 7.7% 7.7% 7.6% 6.9% 6.4%6.4% 3.Annual depreciation expenses as a percent of sales 3.1% 3.0% 3.1%3.3% 3.1%2.8%

34. Case-34 Analysis of Operating Performance and Profitability Exhibit CC.23 CAMPBELL SOUP COMPANY Analysis of Discretionary Expenditures ($ mil.) Year 11Year 10Year 9Year 8Year 7Year 6 Net sales$6,204.1$6,205.8$5,672.1$4,868.9$4,490.4$4,286.8 Plant assets (net)*1,406.51,386.91,322.61,329.11,152.0974.1 Maintenance and repairs173.9180.6173.9155.6148.8144.0 Advertising195.4220.4212.9219.1203.5181.4 Research & development (R&D)56.353.747.746.944.842.2 Maintenance and repairs ÷ sales2.8%2.9%3.1%3.2%3.3%3.4% Maintenance and repairs ÷ plant12.413.013.111.712.914.8 Advertising ÷ sales3.13.63.84.54.54.2 R&D ÷ sales0.90.90.81.01.01.0

35. Case-35 Forecasting and Valuation – Income Statement INCOME STATEMENT Year 12 estimateYear 11Year 10Year 9Year 8Year 7Year 6 NET SALES6514.36204.16205.85672.14868.94490.44286.8 COST OF GOODS4494.94095.54258.24001.63392.83180.53082.7 GROSS PROFIT2019.42108.61947.61670.51476.11309.91204.1 SELLING GENERAL & ADMINISTRATIVE EXPENSE 1385.21319.21324.91118.61012.8884.9782.5 INTEREST & OTHER EXPENSE128.1122.0443.3445.474.77.134.4 INCOME BEFORE TAX506.2667.4179.4106.5388.6417.9387.2 INCOME TAX EXPENSE201.7265.9175.093.4147170.6164 CUMULATIVE EFFECT OF ACCOUNTING CHANGE 0.0 -32.500 NET INCOME304.5401.54.413.1274.1247.3223.2 OUTSTANDING SHARES127.0 126.6129.3 129.9129.5

36. Case-36 Forecasting and Valuation – Balance Sheet

37. Case-37 Forecasting and Valuation

38. Case-38 Forecasting and Valuation

39. Case-39 Market Measures