1. Applying Financial Statement AnalysisCC
CHAPTER

2. Prelude to Comprehensive Analysis
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 2 2

3. Prelude to Comprehensive Analysis Building Blocks of Analysis
Analysis emphasizes six areas of inquiry—with varying degrees of importance
• Short‑term liquidity--Ability to meet short-term obligations.
• Capital structure and solvency--Ability to generate future revenues and meet long-term obligations.
• Return on invested capital--Ability to provide financial rewards sufficient to attract and retain financing.
• Asset turnover--Asset intensity in generating revenues to reach a sufficient profitability level.
• Operating performance and profitability--Success at maximizing revenues and minimizing expenses from operating activities over the long run.
• Forecasting and valuation – ability to generate sufficient cash flows fund investment needs and create shareholder value. 2 2

4. Prelude to Comprehensive Analysis
Reporting on Financial Statement Analysis
Analysis report typically contains at least six distinct sections:
1. Executive Summary--Brief summary focuses on important analysis results.
2. Analysis overview--Background material on the company, its industry, and its economic environment.
3. Evidential matter--Financial statements and information used in the analysis. This includes ratios, trends, statistics, and all analytical measures assembled.
4. Assumptions--Identification of important assumptions regarding a company’s industry and economic environment, and other important assumptions for estimates or forecasts.
5. Crucial factors--Listing of important favorable and unfavorable factors, both quantitative and qualitative, for company performance—usually listed by areas of
analysis.
6. Inferences--Includes forecasts, estimates, interpretations,
and conclusions drawing on all four prior sections of the report. 2 2

5. Case: Campbell Soup Co. Preliminary Financial Analysis Exhibit CC.1
CAMPBELL SOUP COMPANY
Sales Contribution and Percent of Sales by Division ($ mil.)
Year 11 Year 10 Year 9 Year 8 Year 7 Year 6
Sales Contribution:
Campbell North America:
Campbell U.S.A $ 3,911.8 $ 3,932.7 $ 3,666.9 $ 3,094.1 $ 2,881.4 $ 2,910.1
Campbell Canada
$ 4,263.8 $ 4,316.7 $ 3,980.3 $ 3,407.2 $ 3,194.2 $ 3,165.2
Campbell Biscuit and Bakery:
Pepperidge Farm $ $ $ $ $ $ 420.1
International Biscuit — — —
$ $ $ $ $ $ 420.1
Campbell International $ 1,222.9 $ 1,189.8 $ 1,030.3 $ 1,036.5 $ $ 766.2
Interdivision (71.0) (78.0) (64.9) (69.8) (60.1) (64.7)
Total sales $ 6,204.1 $ 6,205.8 $ 5,672.1 $ 4,868.9 $ 4,490.4 $ 4,286.8
Percent of Sales:
Campbell U.S.A % 63.4% 64.7% 63.6% 64.2% 67.9%
Campbell Canada
Pepperidge Farm
International Biscuit — — —
Campbell International
Interdivision (1.1) (1.3) (1.2) (1.4) (1.3) (1.5)
Total sales % % % % % % 2 2

6. Preliminary Financial Analysis
Case: Campbell Soup Co.
Preliminary Financial Analysis
Source: Annual Report 2 2

7. Preliminary Financial Analysis
Case: Campbell Soup Co.
Preliminary Financial Analysis
Source: Annual Report 2 2

8. Cash Flow Analysis and Forecasting
Case: Campbell Soup Co.
Cash Flow Analysis and Forecasting
Source: Annual Report 2 2

9. Preliminary Financial Analysis Income Statements (millions)
Case: Campbell Soup Co.
Preliminary Financial Analysis
Exhibit CC.2
CAMPBELL SOUP COMPANY
Income Statements (millions)
Year 11 Year 10 Year 9 Year 8 Year 7 Year 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 expenses
Administrative expenses
Research and development expenses
Interest expense
Interest income (26.0) (17.6) (38.3) (33.2) (29.5) (27.4)
Foreign exchange losses, net
Other expense (income) (3.2) (9.5) 5.5
Divestitures, restructuring, & unusual charges
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. $ $ $ $ $ $ 386.8
Equity in earnings of affiliates
Minority interests (7.2) (5.7) (5.3) (6.3) (4.7) (3.9)
Earnings before taxes $ $ $ $ $ $ 387.2
Taxes on earnings
Earnings before cumulative effect $ $ 4.4 $ 13.1 $ $ $ 223.2
Cumulative effect of change for taxes
Net earnings $ $ 4.4 $ 13.1 $ $ $ 223.2
Earnings per share $ 3.16 $ 0.03 $ 0.10 $ 2.12* $ 1.90 $ 1.72
Weighted-average shares outstanding $ $ 2 2

10. Preliminary Financial Analysis
Case: Campbell Soup Co.
Preliminary Financial Analysis
Exhibit CC.3
CAMPBELL SOUP COMPANY
Balance Sheets
Year11 Year 10 Year 9 Year 8 Year 7 Year 6
Assets
Current assets:
Cash and cash equivalents $ $ $ $ $ $
Other temporary investments
Accounts receivable
Inventories
Prepaid expenses
Total current assets $ 1, $ 1, $ 1, $ 1, $ 1, $ 1,334.80
Plant assets, net of depreciation $ 1, $ 1, $ 1, $ 1, $ 1, $ 1,168.10
Intangible assets, net of amortization — —
Other assets
Total assets $ 4, $ 4, $ 3, $ 3, $ 3, $ 2,762.80
Liabilities and Shareowners’ Equity
Current liabilities:
Notes payable $ $ $ $ $ $ 88.90
Payable to suppliers and others
Accrued liabilities
Dividend payable — — —
Accrued income taxes
Total current liabilities $ 1, $ 1, $ 1, $ $ $
Long-term debt $ $ $ $ $ $
Other liabilities, mainly deferred tax
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
Capital surplus
Earnings retained in the business 1, , , , , ,554.00
Capital stock in treasury, at cost (270.40) (107.20) (70.70) (75.20) (46.80) (48.40)
Cumulative translation adjustments (25.10)
Total shareowner’s equity $ 1, $ 1, $ 1, $ 1, $ 1, $ 1,538.90
Total liabilities and shareowners’ equity $ 4, $ 4, $ 3, $ 3, $ 3, $ 2,762.80 2 2

11. Case: Campbell Soup Co. Preliminary Financial Analysis Exhibit CC.4
CAMPBELL SOUP COMPANY
Statements of Cash Flows
For Years 6 to 11 ($ millions)
Year 11 Year 10 Year 9 Year 8 Year 7 Year 6 Total
Cash flows from operating activities:
Net earnings $ $ 4.4 $ 13.1 $ $ $ $ 1,163.6
To reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization ,044.1
Divestitures and restructuring provisions — — —
Deferred taxes (67.8)
Other, net
Cumulative effect of accounting change — — — (32.5) — — (32.5)
(Increase) decrease in accounts receivable (60.4) (46.8) (104.3) (36.3) (3.6) (234.3)
(Increase) decrease in inventories (113.2) (3.9)
Net change in other current assets and liabilities (68.8) (0.6)
Net cash provided by operating activities $ $ $ $ $ $ $ 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 assets —
Businesses acquired (180.1) (41.6) (135.8) (471.9) (7.3) (20.0) (856.7)
Sale of businesses —
Increase in other assets (57.8) (18.6) (107.0) (40.3) (50.1) (18.0) (291.8)
Net change in other temporary investments (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 $ $ 12.6 $ $ $ 4.8 $ $ 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) (20.7) (40.1)
Other short-term borrowings
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 issued † 85.1
Other, net (0.1) (0.1)
Net cash provided (used in) financing activities $ (219.6) $ (101.8) $ $ (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 equivalents (40.2) (59.2) (28.1)
Cash and cash equivalents at the beginning of year
Cash and cash equivalents at end of year $ $ 80.7 $ $ 85.8 $ $ $ 784.4 2 2

12. Case: Campbell Soup Co. Preliminary Financial Analysis Exhibit CC.5
CAMPBELL SOUP COMPANY
Five-Year Growth Rates*
Per share Years 6 to 11 Average for Average for [Years 6 to 8] to [Years 9 to 11 ]
Sales 8.09% 5.95%
Net income  
Dividends  
Equity    
Ten-Year Growth Rates*
Per share Years 1 to 11 Average for Average for [Years 1 to 3] to [Years 9 to 11 ]
Sales   8.51% 7.22%
Net income  
Dividends    
Equity     2 2

13. Preliminary Financial Analysis Common-Size Income Statements
Case: Campbell Soup Co.
Preliminary Financial Analysis
Exhibit CC.6
CAMPBELL SOUP COMPANY
Common-Size Income Statements
Year 11 Year 10 Year 9 Year 8 Year 7 Year 6
Net sales % % % % % %
Costs and expenses:
Cost of products sold % % % % % %
Marketing and selling expenses
Administrative expenses
Research and development expenses
Interest expense
Interest income (0.42) (0.28) (0.68) (0.68) (0.66) (0.64)
Foreign exchange losses, net
Other expense (income) (0.07) (0.21) Divestitures, restructuring & unusual charges — — —
Total costs and expenses % % % % % %
Earnings before equity in earnings of affiliates and minority interests % 2.77% 1.79% 7.98% 9.07% 9.02%
Equity in earnings of affiliates
Minority interests (0.12) (0.09) (0.09) (0.13) (0.10) (0.09)
Earnings before taxes % 2.89% 1.88% 7.98% 9.31% 9.03%
Taxes on earnings
Earnings before cumulative effect of accounting change 6.47% 0.07% 0.23% 4.96% 5.51% 5.21%
Cumulative effect of change in accounting for income taxes — — — — —
Net earnings 6.47% 0.07% 0.23% 5.63% 5.51% 5.21% 2 2

14. Preliminary Financial Analysis Common-Size Balance Sheets
Case: Campbell Soup Co.
Preliminary Financial Analysis
Exhibit CC.7
CAMPBELL SOUP COMPANY
Common-Size Balance Sheets
Year 11 Year 10 Year 9 Year 8 Year 7 Year 6 Industry Composite Year 11
Current assets:
Cash and cash equivalents 4.31% 1.96% 3.07% 2.38% 4.69% 5.61% 3.4%
Other temporary investments
Accounts receivable
Inventories
Prepaid expenses
Total current assets % % % % % % %
Plant assets, net of depreciation % % % % % % 21.0%
Intangible assets, net of amortization — —
Other assets
Total assets % % % % % % %
Current liabilities:
Notes payable 6.80% 4.92% 6.90% 3.82% 3.02% 3.22% 6.7%
Payable to suppliers and others
Accrued liabilities
Dividend payable — — —
Accrued income taxes
Total current liabilities % % % % % % %
Long-term debt % % % % % % 19.7%
Other liabilities, mainly deferred taxes
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
Capital surplus
Earnings retained in the business
Capital stock in treasury, at cost
Cumulative translation adjustments
Total shareowner’s equity % % % % % % %
Total liabilities and equity % % % % % % % 2 2

15. Case: Campbell Soup Co. Cash Flow Analysis and Forecasting
Exhibit CC.10
CAMPBELL SOUP COMPANY
Common-Size Statements of Cash Flows*
Year 11 Year 10 Year 9 Year 8 Year 7 Year 6 Total
Cash flows from operating activities:
Net earnings % 0.54% 1.15% 25.14% % % %
To reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization
Divestitures and restructuring provisions — — —
Deferred taxes (5.93)
Other, net
Cumulative effect of accounting change — — — (2.98) — — (0.60)
(Increase) decrease in accounts receivable (7.39) (4.09) (9.57) (5.64) (0.45) (4.34)
(Increase) decrease in inventories (9.90) (0.61)
Net change in other current assets & liabilities   (8.42)  (0.05)
Net cash provided by operating activities % % % 42.80% % % %
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 assets —
Businesses acquired (12.06) (5.09) (11.88) (43.28) (1.13) (2.50) (15.86)
Sale of businesses —
Increase in other assets (3.87) (2.28) (9.36) (3.70) (7.78) (2.25) (5.40)
Net change in other temporary investments  (9.43) (18.00)
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 borrowings % 1.54% % 9.45% 0.75% % %
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) (3.22) (0.74)
Other short-term borrowings
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 issued
Other, net  (0.01)   (0.01)
Net cash provided (used in) financing activities (14.71)% (12.46)% %  (4.84)% (13.72)%  (6.81)%  (6.55)%
Effect of exchange rate change on cash (0.58)% % (1.06)% (0.99)% (1.10)% (0.46)% (0.77)%
Net increase (decrease) in cash & equivalents (4.92) (5.43) (4.37) 2 2

16. Cash Flow Analysis and Forecasting
Case: Campbell Soup Co.
Cash Flow Analysis and Forecasting
Year 11 Year 10 Year 9 Year 8 Year 7 Year 6 Total
Operating activities $ $ $ $ $ $ $ 3,009.6
Investing activities (478.7) (387.5) (473.2) (462.2) (401.0) (387.6) (2,590.2)
Financing activities (219.6) (101.8) (163.1) (52.8) (88.3) (54.5) (353.9)
Increase (decrease) in cash (40.2) (59.2) (28.1) 2 2

17. Cash Flow Analysis and Forecasting
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 2 2

18. Preliminary Financial Analysis Trend Index of Selected Accounts
Case: Campbell Soup Co.
Preliminary Financial Analysis
Exhibit CC.8
CAMPBELL SOUP COMPANY
Trend Index of Selected Accounts
(Year 6 = 100)
Year 11 Year 10 Year 9 Year 8 Year 7 Year 6
Cash and cash equivalents 115% 52% 78% 55% 93% $ 155.1
Accounts receivable
Temporary investments
Inventory
Total current assets ,334.8
Total current liabilities
Working capital
Plant assets, net ,168.1
Other assets
Long-term debt
Total liabilities ,223.9
Shareowners’ equity ,538.9
Net sales ,268.8
Cost of products sold ,082.7
Admin. and research expenses
Marketing and sales expenses
Interest expense
Total costs and expenses ,900.0
Earnings before taxes
Net income * 6* 2 2

19. Case: Campbell Soup Co. Per Share Results Exhibit CC.9
CAMPBELL SOUP COMPANY
Per Share Results
Year 11 Year 10 Year 9 Year 8 Year 7 Year 6
Sales $ $47.88 $43.87 $ $ $ 33.10
Net income
Dividends
Book value
Average shares outstanding (mil.) 2 2

20. Short-term Liquidity Analysis Short-Term Liquidity Analysis
Case: Campbell Soup Co.
Short-term Liquidity Analysis
Exhibit CC.12
CAMPBELL SOUP COMPANY
Short-Term Liquidity Analysis
Units Measure Year 11 Year 10 Year 9 Year 8 Year 7 Year 6 Year 11
Industry Composite
 1. Ratio Current ratio
 2. Ratio Acid-test ratio
 3. Times Accounts receivable turnover
 4. Times Inventory turnover
 5. Days Days’ sales in receivables
 6. Days Days’ sales in inventory
 7. Days Approximate conversion period
 8. Percent Cash to current assets % 4.84% % 6.30% % % 5.60%
 9. Percent Cash to current liabilities % 6.22% % 9.94% % % 10.40%
10. Days Liquidity index
11. M$’s Working capital
12. Days Days’ purchases in accounts payable
13. Days Average net trade cycle
14. Percent CFO to average current liabilities % % % 60.22% % % 2 2

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 11 Year 10 Year 9 Year 8 Year 7 Year 6 Year 11
Industry
Composite
Current assets:
Cash and cash equivalents % 4.85% 7.55% 6.30% 10.09% 11.62% 5.60%
Other temporary investments —
Accounts receivable
Inventories
Prepaid expenses
Total current assets % % % % % % %
Current liabilities:
Notes payable % % % 15.99% 13.48% 14.20% %
Payable to suppliers and others
Accrued liabilities
Dividend payable — — — =48.32
Accrued income taxes
Total current liabilities % % % % % % % 2 2

22. Case: Campbell Soup Co. Inventory Data Exhibit CC.14
CAMPBELL SOUP COMPANY
Inventory Data ($ mil.)
Year 11 Year 10 Year 9 Year 8 Year 7 Year 6
1.Beginning inventory $ $ $ $ $ $ 623.1
2.Plus: production inputs 3, , , , , ,070.1
3.Goods available for sale $ 4,802.2 $ 5,078.0 $ 4,187.6 $ 4,057.5 $ 3,804.1 $ 3,693.2
4.Less: Ending inventory
5.Cost of products sold $ 4,095.5 $ 4,258.2 $ 4,001.6 $ 3,392.8 $ 3,180.5 $ 3,082.7
6.Depreciation $ $ $ $ $ $ 126.8
7.(2)  (6) = Purchases 3, , , , , ,943.3
8.(7)/360 = Purchases per day $ $ $ $ 9.06 $ 8.47 $ 8.18
Ending inventories:
Raw materials, containers, and supplies $ $ $ $ $ $ 340.4
Finished products
$ $ $ $ $ $ 688.5
Less: Adjustment of inventories to LIFO
Total ending inventories $ $ $ $ $ $ 610.5
Raw materials, containers, and supplies 43.0% 42.5% 42.6% 44.7% 47.3% 49.4%
Finished products  57.0   57.5   57.4   55.3     50.6
100.0% % % % % % 2 2

23. Inventory Data Using FIFO versus LIFO ($ mil.)
Case: Campbell Soup Co.
Inventory Data
Exhibit CC.15
CAMPBELL SOUP COMPANY
Inventory Data Using FIFO versus LIFO ($ mil.)
Year 11 Year 10 Year 9 Year 8 Year 7 Year 6
Beginning inventory $ $ $ $ $ $ 707.0
Production inputs (same as LIFO) 3, , , , , ,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 inventory
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 2 2

24. Capital Structure and Solvency Analysis of Capital Structure (mil.)
Case: Campbell Soup Co.
Capital Structure and Solvency
Exhibit CC.16
CAMPBELL SOUP COMPANY
Analysis of Capital Structure (mil.)
Year 11 Year 10 Year 9 Year 8 Year 7 Year 6
Long-term liabilities:
Notes payable $ $ $ $ $ $ 346.7
Capital lease obligation
Total long-term debt $ $ $ $ $ $ 362.3
Deferred income taxes*
Other long-term liabilities
Total long-term liabilities $ $ $ $ $ $ 478.2
Current liabilities† 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 interests
Deferred income taxes*
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 2 2

25. Capital Structure and Solvency
Case: Campbell Soup Co.
Capital Structure and Solvency
Source: Annual Report 2 2

26. Case: Campbell Soup Co. Capital Structure and Solvency Exhibit CC.17
CAMPBELL SOUP COMPANY
Common-Size Analysis of Capital Structure
Year 11 Year 10 Year 9 Year 8 Year 7 Year 6
Long-term liabilities:
Notes payable % % % % % %
Capital lease obligation
Total long-term debt % % % % % %
Deferred income taxes*
Other long-term liabilities
Total long-term liabilities % % % % % %
Current liabilities†
Total liabilities % % % % % %
Equity capital:
Common shareholders’ equity % % % % % %
Minority interests
Deferred income taxes*
Total equity capital % % % % % %
Total liabilities and equity % % % % % % 2 2

27. Capital Structure and Solvency Capital Structure and Solvency Ratios
Case: Campbell Soup Co.
Capital Structure and Solvency
Exhibit CC.18
CAMPBELL SOUP COMPANY
Capital Structure and Solvency Ratios
Year 11 Year 10 Year 9 Year 8 Year 7 Year 6 Year Industry Composite
1.Total debt to equity
2.Total debt ratio
3.Long-term debt to equity
4.Adjusted long-term debt to equity —
5.Equity to total debt
6.Fixed assets to equity
7.Current liabilities to total liabilities
8.Earnings to fixed charges —
9.Cash flow to fixed charges — 2 2

28. (CC.19) 2 2

29. Return on Invested Capital
Case: Campbell Soup Co.
Return on Invested Capital
Source: Annual Report 2 2

30. Asset Utilization Ratios
Case: Campbell Soup Co.
Asset Utilization
Exhibit CC.20
CAMPBELL SOUP COMPANY
Asset Utilization Ratios
Year 11 Year 10 Year 9 Year 8 Year 7 Year 6 Year Industry Composite
1.Sales to cash and equivalents
2.Sales to receivables
3.Sales to inventories
4.Sales to working capital
5.Sales to fixed assets
6.Sales to other assets*
7.Sales to total assets
8.Sales to short-term liabilities 2 2

31. Analysis of Profit Margin Ratios
Case: Campbell Soup Co.
Asset Utilization
Exhibit CC.21
CAMPBELL SOUP COMPANY
Analysis of Profit Margin Ratios
Profit margins Year 11 Year 10 Year 9 Year 8 Year 7 Year 6 Year 11
Industry Composite
1.Gross profit margin % % % % 29.17% % 29.30%
2.Operating profit margin % 4.69% 3.54% 9.09% 10.46% % —
3.Net profit margin 6.47% 0.07% 0.23% 5.63% 5.51% 5.21% 6.60% 2 2

32. Profitability Analysis
Case: Campbell Soup Co.
Profitability Analysis 2 2

33. Profitability Analysis Analysis of Depreciation
Case: Campbell Soup Co.
Profitability Analysis
Exhibit CC.22
CAMPBELL SOUP COMPANY
Analysis of Depreciation
Year 11 Year 10 Year 9 Year 8 Year 7 Year 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% 2 2

34. Profitability Analysis Analysis of Discretionary Expenditures ($ mil.)
Case: Campbell Soup Co.
Profitability Analysis
Exhibit CC.23
CAMPBELL SOUP COMPANY
Analysis of Discretionary Expenditures ($ mil.)
Year 11 Year 10 Year 9 Year 8 Year 7 Year 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, , , , ,
Maintenance and repairs
Advertising
Research & development (R&D)
Maintenance and repairs ÷ sales 2.8% 2.9% 3.1% 3.2% 3.3% 3.4%
Maintenance and repairs ÷ plant
Advertising ÷ sales
R&D ÷ sales 2 2

35. Forecasted Income Statement
Case: Campbell Soup Co.
Forecasted Income Statement
INCOME STATEMENT
Year 12
estimate
Year 11
Year 10
Year 9
Year 8
Year 7
Year 6
NET SALES
6514.3
6204.1
6205.8
5672.1
4868.9
4490.4
4286.8
COST OF GOODS
4494.9
4095.5
4258.2
4001.6
3392.8
3180.5
3082.7
GROSS PROFIT
2019.4
2108.6
1947.6
1670.5
1476.1
1309.9
1204.1
SELLING GENERAL & ADMINISTRATIVE EXPENSE
1385.2
1319.2
1324.9
1118.6
1012.8
884.9
782.5
INTEREST & OTHER EXPENSE
128.1
122.0
443.3
445.4
74.7
7.1
34.4
INCOME BEFORE TAX
506.2
667.4
179.4
106.5
388.6
417.9
387.2
INCOME TAX EXPENSE
201.7
265.9
175.0
93.4
147
170.6
164
CUMULATIVE EFFECT OF ACCOUNTING CHANGE
0.0
-32.5
NET INCOME
304.5
401.5
4.4
13.1
274.1
247.3
223.2
OUTSTANDING SHARES
127.0
126.6
129.3
129.9
129.5 2 2

36. Forecasted Balance Sheet
Case: Campbell Soup Co.
Forecasted Balance Sheet 2 2

37. Valuation of Common Stock
Case: Campbell Soup Co.
Valuation of Common Stock 2 2

38. Evaluations and Inferences
Case: Campbell Soup Co.
Evaluations and Inferences 2 2

39. Evaluations and Inferences
Case: Campbell Soup Co.
Evaluations and Inferences
Exhibit CC.28
CAMPBELL SOUP COMPANY
Market Measures
Year 11 Year 10* Year 9* Year 8 Year 7 Year 6
1.Price-to-earning (range) 27–14 26–18 29–12 16–11 19 –14 20–10
2.Price-to-book (range) 6.0– – – – – –1.5
3.Earnings yield 4.91% 4.53%  4.91%  7.45%  6.20%  6.61%
4.Dividend yield  1.74%  1.88%   2.08%  2.85%   2.32%   2.50%
5.Dividend payout ratio 35.44% 41.53% 42.45% 38.21% 37.37% 37.79% 2 2