Financial Accounting Case Study

Financial Accounting Case Study Industry Attributes Despite its large size and established market position, General Mills, like any other company, has to grapple with those factors that, if not properly addressed, could have a negative effect on performance. Market demand is one of those factors. In order to effectively address the issue of demand, the company has to determine and respond to two major demand-related issues. First, there is need to understand the factors influencing demand.

These include the prices of products, the availability and prices of substitutes produced by competitors, and government regulation - especially with regard to the promotion of healthy foods. Secondly, there is need to analyze the outlook of this demand in the near future. General Mills offers for sale a wide range of food items such as snacks.

The demand of these could fall significantly in future, mainly due to the government's effort to ensure a healthier nation by discouraging the consumption of the same, and promoting foods that are considered healthier. The company could use this kind of knowledge to seek out alternatives such as increasing their production of 'healthy' foods. General Mills is a major player in the cereal industry, not only in the U.S., but in the world over.

It controls a significant share of the market, and is only second to Kellogg in the U.S. (Hoovers, 2013). General Mills also operates in one of the most dynamic industries. Each company in the industry strives to increase its market share. This manly entails introducing new products, or incorporating new and healthier components such as whole grains into existing products, in line with consumer trends (General Mills, 2013). New or improved products are, therefore, a common phenomenon in the cereal-making industry.

General Mills, for instance, introduced a range of new items this year, including Yoplait Greek Yoghurt, Medley Crunch cereal, Nature Valley protein bars, to mention but a few (General Mills, 2013). Asset Management From the look of things, General Mills is a capital intensive company. This is particularly the case given that its long-lived assets constitute 81% of its total assets. It is important to note that between the financial years 2012 and 2013, the long-lived assets figure increased from $17,405 million to $18,360 million respectively.

More specifically, the value of land, buildings, and equipment increased from $3,691 million in 2012 to $3,878 million in 2013. This is in itself an indicator of a major increase in asset structure. During the same period, the company's fixed asset turnover ratio decreased from 4.76 in 2012 to 4.72 in 2013.

In the words of Weil (2012, p.230), "the fixed asset turnover ratio measures the relation between sales and the investment in fixed assets -- property, plant and equipment." In that regard therefore, it is clear that General Mills' ability to make use of its fixed asset investments to generate net sales decreased within the period under consideration. The company is not making effective use of the assets it acquired. During the most recent financial period, the company had goodwill of $8,622 million.

A fortune 500 company, General Mills is a manufacturer of well-known brands. These include but they are not limited to Old El Paso, Green Giant, and Betty Crocker. These are not recorded on the company's balance sheet. Stock Price At the time of writing, General Mills' stock (represented by the ticker GIS) was going for $49.57. It is important to note that, save for the occasional slumps in price, over the last three years, General Mills stock value has been on an upward trend. At the close of the year 2010 (i.e.

Dec 31st 2010), General Mills stock was trading at $35.59. For the years 2011 and 2012 respectively, the company closed the year with shares valued at $40.41 and $40.06 respectively (Google Finance, 2013). Hence between 2010 and 2013, General Mills' stock grew by 39.28% while that of the S&P composite index grew.