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Khoa Huynh Professor LaRosa Samantha Schoenberg Business 101 October 30, 2009
CONTENTS
I. Company Profile
A) B) C)
1 2
12
V. VI.
Company Profile
Company Name: Chairman: James Jenness CEO and President: David Mackay Location: Battle Creek, MI, United States Industry: Food Processing Products: Baking products, beverages, cereal, cookies, crackers, eggo, frozen breakfast, fruit flavored snacks, pop tarts, snack and bars, special K, syrup, and vegetarian. Stock Ticker: (NYSE: K)
Interpretive Analysis
Liquidity
Liquidity is one of Kelloggs fundamental strength. Liquidity is a business ability to turn assets into cash to meet all of its payment obligations. Kelloggs experienced an increase in liquidity from 2007 to 2008. In 2008, based on current ratio where figures are found on the annual report, Kelloggs has a liquidity of .71X compared to 2007, .67X. This mean for every $1.00 that Kellogg had in current liabilities, the company had $0.71 of current assets in 2008 on hand and $0.67 of current assets in 2007 on hand. By borrowing money for major acquisition and other significant transaction, Kellogg used that as their main source of liquidity. This will allow them to invest more in their company; either in inventory, employees, or pay back some of their long term debts. Short term, the company can access new capital and manage working capital requirements to strengthen their cash flow.
Return on Assets
Return on Assets shows how much income a company produces for every dollar invested in assets. Kelloggs experienced an increase in Return on Assets from 2007 to 2008. In 2008, Kelloggs Return on assets shows 10.5% compare to 2007, 9.7%. This increase in Return on Assets shows that the company is using their assets more effectively than in the previous year. For example, the inventory (assets) slot in the financial data chart show that Kellogg is spending less money on inventory in 2008 than in 2007. However they are making more money in sales in 2008 than in 2007. Using the Inventory Turnover ratio, it was determine that in 2008, Kellogg is cycling through their inventory 14 times a year. This is one more cycle than in 2007, this mean they are producing more products (assets) and also getting rid of it faster. If Kelloggs continues to show a higher percentage in ROA, Kelloggs can reduce its long term debt. As far as short-term performance, Kelloggs can invest in more assets to meet demands.
the company financial health, performance, and management decision making is good, it should be positively correlated to the earnings of each stock. Kelloggs is definitely making better decisions because their stock has risen from $2.63 in 2007 to $2.74 in 2008.
Recommendation
I would buy and advise clients who arent looking for immediate profit but intentions are long term investment to buy this stock based on the compiled data from the annual report and ratio analysis. Although Kellogg profit margin is lower in 2008 than the previous year, there are other important aspects to focus on like the earning per share and the dividends per share. Kellogg earnings and dividends are higher in 2008 than in 2007. This shows that Kellogg stock is steadily continuing to increase in value. Other ratios give insight to how the well the company is operating. Kellogg is definitely doing well in other aspect other than the profit margin.
Work Cited
"Coco." Kelloggs. Web. 29 Oct 2009. <http://www.kelloggcompany.com/ServeBinaryImage.aspx>. "Cookies." Kelloggs. Web. 29 Oct 2009. <http://www.kelloggcompany.com/ServeBinaryImage.aspx>. "Flakes." Kelloggs. Web. 29 Oct 2009. <http://www.kelloggcompany.com/ServeBinaryImage.aspx>. "Kelloggs." Marlerblog. Web. 20 Oct 2009. <http://www.marlerblog.com/uploads/image/Kellogg%27s.jpg>. "Rice Krispies." milton train works. Web. 29 Oct 2009. <http://www.miltontrainworks.com/MTW/services/KCC/images/K_group-scp.jpg>. McGraw-Hill, Irwin. Accounting and Financial Statement. M. New York : McGraw-Hill Companies Inc., 2009. 299-320. Print. Murray, Barbara. "Hoovers." Kelloggs. Hoovers, Web. 21 Oct 2009. <http://www.hoovers.com/kellogg/--ID__10841--/free-co-factsheet.xhtml>. "Smack Frog." Gremlin Dog. Web. 29 Oct 2009. <http://gremlindog.com/wordpress/wpcontent/uploads/2008/10/dig-em-frog.gif>. "Special K." Tampa Bay Run. Web. 29 Oct 2009. <http://www.tampabayrun.com/Assets/Sponsor+Logos/Special+K.jpg>. "Sun Torch." Kellogg's. Web. 29 Oct 2009. <http://www2.kelloggs.com/>.
"Tony The Tiger." Static. Web. 29 Oct 2009. . <http://static.squidoo.com/resize/squidoo_images/1/draft_lens4504432module320504 52photo_1242749720Tiger__Kellogs_Tony_the_Tiger_- _xavi_pinas.jpg>. "Toucan Sam." Blog Spot. Web. 29 Oct 2009. <http://1.bp.blogspot.com/_XS7hxgm1w8M/SRKzoKkUPyI/AAAAAAAAC44/U7wr 0Bd7.SM/s400/0toucan_sam.jpg>.