Kraft And Genarl Mills Finance Anlysis

INTRODUCTION TO ACCOUNTING & FINANCE

In this report, we will analyze the financial performance of two companies: Kraft and General Mills. They are global consumer foods companies that develop different packaged food products. The main goals of these companies are to meet consumers' needs and preferences while generating superior returns by delivering consistent growth in sales and earnings, coupled with an attractive dividend yield. This report shows how each company meets their goals and which one is in better standing.

The report will give an overview of each company, an explanation of what type of companies we are analyzing, the purpose of each company in terms of its goals and objectives, the products and services each company produces, and what future prospects we see these companies having. The reader should gain an understanding of each company as well. We also analyze the type of industry these companies are competing in. This will help us understand where each company fits in the marketplace. This is important because it places the two companies into a broader picture. The most important part of the financial report is the financial statement analysis. In this, the annual report of each company was analyzed. It studies the firms' past earnings to understand their operating performances. It also forecasts future profitability and risk (short-term and long term). The financial statements give information on how these risks affect expected return. In the end, the reader will have an understanding of the two companies, the industry in which they operate, its financial standing in the past and present, and future profitability.

The food processing Industry is an extremely competitive environment. Consumers have wide variety of choices, which makes it extremely important for the producers to be responsive to quick shifts in consumption patterns. Some of the main competitors in this industry are Campbell's Soup, PepsiCo, Interstate Bakery, General Mills, and Kraft.

Kraft Foods is the largest brand food and beverage company with headquarters in North America and it is the second largest in the world. In the US, it's best known for its cheese products, especially Kraft Dinner, and Dairylea. Other brands with a large presence in various parts of the world are Toblerone, Philadelphia, Velveeta, Nabisco, Maxwell House, Oscar Mayer, Jello, Kool-Aid and Capri Sun. Kraft Foods employs over 100,000 people in 68 countries worldwide. Kraft Foods has 197 manufacturing facilities worldwide.

Kraft Foods has several strategies for long-term success: building superior brand value, transforming their portfolio, expanding the global scale of the business, and driving out cost and assets. More product benefits means innovative packaging, consistent high quality, wide availability, and strong brand images. This way they can shift their product portfolio accordingly. In terms of global expansion, Kraft Foods is developing business in many international markets while concentrating especially on the fastest growing developing market around the world.

General Mills is an international company, similar to Kraft, in the food processing industry. The brands General Mills sells include Betty Crocker, Haagen Dazs, Nestle, Yoplait, and Pillsbury. In 1990, Cereal Partners Worldwide was started by General Mills and Nestle as a joint venture to market breakfast cereals for Europe and America. The cereals that are distributed by Cereal Partners Worldwide are manufactured by both companies under the Nestle brand. General Mills merged with Pillsbury in 2001 so General Mills now manufactures many of the products that carry the Pillsbury name.

In analyzing each company in itself, and against the other, we would most instantly benefit from acknowledging trends. These trends can be found on the left side of the attached list of calculated ratios. The terms "peak" and "dip" refer to ratios that noticeably peaked or dipped in 2002 with respect to 2001 and 2003. Seemingly random movement of a specific ratio from year to year earned a "Ð'--" notation. From this initial comparison, Kraft seems much more sporadic and/or static from year to year. General Mills, on the other hand, follows clear financial trends in our window of observation.

On a most general level, both companies were able to increase their abilities to use assets to generate earnings each year, but with General Mills making better gains. For both companies, the profit margin ratio (for ROA) changed in tune with the actual ROA. This seems to indicate that the improvements in ROA were generally related to improvements in cost control. General Mills, though, got a boost from improved output from existing assets (as indicated in the total assets turnover ratio). Kraft maintained a constant productivity from current assets. One possible explanation for this might be found in the number of days