Financial diagnostic Chosen company Benchmark competitor KELLOGG\'S GENERAL MILL

Question

Financial diagnostic Chosen company Benchmark competitor KELLOGG'S GENERAL MILLS 1.) Liquidity of short-term assets I-Current tatic.. -Current ratio 0.76 -Cash ratio 166.2 -Quick ratio 0.68 -Cash ratio 0.06 -Quick ratio 0.37 0.86 -Debt-equity atio 6.33 Times interest earned 7.39 2.) Long-term debt-payingDebt ratio ability -Debt ratio 0.75 -Debt-equity ratio 4.00 Times interest earned 0.56 3.) Profitability -Net income/sales (profit margin9.8Net income/sales (profit margin) 10.62 -Net income/assets (ROA·0.078 -Net income assets (ROA) 0.072 0.57 eauitk ROE) 0.38 4.) Asset utilization/ management efficiency Total asset turnover 0.68 Total asset turnover 0.79 -Inventory turnover measures 5.8 Accounts receivable turnover 9.30 Inventory turnover measures. 21.10 Accounts receivable turnover 19.16 5.) Market measures -Price earnings ratio 18.72 -Earnings per common share 3.65 -Dividend payout 0.58 -Price earnings ratio 20.93 Earnings per common share 0.0028 -Dividend payout 0.68

Explanation / Answer

1. Kellogs' cash ratio is very low (0.06) which means that they have very limited ability to meet their short terms obligations

2. Its debt ratio is 0.8 and debt to equity ratio is 6.33 which means that company has substancial amount of debt in their books but at the same time its Time interest earned is really good which means company is not facing any issues in meeting its debt obligations

3. Profitability is also good for Kellogs and it is almost similar to benchmark

4. Asset utilization ratios are not good when compared to the benchmark. Kellogs inventory turnover and account receivable are not good compared to benchmark

5. P/E is little lower than the benchmark but EPS is much better than the same.

I think it is early to say that it is a good stock. We should observe this stock for a little more time and then make any decision

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