The Financial Performance of Kraft and General Mills

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, ...

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...ls has excellent ratios for long-term debt and debt-equity, but has the same problems that Kraft has in cash flow. General Mills, on the other hand, has very little interest coverage and is more likely to teeter on the brink of having some long-term liquidity risk. This might be expected due to what seems to be fair amounts of growth and probably investment on General Mills’ part. Kraft’s long-term risk picture might seem a bit rosier because it has remained largely constant throughout our period of observation.
In analyzing these two companies. It is clear that both try to maximize profit, minimize cost, while maintaining costumer satisfaction. Both companies are in the food processing industry and are highly competitive with each other as well as with other competitors in the industry. Kraft and GM both are able to increase their abilities to use assets to generate earning each year. While General Mills makes better gains and maintains improvement in cost control, Kraft maintains a constant productivity from current assets. In general these two companies are successful and we may decisively conclude they will remain competitive within the industry.