Refer to the income statements for Kelloggs and General Mills reproduced at the end of the book.
1. Which is the largest expense for each company in the most recent year? What is its dollar amount? Is it logical that this would be the largest expense given the nature of each companys business? Explain your answer.
2. One of the accounts on each companys income statement is ?oSelling, general and administrative expense.?? For each of the two most recent years, compute the ratio of this expense to net sales for each company. Did this ratio increase or decrease from one year to the next? Which company has the lower ratio in each of the two years?
3. Compute the ratio of income taxes to income (earnings) before taxes (use ?oEarnings before Income Taxes and After-tax Earnings from Joint Ventures?? for General Mills) for the two most recent years for each company. Is the ratio the same for Kelloggs for both years? Is the ratio the same for General Mills for both years? Which company has the higher ratio for each of the two years?