1 Analyzing the Financial Health of 3M Company There are several relevant economic theories that can be used to better understand what has helped transform 3M Company into a successful multibillion dollar business, one of which is demand-side economics. This is a theory that argues that economic growth is best created by a high demand for products and services. In the case of 3M, the company has experienced significant growth since it was founded 115 years ago because of the existing demand for its products. If there were no demand for items like abrasives, adhesives, laminates, fire protection, and so on, then there would be no macroeconomic growth. If there were no macroeconomic growth, then there would be little microeconomic growth either, and 3M would suffer as a result of there being little demand for its products. To analyze the company’s financial figures, I first needed to access the raw annual data that was provided through the company’s income statements. I did this by using the website Stock Analysis on Net, which provides annual data for the past five years. I was able to then export this data to Excel and calculate the different margins and ratios using a variety of formulas that interacted with the data. Having this raw data in Excel form made it easy to create the necessary formulas and then apply them to each year because I could simply calculate a ratio once and then apply the formula to the remaining years in the income statement. I was able to determine the adjusted current ratio by dividing the adjusted current assets by the adjusted current liabilities. This figure is similar to the quick ratio in the sense that assets are being compared to liabilities and a higher ratio is going to indicate the company is in a better position. From 2008 to 2017, 3M company had an adjusted current ratio that ranged from 1.54 to 2.25. Its peak ratio of 2.25 was achieved during 2011 when it had $12.240 billion in adjusted current assets and $5.441 billion in adjusted current liabilities. To find the quick ratio, I divided the total quick assets by the current liabilities. From 2010 to 2017, 3M Company had a quick ratio of 0.85 to 1.39 with the quick ratio being at a low point in 2015 and a high point in 2011 and 2012. The quick ratio can be used to measure how well a company can fulfill its short-term financial liabilities, so a larger quick ratio is better. If the quick ratio is under 1.0, this indicates the company has more current liabilities than quick assets. This was the case in 2015 when the company had $6.070 billion in assets and $7.118 in liabilities giving it a quick ratio of 0.85. The low point was a result of the company having a smaller than usual amount of cash and cash equivalents and marketable securities with $1.798 billion in cash and $118 million in securities. In terms of working capital turnover ratio, I was able to find this figure by dividing the net sales by working capital. From 2011 to 2017, 3M Company ha ...

1. 1
Analyzing the Financial Health of 3M Company
There are several relevant economic theories that can be used to
better understand what has helped transform 3M Company into
a successful multibillion dollar business, one of which is
demand-side economics. This is a theory that argues that
economic growth is best created by a high demand for products
and services. In the case of 3M, the company has experienced
significant growth since it was founded 115 years ago because
of the existing demand for its products. If there were no demand
for items like abrasives, adhesives, laminates, fire protection,
and so on, then there would be no macroeconomic growth. If
there were no macroeconomic growth, then there would be little
microeconomic growth either, and 3M would suffer as a result
of there being little demand for its products.
To analyze the company’s financial figures, I first needed to
access the raw annual data that was provided through the
company’s income statements. I did this by using the website
Stock Analysis on Net, which provides annual data for the past
five years. I was able to then export this data to Excel and
calculate the different margins and ratios using a variety of
formulas that interacted with the data. Having this raw data in
Excel form made it easy to create the necessary formulas and
then apply them to each year because I could simply calculate a
ratio once and then apply the formula to the remaining years in
the income statement.
I was able to determine the adjusted current ratio by
dividing the adjusted current assets by the adjusted current
liabilities. This figure is similar to the quick ratio in the sense
that assets are being compared to liabilities and a higher ratio is
going to indicate the company is in a better position. From 2008

2. to 2017, 3M company had an adjusted current ratio that ranged
from 1.54 to 2.25. Its peak ratio of 2.25 was achieved during
2011 when it had $12.240 billion in adjusted current assets and
$5.441 billion in adjusted current liabilities.
To find the quick ratio, I divided the total quick assets by
the current liabilities. From 2010 to 2017, 3M Company had a
quick ratio of 0.85 to 1.39 with the quick ratio being at a low
point in 2015 and a high point in 2011 and 2012. The quick
ratio can be used to measure how well a company can fulfill its
short-term financial liabilities, so a larger quick ratio is better.
If the quick ratio is under 1.0, this indicates the company has
more current liabilities than quick assets. This was the case in
2015 when the company had $6.070 billion in assets and $7.118
in liabilities giving it a quick ratio of 0.85. The low point was a
result of the company having a smaller than usual amount of
cash and cash equivalents and marketable securities with $1.798
billion in cash and $118 million in securities.
In terms of working capital turnover ratio, I was able to
find this figure by dividing the net sales by working capital.
From 2011 to 2017, 3M Company had a working capital
turnover ratio between 4.02 and 7.83, with 2015 being the peak
year and 2012 seeing the smallest ratio. The point of the
working capital turnover ratio is to determine how effective a
company is at using its working capital, so the higher this ratio
is, the better. It seems that 2015 was a particularly good year
for 3M because they were able to raise $30.274 billion in net
sales with just $3.868 billion in working capital.
Next, I was able to calculate ROA by dividing the net
working capital by total assets. From 2011 to 2017, 3M
Company had an ROA that ranged from 13.57% to 15.35%.
These higher percentages are better because they indicate that
the company was able to get a higher return on its assets by
achieving a higher net income. Additionally, I was able to
calculate adjusted ROA by adding by interest expense adjusted
for tax effects to net income. This resulted in slightly different
ROA percentages, but only by a few tenths of a percent. Then, I

3. calculated ROE by dividing net income by the average
stockholders’ equity. I also calculated adjusted ROE by taking
deferred taxes into account. This resulted in ROE figures
ranging from 26.94% to 47.49% for ROE and 25.29% to 49.04%
for adjusted ROE. Since 3M would benefit from having a higher
return on equity, it wants to do everything in its power to get
this figure as close to 100% as possible.
As for net profit margin and adjusted net profit margin, I
was able to calculate this figure by dividing net income by sales
and then factoring in adjustments due to deferred taxes. For the
original net profit margin, 3M Company had percentages
ranging from 13.57% to 15.35% and then 14.46% to 16.76% for
adjusted net profit margin. Higher net profit margins are going
to be better because they indicate that there is more revenue left
over after expenses have been deducted out of sales. If a
company’s net profit margins are below 0%, this indicates they
are not profitable. What is good is that 3M Company has never
slipped below double-digit net profit margin percentages and
has been consistent in bringing in billions of dollars of profits.
Other items I analyzed include activity analysis ratios,
capital structure analysis ratios, and capital market analysis
ratios. For instance, I calculated total asset turnover and
adjusted total asset turnover by dividing sales by average total
assets. Inventory turnover ratios were also calculated by
dividing the cost of goods sold by the average inventories. The
same was done through account receivables turnover ratios by
dividing sales by the average accounts receivable. I found
interest coverage by dividing income before interest and income
tax by interest expense. I then calculated the debt to capital
ratios by dividing total liabilities by total stockholders’ equity.
Finally, I found the P/E ratio by dividing the market price of
common stock per share by the earnings per share. The dividend
payout ratio was calculated by dividing cash dividends by net
income.
Another business whose data can be compared to 3M’s is
Honeywell International Inc. Honeywell is another

4. multinational conglomerate that specializes in engineering and
manufacturing consumer products. With a revenue of over $40
billion as of 2017 and an operating income of $6.9 billion,
Honeywell is somewhat larger than 3M and also has around
30,000 more employees. Some of the key ratios for Honeywell
include its operating margin of 17.64, net margin of 4.08, asset
turnover ratio of 0.71, return on assets percentage of 2.92,
return on equity percentage of 9.03, and return on invested
capital percentage of 4.99. Each of these figures comes from
2017, and it seems that 2017 was a bit of an unusual year for
Honeywell because prior years saw its ratios as much higher
with an ROE of 25.54% in 2016 and an ROA of 9.30% in 2016.
So in 2017 alone, 3M seems to have come out ahead due to its
healthier ratios, but on a long-term basis, Honeywell is the more
financially sound company.
These findings are important because they help to reveal
important financial figures about 3M Company that are relevant
to investors and potential business partners. Without analyzing
a company’s financial figures, it would be impossible to
determine the financial health of the company and make
accurate predictions about the company’s projected path. There
is no single data point that rises above the rest in terms of
importance either. Instead, investors and those willing to
provide financial services to 3M Company need to examine
every bit of information to get a clearer picture on the overall
health of the company. This is why it is crucial to take the raw
data from the company’s financial reports and analyze it by
putting it into ratios and margins to get a better understanding
of the company’s financial status.
Research Summary 2
Conduct a literature search for content and articles from
reputable online sources, including Web pages and article
databases (HU Library and others) for a discussion on the
following topics:
1. What are the possible business strategies for healthcare

5. organizations?
· Hospitals
· Clinics
· Private practice
· Pharmacies
· Insurance companies
· Other?
2. Can the strategies discovered for organizations in #2 above
be extended for telehealth?
· What are some viable business strategies for telehealth
enterprises?
· What are the barriers faced by telehealth strategy?
3. What are the possible organizational strategies for telehealth?
That is, how can existing or potential healthcare enterprises
organize (structurally), i.e., with regard to physical and
geographical locations, organizational form (hierarchical,
matrix, etc.), types of work, processes, etc?
4. What are the possibilities for IT strategy for telehealth?
· What generic technologies are available (Web, networking,
etc.)?
· What specific technologies are available?
· What technologies are needed?
Address each of the above issues (each major numbered item)
through a concise narrative of one-half page to one page.
Below your narrative, list the full citation for each source used.
If the source is a Web page, provide a properly cited URL
source. Provide a PDF version of each source article (exclude
Web sources) found. You may use a .zip file to upload the
collection of sources if necessary.
Adjusted Current Ratio3M Co., Adjusted Current RatioDec 31,
2017Dec 31, 2016Dec 31, 2015Dec 31, 2014Dec 31, 2013Dec
31, 2012Dec 31, 2011Dec 30, 2010Dec 30, 2009Dec 30, 2008As
ReportedCurrent assets (USD $ in
millions)14,27711,72610,98611,76512,73313,64012,24012,2151
0,7959,598Current liabilities (USD $ in

6. millions)7,6876,2197,1185,9987,4986,2005,4416,0894,8975,839
Current
ratio1.861.891.542.061.702.202.252.012.201.64Adjusted for
Deferred TaxesAdjusted current assets (USD $ in
millions)14,27711,72610,98611,76512,73313,64012,24012,2151
0,7959,598Adjusted current liabilities (USD $ in
millions)7,6876,2197,1185,9987,4986,2005,4416,0894,8975,839
Adjusted current
ratio1.861.891.541.961.702.202.252.012.201.64
Quick Ratio3M Co., Quick RatioDec 31, 2017Dec 31, 2016Dec
31, 2015Dec 31, 2014Dec 31, 2013Dec 31, 2012Dec 31,
2011Dec 31, 2010Dec 31, 2009Dec 31, 2008Selected Financial
Data (USD $ in millions)Cash and cash
equivalents3,0532,3981,7981,8972,5812,8832,2193,3773,0401,8
49Marketable securities,
current1,0762801181,4397561,6481,4611,101744373Accounts
receivable, net of
allowances4,9114,3924,1544,2384,2534,0613,8673,6153,2503,1
95Total quick
assets9,0407,0706,0707,5747,5908,5927,5478,0937,0345,417Cu
rrent
liabilities7,6876,2197,1185,9647,4986,2005,4416,0894,8975,83
9RatioQuick
ratio1.181.140.851.271.011.391.391.331.440.93Quick ratio =
Total quick assets ÷ Current liabilities= 9,040 ÷ 7,687 = 1.18
Working Capital Turnover3M Co., Working Capital
TurnoverDec 31, 2017Dec 31, 2016Dec 31, 2015Dec 31,
2014Dec 31, 2013Dec 31, 2012Dec 31, 2011Selected Financial
Data (USD $ in millions)Current
assets14,27711,72610,98612,30312,73313,63012,240Less:
Current
liabilities7,6876,2197,1185,9647,4986,2005,441Working
capital6,5905,5073,8686,3395,2357,4306,799Net
sales31,65730,10930,27431,82130,87129,90429,611RatioWorki
ng capital turnover4.805.477.835.025.904.024.36

7. Adjusted Total Asset Turnover3M Co., Adjusted Total Asset
TurnoverDec 31, 2017Dec 31, 2016Dec 31, 2015Dec 31,
2014Dec 31, 2013Dec 31, 2012Dec 31, 2011Dec 31, 2010Dec
31, 2009Dec 31, 2008As ReportedNet sales (USD $ in
millions)31,65730,10930,27431,82130,87129,90429,611Total
assets (USD $ in
millions)37,98732,90632,71831,26933,55033,87631,616Total
asset turnover0.901.000.980.980.850.910.92Adjusted for
Deferred TaxesNet sales (USD $ in
millions)31,65730,10930,27431,82130,87129,90429,611Adjuste
d total assets (USD $ in
millions)37,47632,48432,20829,93632,68833,87631,616Adjuste
d total asset turnover0.840.930.941.060.940.880.94
Inventory Turnover ratio3M Co., Inventory TurnoverDec 31,
2017Dec 31, 2016Dec 31, 2015Dec 31, 2014Dec 31, 2013Dec
31, 2012Dec 31, 2011Selected Financial Data (USD $ in
millions)Cost of
sales16,00115,04015,34316,44716,10615,68515,693Inventories
4,0343,3853,5183,7063,8643,8373,416RatioInventory
turnover3.974.444.364.444.174.094.59Inventory turnover =
Cost of sales ÷ Inventories= 16,001 ÷ 4,034 = 3.97
Account Receivables Turnover3M Co., Receivables
TurnoverDec 31, 2017Dec 31, 2016Dec 31, 2015Dec 31,
2014Dec 31, 2013Dec 31, 2012Dec 31, 2011Selected Financial
Data (USD $ in millions)Net
sales31,65730,10930,27431,82130,87129,90429,611Accounts
receivable, net of
allowances4,9114,3924,1544,2384,2534,0613,867RatioReceivab
les turnover6.456.867.297.517.267.367.66Receivables turnover
= Net sales ÷ Accounts receivable, net of allowances= 31,657 ÷
4,911 = 6.45
Return on Assets3M Co., Adjusted Return on Assets (ROA)Dec
31, 2017Dec 31, 2016Dec 31, 2015Dec 31, 2014Dec 31,
2013Dec 31, 2012Dec 31, 2011As ReportedNet income
attributable to 3M (USD $ in

8. millions)4,8585,0504,8334,9564,6594,4444,283Total assets
(USD $ in
millions)37,98732,90632,88331,20933,55033,87631,616ROA13.
71%15.35%15.08%15.31%13.82%13.57%13.87%Adjusted for
Deferred TaxesNet income attributable to 3M (USD $ in
millions)4,8585,0504,8334,9564,6594,4444,283Total assets
(USD $ in
millions)37,98732,90632,88331,20933,55033,87631,616Adjuste
d ROA12.79%15.35%14.70%15.88%13.89%13.12%13.55%
Return on Equity3M Co., Adjusted Return on Equity (ROE)Dec
31, 2017Dec 31, 2016Dec 31, 2015Dec 31, 2014Dec 31,
2013Dec 31, 2012Dec 31, 2011As ReportedNet income
attributable to 3M (USD $ in
millions)4,8585,0504,8334,9564,6594,4444,283Total 3M
Company shareholders' equity (USD $ in
millions)11,56310,29811,42913,10917,50217,57515,420ROE46.
49%39.39%32.38%26.56%26.94%27.56%28.74%Adjusted for
Deferred TaxesAdjusted net income attributable to 3M (USD $
in millions)4,8585,0504,8334,9564,6594,4444,283Adjusted
total 3M Company shareholders' equity (USD $ in
millions)11,56310,29811,42913,10917,50217,57515,420Adjuste
d ROE42.01%49.04%42.29%37.81%26.62%25.29%27.78%
Net Profit Margin3M Co., Adjusted Net Profit MarginDec 31,
2017Dec 31, 2016Dec 31, 2015Dec 31, 2014Dec 31, 2013Dec
31, 2012Dec 31, 2011Dec 31, 2010Dec 31, 2009As ReportedNet
income attributable to 3M (USD $ in
millions)4,8585,0504,8334,9564,6594,4444,2834,0853,193Net
sales (USD $ in
millions)31,65730,10930,27431,82130,87129,90429,611Net
profit
margin13.71%15.35%15.08%15.31%13.82%13.57%13.87%Adju
sted for Deferred TaxesAdjusted net income attributable to 3M
(USD $ in
millions)5,1115,0454,8104,7654,5604,4444,2834,0853,193Net
sales (USD $ in
millions)31,65730,10930,27431,82130,87129,90429,611Adjuste

9. d net profit
margin16.14%16.76%15.89%14.97%14.77%14.86%14.46%
PE & EPS3M Co., Price to Earnings (P/E)Dec 31, 2017Dec 31,
2016Dec 31, 2015Dec 31, 2014Dec 31, 2013Dec 31, 2012Dec
31, 2011No. shares of common stock
outstanding595597609635663687695Selected Financial Data
(USD $)Net income attributable to 3M (in
millions)4,8585,0504,8334,9564,6594,4444,283Earnings per
share
(EPS)8.16607833258.46321434567.93205317587.80349551257.
02397105386.46776306216.1625899281Share
price222.89178.18150.67165.91130.14102.7887.65RatioP/E
ratio27.2921.0519.0021.2618.5315.8914.22
Dividend Payout Ratio3M Co., Dividend Payout RatioDec 31,
2017Dec 31, 2016Dec 31, 2015Dec 31, 2014Dec 31, 2013Dec
31, 2012Dec 31, 2011Selected Financial Data (USD $)Total
Cash Common
Dividends2,8032,6782,5652,2201,7321,6381,559Net
Income4,8585,0504,8334,9564,6594,4444,283Dividend Payout
Ratio0.580.530.530.450.370.370.36
ROA3M Co., Dividend Payout RatioDec 31, 2017Dec 31,
2016Dec 31, 2015Dec 31, 2014Dec 31, 2013Dec 31, 2012Dec
31, 2011Selected Financial Data (USD $)Profit
Margin16.14%16.76%15.89%14.97%14.77%14.86%14.46%Asse
ts Turnover
Ratio0.840.930.941.060.940.880.94ROA0.140.160.150.160.140.
130.14ROA = Profit Margin * Assets Turnover Ratio
Interest Coverage3M Co., Interest CoverageDec 31, 2017Dec
31, 2016Dec 31, 2015Dec 31, 2014Dec 31, 2013Dec 31,
2012Dec 31, 2011Selected Financial Data (USD $ in
millions)Net income attributable to
3M4,8585,0504,8334,9564,6594,4444,283Add: Net income
attributable to noncontrolling interest118842626774Add:
Income tax expense2,6791,9951,9822,0281,8411,8401,674Add:

10. Interest expense322199149142145171186Earnings before
interest and tax
(EBIT)7,8707,2526,9727,1686,7076,5226,217RatioInterest
coverage24.4436.4446.7950.4846.2638.1433.42 Interest
coverage = EBIT ÷ Interest expense
= 7,870 ÷ 322 = 24.44
Debt to Capital3M Co., Debt to CapitalDec 31, 2017Dec 31,
2016Dec 31, 2015Dec 31, 2014Dec 31, 2013Dec 31, 2012Dec
31, 2011Selected Financial Data (USD $ in millions)Short-term
borrowings and current portion of long-term
debt1,8539722,0441061,6831,085682Long-term debt, excluding
current portion12,09610,6788,7536,7054,3264,9164,484Capital
lease obligations60454659585858Total
debt14,00911,69510,8436,8706,0676,0595,224Total 3M
Company shareholders'
equity11,56310,29811,70813,10917,50217,50217,502Total
capital25,57221,99322,55119,97923,56923,56122,726RatioDebt
to capital0.550.530.480.340.260.260.23Debt to capital = Total
debt ÷ Total capital
= 14,009 ÷ 25,572 = 0.55