Procter & Gamble Financial Ratios

Topics: Balance sheet, Financial ratio, Generally Accepted Accounting Principles Pages: 6 (1648 words) Published: December 17, 2009
The financial statements of proctor & Gamble can be found in the annual report. But what these numbers really mean can be found by the use of ratios. In order to give you a more in depth analysis of Proctor & Gamble’s financial position we used several ratios.

Activity ratios. These ratios measure whether a company is able to convert account within their balance sheet into cash. Showing us how fast a company can generate into cash and thus sales and ultimately more revenue. We used four ratios.

Accounts Receivable Turnover (AR)( Net sales ( Average Accounts Receivable A ratio that how quickly customers are paying your business back..

79029 ( 6298.5 ( 12.55 → A high ratio suggest that the company has a good oversight on their accounts receivable. Comparing their ratio to other companies in this industry it shows us that they are doing better than others.

Day’s Receivables Outstanding ( 365 days ( AR
A measurement that calculated how many days that a company takes to collect revenue after a sale has been made

365 ( 12.55 ( 29.09 → An average which Proctor & Gamble has been keeping for years.

Inventory Turnover ( Cost of Goods Sold ( Average Inventory
This ratio shows us how quick inventory is replaced after it has been sold.

38898 ( 7648 ( 5.09 →Once again comparing to similar companies in their industry, it shows us that their inventory turnover is of average. Meaning that their selling at this moment is not what they want it to be, so inventories are in excess. But it could also mean that Proctor & Gamble bought ineffectively.

Day’s Inventory Held ( 365 Days ( Inventory Turnover
The number shows us how many days inventory is held before being sold.

365 ( 5.09 ( 71.71 → obviously this ratio is also moderate, meaning that Proctor & Gamble better sell more, or their inventories will stack up. Because in worst case, prices are lowering, inventories value lowers too.

Liquidity Ratios.
These ratios show a company’s ability to pay off short-term debts. These are important ratios because frankly they determine whether a company is healthy enough to go on further.

Current Ratio ( Current Assets ( Current Liabilities
This Ratio determines a company’s ability to pay back short-term liabilities with short-term assets.

21905 ( 30901 ( 0.71 → A current ratio below one always suggest that a company would not be able to pay of his debts at a certain moment. But Proctor & Gamble has definitely other ways in gaining more finance; this is still a sign of weakness.

Quick Ratio ( (Cash + Receivables + Marketable Securities) ( Current Liabilities This ratio indicated the ability to pay of short-term liabilities with it most liquid assets. Meaning that this ratio excludes the account ‘’inventories’’. Because a company with much inventory it might be difficult to quickly turn inventory to cash.

(4781 ( 5836 + 0) ( 30901 ( 0.34 → Once Again, a sign of weakness. Comparing this number to other similar companies, it shows us that Proctor & Gamble is having a difficult time.

Solvency Ratios.
One of the many ratios used to measure a company's ability to meet long-term obligations.  It provides a measurement of how likely a company will be to continue meeting its debt obligations.

Debt Ratio ( Total Liabilities ( Total Assets
A ratio that indicates the relativity of a company debts to its assets. So when Debts become to high

71254 ( 138014 ( 0.52 → A Ratio below one shows us that there are more assets then depts.. This is quite a good sign. Although comparing this to other companies, they are average. Nonetheless, this piece of information also determines company’s level of risk for investors. So it is good enough.

Times Interest Earned ( Income From Operations ( Interest Expense A ratio that indicates how many times a company can cover its interest charges. Meaning whether a comapy can pay it’s debt obligations.

14710 ( 1304 = 11.28 →A Ratio above 2.5 is just good enough, so this is pretty...
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