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Analysis of Financial Statements of P & G for the year 2008 and 2009
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Submitted To:

Muhammad Tahir.

Submitted by:

1. Tanveer Habib (FA09-MBA-172)

2. Anees-Ur-Rehman (FA09-MBA-199)

3. Adnan Abdul Aziz (FA09-MBA-205)

4. Syed Fasahat Ali Zaidi (SP09-MBA-167)

5. M.Usman Syed (FA09-MBA-114)

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History of P&G:
In 1837, William Procter and James Gamble formed a humble but bold new enterprise.
What began as a small, family-operated soap and candle company grew and thrived, inspired
by P&G's purpose of providing products and services of superior quality and value. In 1859,
sales reached one million dollars. By this point, approximately eighty employees worked for
Procter & Gamble. During the American Civil War, the company won contracts to supply the
Union Army with soap and candles. In addition to the increased profits experienced during the
war, the military contracts introduced soldiers from all over the country to Procter & Gamble's
products.And after that P & G is operating globaly.

Effective July 1, 2007, the company's operations are categorized into three "Global Business
Units" with each Global Business Unit divided into "Business Segments" according to the
company's March 2009 earnings release.

• Beauty Care
o Beauty segment
o Grooming segment
• Household Care
o Baby Care and Family Care segment
o Fabric Care and Home Care segment
• Health and Well-Being
o Health Care segment
o Snacks, Coffee, and Pet Care segment
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Annual Report of P & G Company (2008-2009) and its analysis

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Liquidity Ratios of 2008 and 2009:

CurrentAse ets
• Current Ratio of 2008 =
CurrentLia bilities

$24515
=
$30958

=0.79

CurrentAse ets
• Current Ratio of 2009 =
CurrentLia bilities

$21905
=
$30901

=0.7089

QuickAsset s
• Quick Ratio of 2008 =
CurrentLia bilities

$10074
=
$30958

=0.3254

QuickAsset s
• Quick Ratio of 2009 =
CurrentLia bilities

$10617
=
$30901

=0.3439

• Working Capital =Current Assets – Current Liabilities

=24515–30958

=-6443

• Working Capital =Current Assets – Current Liabilities

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=21905 - 30901

=-8996

Debt Ratios of 2008 and 2009:

debt
• Debt-to-total-assets Ratio of 2008= ×100
TotalAsset s

$74498
= ×100
$143992

=51.73%

debt
• Debt-to-total-assets Ratio of 2009= ×100
TotalAsset s

$71734
= ×100
$134833

=53.202%

debt
• Debt-to-equity Ratio of 2008 = TotalStock holdersEqu ity ×100

$74498
= ×100
$69494

=107.20%

debt
• Debt-to-equity Ratio of 2009 = TotalStock holdersEqu ity ×100

$71734
= ×100
$63099

=133.68%
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Profitability Ratios of 2008 and 2009:

NetIncome
• Return on equity of 2008 = TotalStock holdersEqu ity ×100

$12075
= ×100
$69494

=17.38%

NetIncome
• Return on equity of 2009 = TotalStock holdersEqu ity ×100

$13436
= ×100
$63099

=21.29%

operatingi ncome
• Return on assets Ratio 2008 = ×100
TotalAsset s

$16637
= ×100
$143992

=11.55%

operatingi ncome
• Return on assets Ratio 2009 = ×100
TotalAsset s

$16123
= ×100
$134833

=11.95%
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Gross Pr ofit
• Gross profit margin rate of 2008= ×100
Sales

$42212
= ×100
$81748

=51.63%

Gross Pr ofit
• Gross profit margin rate of 2009= ×100
Sales

$40131
= ×100
$79029

=50.78%

Net Pr ofit
• Net profit margin rate of 2008 = ×100
Sales

$12075
= ×100
$81748

=14.77%

Net Pr ofit
• Net profit margin rate of 2009 = ×100
Sales

$13436
= ×100
$79029

=17.00%
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Asset activity Ratios:
NetSale
• Account Receivables turn over ratio 2008=
Account Re ceivables

$81748
=
$6761

=12.09

NetSale
• Account Receivables turn over ratio 2009=
Account Re ceivables

$79029
=
$5836

=13.54

365 days
• Account Receivable turn over rate in days of 2008=
Accoutrece ivableT .O.R

365 days
=
12 .09

=30.19

365 days
• Account Receivable turn over rate in days of 2009=
Accoutrece ivableT .O.R

365 days
=
13 .54

=26.95
C.G.S
Inventory Turn Over Ratio of 2008= Inventory

$39536
=
$8416

=4.69

C.G.S
Inventory Turn Over Ratio of 2009= Inventory

$38898
=
$6880

=5.65
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365 days
Inventory to Rate ratio of 2008= InventoryT .O.R

365
` =
4.69

`` =77.82

365 days
Inventory to Rate ratio of 2009= InventoryT .O.R

365
=
5.65

=64.60

Market value Ratios

1) Dividend Yeild:
AnnualDivi dend
Dividend Yeild in 2008 =
CurrentSto ck Pr ice

$4655
=
$51 .01

=91.25

AnnualDivi dend
Dividend Yeild in 2009 =
CurrentSto ck Pr ice

$5044
=
$65 .81

=76.64

2) Price earning Ratio:

Currentsto ck Pr ice
Price earning Ratio in 2008 = EarningPer Share
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$51 .01
=
$3.54

=14.41

Currentsto ck Pr ice
Price earning Ratio in 2009 = EarningPer Share

$65 .81
=
$4.26

=15.44

Graphical analysis of current ratio:

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current ratio

0.8

0.75
current ratio
0.7

0.65
2008 year 2009 year

Analysis of Current ratio:

Although the current ratio shows that in 2008 P & G company was in a better
position as compared to the current ratio of 2009. But still it is far below than industry
standard of 2.01. Therefore the company will be having difficulties to satisfy its short-
term debts.

Graphical analysis of Quick Ratio:

Quick Ratio

0.35
0.345
0.34
0.335
Quick Ratio
0.33
0.325
0.32
0.315
2008 year 2009 year

Analysis of Quick Ratio:

The Quick ratio shows that in 2008 P & G company was not in a better position
as compared to the Quick ratio of 2009. But still it is far below than industry standard
of 1.01. Therefore the company will be having difficulties to satisfy its short-term debts.

Graphical analysis of Debt to total assets Ratio:

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Debt-to-total-assets Ratio

53.50%
53.00%
52.50%
Debt-to-total-
52.00%
assets Ratio
51.50%
51.00%
50.50%
2008 year 2009 year

Analysis of Debt to total assets Ratio:

The debt to total asset ratio of 2009 is in a better condition as compared to the
ratio of 2008. And is much better than the industry standard of 44%.

Graphical analysis of Debt to equity Ratio:

Debt-to-equity Ratio

160.00%
140.00%
120.00%
100.00%
Debt-to-equity
80.00%
Ratio
60.00%
40.00%
20.00%
0.00%
2008 year 2009 year

Analysis of debt to equity ratio:

The debt to equity ratio of the company in 2009 is much as compared to the
2008 ratio. And is also above the industry standard of 80%.

Graphical analysis of Return on equity:

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Return on equity

25.00%

20.00%

15.00%
Return on equity
10.00%

5.00%

0.00%
2008 year 2009 year

Analysis:

The return on equity ratio of the company in the year 2008 was less than 2009.

Graphical Analysis of Return on assets Ratio:

Return on assets Ratio

12.00%
11.90%
11.80%
11.70% Return on assets
11.60% Ratio
11.50%
11.40%
11.30%
2008 year 2009 year

Analysis of Return on assets Ratio:

The return on assets ratio of 2009 is in a good postion as compared both to

2008 and industry standard of 14.04.

Graphical analysis of Gross profit margin rate:

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Gross profit margin rate

51.80%
51.60%
51.40%
51.20%
Gross profit
51.00%
margin rate
50.80%
50.60%
50.40%
50.20%
2008 year 2009 year

Analysis of Gross profit margin:

The Gross profit margin of P & G has decline in 2009 to 50.78% from 51.63% in
2008 but is still far above than the industry standard of 23.8%

Graphical Analysis of Net profit margin:

Net profit margin rate

17.50%
17.00%
16.50%
16.00%
Net profit margin
15.50%
rate
15.00%
14.50%
14.00%
13.50%
2008 year 2009 year

Analysis of Net profit margin:

The net profit margin of P & G company in 2009 is much better than the same
ratio in 2008 and is also in a safe position as compared to the industry standard of
4.70%

Graphical Analysis of Account Receivables turn over ratio:

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Account Receivables turn over ratio

14
13.5
13 Account
12.5 Receivables turn
12 over ratio

11.5
11
2008 year 2009 year

Analysis of Account Receivable Turn over ratio:

Account Receivable T.O.R has raised in 2009 as compared to 2008 which is

better for the company having low current ratio and quick ratio. So that the company
will be able to have cash to satisfy its customers.

Graphical Analysis:

Account Receivable turn over rate in days

31
30
29
Account
28 Receivable turn
over rate in days
27
26
25
2008 year 2009 year

Analysis of Account Receivable T.O.R :

The account receivable T.O.R in days is lesser in 2009 as compared to 2008 it

means the company will be having their account receivables converted sooner than
2008.
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Graphical Analysis of Inventory T.O.R:

Inventory Turn Over Ratio

6
5
4
Inventory Turn
3
Over Ratio
2
1
0
2008 year 2009 year

The inventory turn over ratio has increased in 2009. This is beneficial for the
company.

Graphical Analysis of Inventory to Rate ratio:

Inventory to Rate ratio

100
80
60 Inventory to Rate
40 ratio
20
0
2008 year 2009 year

Just like inventory turn over ratio the inventory turn over ratio in days has also
became beneficial as it declined in 2009 as compared to 2008.

Graphical Analysis of Dividend yield:

Dividend Yeild

95
90
85
80 Dividend Yeild
75
70
65
2008 year 2009 year
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According to the company policy the dividend is increased to 9 % every year.
And this ratio is telling us that the dividend yield has decreased to almost double even
though the dividend according to cash flow statement has increased to $5044 in 2009
from $ 4655 and the current stock price has raised to $65.81 in 2009 as compared to
$51.01 in 2008 due to which dividend yield has declined.

Graphical Analysis of price earning ratio:

Price earning Ratio

16
15.5
15 Price earning
14.5 Ratio
14
13.5
2008 year 2009 year

The price earning Ratio has increased in 2009 as compared to 2008. In

fact it doubled in 2009.