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.. 9029 ( 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. 8898 ( 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 good. Although they may also be a downside. A too high ratio could mean that a company is paying off to many depts. Leaving less cash for other activities such as research or new investments.
Profitability Ratios. Ratios that asses a company’s ability to generate revenue with a good oversight on their expenses during a period of time. Return on Common Equity (ROE) ( Net income Available to common shareholders / Average Common Shareholders’ Equity The percentage of profit which has been generated due to shareholders investments. 13436 ( 66296. 5 ( 100% ( 17. 11% > This number is very important when comparing their ROE to others. On as scale from one to five, Proctor & Gamble scores a four. SO in comparison to their competitors they are doing well, but it could be even better.
Return on Assets (ROA) ( net operating profit after taxes / average assets An indication on how efficient management is using their assets to generate earnings. So it calculates the relativity between assets and profit. 13436 ( 13941. 25 ( 100%( 9. 64 % > Here too this ratio is used in comparing with other companies but also with your own company. In comparison with other companies, Proctor & Gamble isn’t standing on top, but it is close. Meaning that their return on investments is good. In previous year their ROA was 8. 56 ( 12075 ( 141003 ( 100%) So This year they invested better with their money.
If they keep on investing like this, they are the best in their market. Fundamental Ratios. So how have the fundamentals changed during the last year. Has sales increased or decreased, has expenses changed? Analysing the fundamentals shows us if the company exceeded previous year(s) results. When analysing the fundamentals we mean calculating change ratios in Inventory, Account Receivable, Capital Expenditure, R&D, Gross Margin and S&A. | |2009 |Change ? |2008 | |Inventory |6880 |-22. % |8416 | |Account Receivable |5836 |-13. 7% |6761 | |Capital Expenditure |3238 |6. 3% |3046 | |R&D |2044 |-7. 6% |2212 | |Gross Margin |16123 |-3. % |16637 | |S&A |24008 |-6. 1% |25575 | |Net Sales |79029 |-3. 3% |81748 | |Net Earnings |13436 |11. 3 % |12075 | Analysing these changes, Proctor & Gamble is improving their results.
In these difficult times, Proctor & Gamble is on the right path. Although Gross Margin decreased, Net Earning Increased. This is due to the fact that cost decreased, both R&D and S&A. the decrease in R&D might be bad, but a decrease in profit is worse. And as you can see, Capital investment increased, always a good sign. Stock Ratios. Earning per Share > 4. 26 (updated on 16-12-09) Price Earnings Ratio ( Market Price per Share ( EPS > 62. 16 ( 4. 26 ( 14. 59 A Ratio that determines the ‘’per share earnings’’ compared to the market price. So how does the company earn on each share.
Dividend Yield ( Dividend per Share ( Market Price per Share > 1. 64 ( 62. 16 ( 2. 64% A percentage indication of how much dividend you receive of your total share. So how much cash flow do you get for every dollar you invested in this company. Book Value per Share ( (Total stockholders’ equity ( preferred equity) ( number of common shares outstanding > (69494 ( 1366) ( 2921. 7 ( 23. 32 The actual value per share based on your balance sheet account balance. EBIT = Net Income ( Interest ( Taxes > 13436 ( 1358 ( 4032 ( 18826 An indicator for the companies profitability
EBITDA = Net income ( Interest ( Taxes ( Depreciation ( Amortization > 13436 ( 1358 ( 4032 ( 3082 ( 21908 EBITDA is the follow-up of EBIT. It is also an indicator on the businesses performance. Pro-Forma Earnings > We had difficulty finding the right information to find this particular ratio. We only found a piece on the internet stating pro forma net earnings > 3348 To DIEBA Inc. Your question on whether to Sell, Buy or Hold your shares is quite a difficult one. In these economical unfortunate days, we all want to make the right decision. I have done my homework, and have come to a conclusion.
You should definitely hold your shares, en even try to buy some more. My results show that P&G, just like everyone else, suffers during the crisis. But it seems they are getting back on their saddle and going the right way. The Financials support me, but not completely. I have my doubts on their solvency ratios, but is am assured that P&G won’t go bankruptcy that easy, it isn’t even ……… But most importantly I think is not only what is happening now, but what s going to happen. P&G is not at his best moment, but the prospects say that they can be just as big as they were before the crisis.
And this especially means that shares prices will go up, and that’s what counts here. They have restructured, so that costs decreased, now we only have to wait for more sales. At this moment your dividend yield is 2. 64%. If you are in search in more dividend yield right now, than I advise you to invest in other firms in the same area, like Colgate-Palmolive. But for the long-run I would advise you to stick with the shares you have, and buy some extra. If thing are looking even better a half year from now, I assure you that P&G wil regain their position in number on the market, and it will make you a lot of money. ttp://www. investopedia. com/? viewed=1 http://www. advfn. com/p. php? pid=financials&symbol=NYSE:PG http://investing. businessweek. com/research/stocks/charts/charts. asp? symbol=PG:US http://ycharts. com/companies/PG/profit_margin http://www. valuecruncher. com/companies/1143 http://www. ns. nl/reisplanner-v2/index. shtml http://biz. yahoo. com/e/091015/pg8-k. html http://finance. yahoo. com/echarts? s=PG#chart1:symbol=pg;range=1d;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined http://www. investopedia. com/articles/financialcareers/06/snapdecisions. asp