Hassan Afs Final

8/10/2019 Hassan Afs Final

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PROCTER & GAMBLE

Procter & Gamble Co. (P&G, NYSE: PG) is a Fortune 500, American global corporation basedin Cincinnati, Ohio, that manufactures a wide range of consumer goods. As of 2008, P&G isthe 23rd largest US Company by revenue and 14thlargest by profit. It is 10th in Fortune's Most

Admired Companies list (as of 2007). P&G is credited with many business innovations including brand management, the soap opera, and "Connect & Develop" innovation. According to the Nielsen Company, in 2007

P&G spent more on U.S. advertising than any other company; the $2.62 billion it spent is almosttwice as much as General Motors, the next company on the Nielsen list. P &G was named2008 Advertiser of the Year by Cannes InternationalAdvertising Festival. Procter & Gamble hasexpanded dramaticallythroughout its history, but its headquarters still remains in Cincinnati.P&G's dominance in many categories of products makes its brand management decisionsworthy of study. For example, P&G'scorporate strategists must account for the likelihood of one

of theirproducts cannibalizing the sales of another.

MISSION

To provide branded products and services of superior quality and value that improves the livesof the world's consumers, now and for generations to come.

VALUES

P&G is its people and the values by which live.

We attract and recruit the finest people in the world. We build ourorganization from within, promoting and rewarding people without regard to any difference unrelated to performance. Weact on the conviction thatthe men and women of Procter & Gamble will always be our mostimportant asset.

LEADERSHIP

We are all leaders in our area of responsibility, with a deep commitment todeliver leadership results

We have a clear vision of where we are going.

We focus our resources to achieve leadership objectives and strategies. We develop the capability to deliver our strategies and eliminate organizational barriers.

OWNERSHIP

We accept personal accountability to meet our business needs,improve our systems, and help others improve their effectiveness.


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CASH FLOW

STATEMENTS OF P & G

FROM 2006-2010


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Cash and cash equivalents,beginning of the year

4,781 3,313 5,354 6,693 6,389

Operating activities Net earnings 12,736 13,436 12,075 10,340 8,684Depreciation & amortization 3,108 3,082 3,166 3,130 2,627Share-based compensationexpenses

453 516 555 668 585

Deferred income taxes 36 596 1,214 253Gain on sale of businesses (2,670) (2,377) (284) - -Change in A/R (14) 415 432 (729) (524)Change in inventories 86 721 (1,050) (389) 383Change in A/P, accrued andother liabilities

2,446 (742) 297 (273) 230

Change in other operatingassets and liabilities

(305) (758) (1,270) (157) (508)

Other 196 30 (127) 592 10Total operating activities 16,072 14,919 15,008 13,435 11,375Investing activitiesCapital expenditure (3,067) (3,238) (3,046) (2,945) (2,667)Proceeds from assets sales 3,068 1,087 928 281 882Acquisitions, net of cashrequired

(425) (368) (381) (492) 171

Change in investments (173) 166 (50) 673 884Total investing activities (597) (2,353) (2,549) (2,483) (730)Financing activitiesDividends to shareholders (5,458) (5,044) (4,655) (4,209) (3,703)Change in STD (1,798) (2,420) 2,650 8,981 (8,627)

Additions in LTD 3,830 4,926 7,088 4,758 22,545Reductions of long term debt (8,546) (2,578) (11,747) (17,929) (5,282)Treasury stock purchase (6,004) (6,370) (10,047) 1,499 1,319Impact of stock options andother

721 681 1,867 (5,578) (16,830)

Total financing activities (17,255) (10,814) (14,844) (12,478) (10,578)Effect of exchange ratechanges on cash and cashequivalents

(122) (284) 344 187 237

Change in cash and cashequivalents

(1,902) 1,468 (2,041) (1,339) 304

Cash and cash equivalents ,end of the year

2,879 4,781 3,313 5,354 6,693

2010$

2009$

2008$

2007$

2006$


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ANALYSIS OF CASH FLOW STATEMENTS

OPERATING ACTIVITIES

Operating cash flow was $16.1 billion in 2010, an 8% increase versus the prior year. Operating

cash flow resulted primarily from net earnings adjusted for non-cash items (depreciation andamortization, stock based compensation, deferred income taxes and gain on the sale of

businesses) and a reduction in working capital. The increase in operating cash flow was primarily due to the current year reduction in working capital balances, partially offset by adecline in earnings versus 2009. Working capital reductions contributed $2.5 billion to operatingcash flow in 2010 mainly due to an increase in accounts payable, accrued and other liabilities.Accounts payable, accrued and other liabilities increased primarily due to increased expendituresto support business growth, primarily related to the increased marketing investments. Accountsreceivable days were down year over year due mainly to the global pharmaceuticals divestitureand improved collection efforts. Inventory contributed to operating cash flow despite growth inthe business due to a reduction in days on hand due primarily to inventory managementimprovement efforts. Cash flow from discontinued operations contributed $285 million tooperating cash flow. In 2009, operating cash flow was $14.9 billion, a decrease of 1% versus the

prior year total of $15.0 billion. Operating cash flow resulted primarily from net earningsadjusted for non-cash items. The decrease in operating cash flow versus 2008 was primarily dueto a decline in net earnings from continuing operations. A net decrease in working capital alsoadded to cash flow as lower accounts receivable and inventory balances were partially offset by adecline in accounts payable. The decrease in working capital was primarily due to the impact oflower net sales and our ability to adequately adjust production to better meet unit volume

requirements. Accounts receivable days declined primarily due to improved collection efforts.Inventory and accounts payable days declined due in part to the optimization of ourmanufacturing process and inventory levels and a moderation of commodity costs late in theyear. Other operating assets and liabilities reduced cash flow primarily due to changes in

postretirement benefit plans. Cash flow from discontinued operations contributed $662 million tooperating cash flow.

INVESTING ACTIVITIES

Net investing activities consumed $597 million of cash in 2010 and $2.4 billion in 2009 mainly

due to capital spending and acquisitions, partially offset by proceeds from asset sales, including$3.0 billion in cash received from the sale of our global pharmaceuticals business in 2010.Discontinued operations consumed $1 million of cash from investing activities in 2010 andcontributed $69 million in 2009.


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PROFITABILITYRATIOS

2010 2009 2008 2007 2006

Gross ProfitMargin

51.96 50.78 51.63 49.41 51.44

Net Profit Margin 13.86 14.28 14.43 13.52 12.72ROE 17.81 17.89 16.97 15.48 13.81ROA 12.49 11.95 11.55 11.19 9.76

PROFITABILITY ANAYLSIS

The gross profit margin of P & G shows constant trend its means that its profit are almost samein the 5 years and not show increasing and decreasing trend it means that its management is notefficient and not utilize its assets efficiently so that its profit increase. The GP was highest in2010 and 2008.the net profit margin was highest in 2009 and 2008 but in 2010 it will decrease.ROA and ROE was highest in 2010.

ASSESTMANGEMENT

RATIOS

2010 2009 2008 2007 2006

Inventory Turnover 61 64 78 68 69A/R Turnover 24 26 30 30 30Operating Cycle 85 90 108 98 99

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50

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2010 2009 2008 2007 2006

Gross Profit Margin

Net Profit Margin

ROE

ROA


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ASSET MANAGEMENT ANALYSIS

Asset management analysis of P &G good in 2010 because its account receivables are very efficient in2010.its operating cycle is highest in 2008 it means that it didnt efficiently receive its cash and convertits inventory.

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40

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80

100

120

2010 2009 2008 2007 2006

Inventory Turnover

A/R Turnover

Operating Cycle


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The companys utilize its funds efficiently in investing activities

Companys holding cash is negative which i s not good sign for the company

RECOMMENDATIONS

Need to maintain its operating policies

Companys holding cash is negative so need to reformulate its policies because if holdingcash is negative then company will not be able to perform its daily activities efficiently.


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INCOME STATEMENTS 2006-2010

2010

RUPEES000

2009

RUPEES000

2008

RUPEES000

2007

RUPEES000

2006

RUPEES000

Sales 4,040,887 3,376,511 3,081,879 2,376,408 1,939,515

Cost of sales (2,506,003) (2,122,144) (1,924,766) (1,489,985) (1,208,264)

Gross profit 1,534,884 1,254,367 1,1157,113 886,423 731,251

Distribution cost (786,593) (797,304) (536,144) (477,416) (405,974)

Administrative expenses (51,547) (50,219) (45,421) (47,004) (38,832)Other operating expenses (51,810) (120,275) (43,940) (28,873) (22,951)

Other operating income 23,576 30,161 20,936 19,742 30,967

668,510 316,730 552,544 352,872 294,461

Restricting cost (10,202) (52,557) - - -

Profit from operations 658,308 264,173 552,544 352,872 294,461

Finance cost (12,449) (22,517) (22,233) (6,798) (4,345)

Profit before taxation 645,859 241,656 530,311 346,074 290,116

Taxation (208,396) (64,864) (181,765) (121,582) (102,137)

Profit after tax 437,463 176,792 348,546 224,492 187,979

Earnings per share 71.04 28.71 56.60 36.46 30.53


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RATIOS

PROFITABILITY ANALYSIS

The profitability ratios of unilever was not up to the mark which shows that company is notgenerating enough profit or revenue. The gross profit margin of Unilever shows a constant trentwhich shows that company is not increasing their assets or not fully ut ilize their assts thats whycompany is not increase their profit. Moreover its ROA and ROE also increase in 2010 which isgood because it means that its earnings before interest and tax and net income is more than itsassets and equity. In 2010 ROE is much higher than ROA.net profit margin was also increase in2010 by 6%.

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40

60

80

100

120

140

2010 2009 2008 2007 2006

Gross Profit Margin Net Profit Margin

ROA

ROE

2010

%

2009

%

2008

%

2007

%

2006

%Gross profit margin 38 37 38 37 38Net profit margin 11 5 11 9 10ROA 60 27 54 37 33ROE 108 66 116 113 34

PROFITABILITY RATIOS


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LEVERAGE RATIOS

Equity ratio 0.91 0.87 0.44 0.63 -Total debt ratio 0.08 0.11 0.56 0.37 -

LEVERAGE ANALYSIS

The leverage ratios of Unilever are excellent which shows that company equity ratio is more thanits debt ratio which means that company is running its business on its cash or profit and nottaking loans or debt to continue its operation. This thing indicates that companys management is very good and company is able to operate their business without debt which is very healthy signfor such large company.

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2010 2009 2008 2007 2006

Equity Ratio

Total Debt Ratio

2010%

2009%

2008%

2007%

2006%


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ASSET MANAGEMENT ANALYSIS

The assets management analysis of Unilever is also satisfactory because its operating cycleshows in 2010 its operating cycle is lowest which shows that its inventory turnover and accountreceivables is lower than 2009 which is good and which shows that company is actively receiveits money and cash from lenders and do their business on cash basis not on lending so thats whycompany in not need to take loans or debts to continue its operations.

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2010 2009 2008 2007 2006

Inventory Turnover

A/R Turnover

Operating Cycle

ASSETS MANAGEMENT RATIO2010 2009 2008 2007 2006

Inventory turnover 50 59 69 81 65A/R turnover 8 7 8 12 13Operating cycle 58 66 77 93 78


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LIQUIDITY RAIOS2010%

2009%

2008%

2007%

2006%

Current ratio 1.09 0.88 1 1 2Quick ratio 0.51 0.32 0.22 0.22 1

LIQUIDITY ANALYSIS

The liquidity analysis of unilever shows decreasing trend from 2007 but afterwards it will show aconstant trend, in 2006 current ratio and quick ratio was highest it means that in 2006 currentassets and cash is more than current liabilities but after 2006 its current liabilities are going toincrease due to which its current ratio and quick ratio was going to decrease but again in 2010 itwill show increasing trend which shows that company is going to increase their assts withrespect to liabilities.

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0.5

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1.5

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2.5

2010 2009 2008 2007 2006

Current Ratio

Quick Ratio


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COMPARISON OF LIQUIDITY RATIOS OF UNILEVER WITHPROCTER & GAMBLE

LIQUIDITY RATIOCURRENT RATIO QUICK RATIO

YEARS UNILEVER P & G UNILEVER P & G2010 1.09 0.77 0.51 0.332009 0.88 0.71 0.32 0.342008 1 0.79 0.22 0.322007 1 0.78 0.22 0.392006 2 0.12 1 0.67

LEVERAGE RATIOSDEBT RATIO EQUITY RATIO

YEARS UNILEVER P & G UNILEVER P & G2010 0.08 0.52 0.91 0.472009 0.11 0.53 0.87 0.462008 0.56 0.51 0.44 0.482007 0.37 0.22 0.63 0.482006 - 0.51 - 0.46

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0.5

1

1.5

2

2.5

2010 2009 2008 2007 2006

UNILEVER C.R

P & G C.R

UNILEVER Q.R

P & G Q.R


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ASSEST MANAGEMENT RATIOSINVENTORYTURNOVER

A/R TURNOVER OPERATING CYCLE

YEARS UNILEVER P &G UNILEVER P & G UNILEVER P & G

2010 50 61 8 24 58 852009 59 64 7 26 66 902008 69 78 8 30 77 1082007 81 68 12 30 93 982006 65 69 13 30 78 99

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2010 2009 2008 2007 2006

UNILEVER D.R

P & G D.R

UNILEVER E.R

P & G E.R


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PROFITABILITY RATIOSYEARS GP NP ROE ROA

UNI P & G UNI P & G UNI P & G UNI P & G2010 38 51.96 11 13.86 10.8 17.81 9.87 12.492009 37 50.78 5 14.28 8.6 17.89 10.7 11.95

2008 38 51.63 11 14.43 11.6 16.97 8.9 11.552007 37 49.41 9 13.52 11.3 15.48 9.9 11.192006 38 51.44 10 12.72 10.8 13.81 6.33 9.76

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120

2010 2009 2008 2007 2006

UNILEVER INVENTORY TOP & G INVENTORY TO

UNILEVER A/R TO

P & G A/R TO

UNILEVER OC

P & G OC


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CONCLUSION

We concluded that Procter and Gamble is a large company its assets and equity is according tothat but it have to work so that they will fully utilize its assets and opportunities, its liquidityratios are not satisfactory because in 2010 in will decrease by 2009 it means that its currentliabilities are increasing which is not the good sign for the company. Its leverage ratio shows thatits debt is more than its equity means it run its business on debt and did not generate enough cashor revenue to operate the company. Asset management ratio are also not satisfactory and are highin each year which shows that they do their business on lending and not efficiently receive theirmoney due to which its debt are increasing and they have to take loan to run their business whichis not the good sign for the company, its profitability ratios are also not showing good trend

because its ROA & ROE is not satisfactory means they did not efficiently utilize their assets togenerate revenue.

RECOMMENDATIONSBy the analysis of Procter and Gamble we came to know its financial position and where itsstand in the market so we will recommend it following suggestions so that they will generatemore revenue and do their business in an efficient manner.

They will improve their policies and strategies so that they will receive its cash more andits account receivable days are decreasing and then its operating cycle are decreasing sowhen its operating cycle are decreasing they will not need loans or debts to operate their

business. For leverage ratios I will recommend that they efficiently utilize its assets and

reformulate its policies so that its equity ratio is more than its debt ratio because at present its equity ratio is low than its debt which means that company is doing its business on debt and which is not good for the company in long term.

Its liquidity ratios shows increasing trend which means that its assets are increasing thanits liabilities so we will recommend that they will work more in order to improve theircurrent ratio and quick ratio so that it will show a drastic increasing trend and makescompany profitable.For profitability ratios they have to work very hard because its return on assets and returnon equity is not satisfactory which shows that it net profit and earnings before tax are not

upto mark which will effect profitability ratios so company need to work on that and findout reasons why its profitability ratios are not increasing.

Hassan Afs Final

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