Question

Selected Financial Ratios
For the fiscal years-ending
	Church and Dwight			Procter & Gamble Company
Profitability Ratios	12/31/18	12/31/17	12/31/16	6/30/19	6/30/18	6/30/17
ROA % (Net)	9.41	14.34	10.63	3.34	8.17	12.38
ROE % (Net)	24.34	35.43	22.88	7.83	18.14	27.24
EBITDA Margin %	20.6	21.6	22.45	13.57	24.57	25.16
Liquidity Ratios	12/31/18	12/31/17	12/31/16	6/30/19	6/30/18	6/30/17
Quick Ratio	0.49	0.66	0.47	0.51	0.59	0.65
Current Ratio	0.81	1.07	0.76	0.75	0.83	0.88
Debt Management	12/31/18	12/31/17	12/31/16	6/30/19	6/30/18	6/30/17
LT Debt to Equity	0.61	0.95	0.35	0.43	0.4	0.33
Total Debt to Equity	0.86	1.07	0.57	0.64	0.6	0.57
Interest Coverage	9.97	13.93	26.14	18.99	52.94	47.47
Asset Management	12/31/18	12/31/17	12/31/16	6/30/19	6/30/18	6/30/17
Total Asset Turnover	0.69	0.73	0.81	0.58	0.56	0.53
Receivables Turnover	12	11.93	12.37	14.05	14.4	14.51
Inventory Turnover	6.46	6.95	7.15	7.13	7.32	6.97
Accounts Payable Turnover	10	10.34	11.14	6.27	6.69	6.86
Accrued Expenses Turnover	14.94	15.18	15.42	11.87	14.17	14.45
Property Plant & Equip Turnover	6.88	6.31	5.81	3.23	3.3	3.31
Cash & Equivalents Turnover				19.88	16.42	10.27
Per Share	12/31/18	12/31/17	12/31/16	6/30/19	6/30/18	6/30/17
Book Value per Share	9.94	8.96	7.79	18.84	20.93	21.61

To do this you should consider the 3-year trend, i.e. improving, declining, or remaining stable, and the absolute metrics presented.

1. Over the 3-year period presented, which company is most effective at collecting cash on its accounts receivable?

2. Over the 3-year period presented, which company generated the highest return on its investment in total assets?

3. Based on the 3-year performance, which company has the riskiest debt profile?

4. Based on the 3-year performance, which company is in the best position to meet its current obligations and unexpected cash demands?

5. If you were a bank lending officer and each of these companies applied for a $1 billion construction loan (i.e. to be repaid in 25 years with interest payments beginning immediately after funding begins), which company would you be more likely to lend to and why?

6. If you were a financial analyst for a global investment company or pension fund, which company would you assign the higher investment recommendation?

Answer 1

1.

Metric	Church and Dwight	Procter and Gamble
	12/31/18	12/31/17	12/31/16	6/30/19	6/30/18	6/30/17
Receivables Turnover	12	11.93	12.37	14.05	14.4	14.51
Days to collect	30.42	30.60	29.51	25.98	25.35	25.16

As can be seen, Procter and Gamble is able to collect their receivables at a mucher faster rate. It is able to collect its receivables in less than 26 days whereas in case of Church & Dwight the same is close to 30 days.

Procter and Gamble is much more effective.

2.

Metric	Church and Dwight	Procter and Gamble
	12/31/18	12/31/17	12/31/16	6/30/19	6/30/18	6/30/17
ROA	9.41	14.34	10.63	3.34	8.17	12.38
Average	11.46	7.96

Church and Dwight have better ROA than P&G. Church and Dwight have a higher average ROA as well.

3.

Metric	Church and Dwight	Procter and Gamble
	12/31/18	12/31/17	12/31/16	6/30/19	6/30/18	6/30/17
LT Debt to Equity	0.61	0.95	0.35	0.43	0.4	0.33
Total Debt to Equity	0.86	1.07	0.57	0.64	0.6	0.57

As can be seen from the data above, Church and Dwight have higher DEBT as a percentage of Equity.

4.

Metric	Church and Dwight	Procter and Gamble
	12/31/18	12/31/17	12/31/16	6/30/19	6/30/18	6/30/17
Quick ratio	0.49	0.66	0.47	0.51	0.59	0.65
Current ratio	0.81	1.07	0.76	0.75	0.83	0.88

If you the Quick Ratio P&G are much BETTER. It is in much better position to meet its current obligations.

5.

For this P&G would have been a better option because

-It has better LIQUIDITY so it'd be able to repay payments easily
-It has MUCH HIGHER interest coverage ratio currently. A new loan wouldn'y hit it that much.
-CUrrently it has lesser debt has compared to Dwilight and Church

6.

For this the recommendation would be Church & Dwight for the following reasons-

-It has higher Return on Assets
-It has higher Return on Equity
-It has higher EBITDA margin
-