Question

The table (pictured) shows key financial data for three firms that compete in the consumer products market: Proctor & Gamble, Colgate-Palmolive, and Clorox.

a. Calculate EACH of the following ratios for ALL three companies: current ratio, quick ratio, inventory turnover, average collection period, total asset turnover.

b. What company is in the position of having greatest liquidity?

c. Would you say that the three companies exhibit similar performance or quite different performances in terms of collecting receivables? Why do you think that might be?

Sales Cost of goods sold Accounts receivable Inventory Total current assets Total current liabilities Total assets Procter & Gamble $65,232 32,963 4,728 4,776 25,579 28,906 117,029 Colgate-Palmolive $15,195 6,081 1,411 1,161 4,342 3,292 12,131 Clorox $5,880 3,228 501 499 1,559 2,049 4,562 (Note: All dollar values are in thousands.)

Answer 1

Proeter Colgate- Palmotive Clopoy. Qurulent ratio 4342 25,579 28906 Current Assets 3292 = 1.319 1559 2049 20.761 Current diabet)=0.885 25579-4776 4342-1161 quick patio 1559 - 499 2049 28906 3292 Current Asset - Suenbr0.420 = - 0.517 0.966 Current habilities Inventory turn over ratio COGS 32963 6081 1161 Inventory 4776 -6.902 3228 499 = 6.469. = 5.238 Average collection period A 365 accounts Receivabte turnover patio 365 365 13.80 26 days. 365. 11.736 10.769 34 days 31 days. NOTET Accounts receivable turnover ratio Sales accounts Receivable ? Here first the value adow of accounts receivable turnover natio first calculated, then the collection period ats a found - Procter Colgate Accounts Palmotive Clorox 65232 15195 "4728 turnoner = 13.80 501 = 10.769 2 11.736 receirable 5880 ratto

Tan UT Procter Colgate. and Gramble clorox. Palmotives. tofal C Net Assets turnover. Bales. 65232 15195 5880 58514.50 6065.5 2281 • Average total Assets = 1.115. = 2.505 = 2.578 Average total Assts = total Assets Procter & Gamble = 117099 2 =58514.50 clomex 4562 =22812 = 606515 soleate and palmotines Colga 12131- 606515 fub) the liquidity can be measured through Cuorent patio, quick vratio. The colgate-palmotive company has highest liquidity. (c) the three companies exhibit samen quite different performances in terms of collecting receivables because

no short term collection means better performance and quick collection from o management debtors. "Where As long term collection have an adverse effect in case of the short term debt paying capability of the business. Here lowest time period us 26 days whic is of the Procter and Gamble Company and the highest one is Colgate-Palmotives 34 days and the clorox is in middle 31 days.