Question

PROCTER & GAMBLE* On February 14, 2017, The Wall Street Journal reported that Trian Fund Management, one of the biggest activist investors has built up a more than $3 billion stake in Procter & Gamble, a leading global consumer products firm. The move added urgency to P&G's efforts to turn around its business and boost its stock price. The firm's closely watched organic sales growth, which excludes acquisitions or divestments as well as currency swings, has been stuck between 1% and 3% in recent years (see Exhibits 1 and 2 O). It has struggled to boost sales growth as it has confronted a sluggish global economy and competition from global competitors and Internet upstarts. EXHIBIT 1 Income Statement (in millions of $) Year Ending June 30, 2017 June 30, 2016 June 30, 2015 Total Revenue 65,058 65,299 70,749 Operating Income 13,955 13,441 11,049 EBIT 13,257 13,369 11,012 Net Income 15,411 10,604 7,144 Source: P&G.

Answer 1

Part 1 : The formula used to calculate Current Ratios = Current Assets/ Current Liabilities

2017 2016 2015 Net Income to Total Revenue 15411/65058 10604/65299 7144/70749 EBIT to Total Revenue 113257/65058 13369/65299 11012/70749 Current Ratio 26494/30210 33782/30770 29646/29790 Total Liabilities to Total Assets 64628/120406 69153/127136 66445/129495 Shareholder's Equity Total Asset: 55778/120406 57983/127136 63050/129495 Net Income to Total Revenue EBIT to Total Revenue Current Ratio Total Liabilities to Total Assets Shareholder's Equity Total Asset: 2017 23.69% 20.38% 0.876994373 53.68% 46.32% 2016 2015 16.24% 10.10% 20.47% 15.56% 1.097887553 0.99516616 54.39% 51.31% 45.61% 48.69%

Part 3

The largest divison of P and G with respect to net sales were Fabric and Home Care with 32% whereas the smallest divison were Health Care at 11%. The one most important with the highest proportionate of net earnings with respect to sales were Fabric and Home Care with it contributing around 27% to the net income.

Part 4

With respect to financial statements of P and G, we can see that net sales have decreased from 2015 to 2016 and it has stayed stagnant in 2017. The company should look to improve net sales by trying to grow at a particular rate. also, the Current ratio has goone below 1 or 100% in the Year 2017 which means that current assets are not enough to finance current liabilties which might cause a problem for liquidity. Also, the liabilities to Total assets are growing which means increases liabilities are being faced by P and G. The positive outlook is that P and G is improving their profits by cutting down on costs and other expenses as the Net Income to Total Sales Ratio is improving implying the cost of goods sold has gone down drastically. If the company has ought to make major changes, it can look to increase sales which will lead to increased profitability. P & G should look to improve Fabric and Home Care, Baby Care, Feminine Care & Family Care which is the prime contributor to net income and can lead to increased profits. P & G should look to improve Oral Care and Personal Care which only contributes 11% the lowest to the net income. P & G should try and look to reduce costs and increase the prices slightly so that Oral and Personal Care also contribute healthly to the net income of P and G.