Homework SourseDescribe the major trends or observations that this balance
Describe the major trends or observations that this balance sheet analysis highlights, and provide an opinion on what this means to the company. One paragraph minimum
| Procter and Gamble (PG) | |||
| (in millions of dollars) | |||
| Panel d. Historical Balance Sheet | |||
| Assets | 2012 | 2013 | 2014 |
| Cash & Cash Equivalents | 4,436 | 5,947 | 10,686 |
| Accounts Receivable | 6,068 | 6,508 | 6,386 |
| Inventory | 6,721 | 6,909 | 6,759 |
| Other Current Assets | 4,685 | 4,626 | 2,849 |
| Total Current Assets | $21,910 | $23,990 | $31,617 |
| Gross Property, Plant & Equipment | 40,233 | 43,012 | 44,427 |
| Accumulated Depreciation | (19,856) | (21,346) | (22,123) |
| Net Property, Plant & Equipment | 20,377 | 21,666 | 22,304 |
| Other Long-Term Assets | 89,917 | 93,607 | 90,345 |
| Total Assets | $132,244 | $139,263 | $144,266 |
| Liabilities and Equity | 2012 | 2013 | 2014 |
| Accounts Payable | 7,920 | 8,777 | 8,461 |
| Short-Term Notes Payable | 8,698 | 12,432 | 15,606 |
| Other Current Liabilities | 8,289 | 8,828 | 9,659 |
| Total Current Liabilities | $24,907 | $30,037 | $33,726 |
| Long-Term Debt | 21,080 | 19,111 | 19,811 |
| Other Long-Term Liabilities | 22,818 | 22,051 | 21,515 |
| Total Liabilities | $68,805 | $71,199 | $75,052 |
| Retained Earnings | 75,349 | 80,197 | 84,990 |
| Other Equity | (11,910) | (12,133) | (15,776) |
| Total Equity | $63,439 | $68,064 | $69,214 |
| Total Liabilities & Equity | $132,244 | $139,263 | $144,266 |
| Panel e. Common-Size Balance Sheet | |||
| 2012 | 2013 | 2014 | |
| Cash & Cash Equivalents | 3.4% | 4.3% | 7.4% |
| Accounts Receivable | 4.6% | 4.7% | 4.4% |
| Inventory | 5.1% | 5.0% | 4.7% |
| Other Current Assets | 3.5% | 3.3% | 2.0% |
| Total Current Assets | 16.6% | 17.2% | 21.9% |
| Gross Property, Plant & Equipment | 30.4% | 30.9% | 30.8% |
| Accumulated Depreciation | -15.0% | -15.3% | -15.3% |
| Net Property, Plant & Equipment | 15.4% | 15.6% | 15.5% |
| Other Long-Term Assets | 68.0% | 67.2% | 62.6% |
| Total Assets | 100.0% | 100.0% | 100.0% |
| Liabilities and Equity | 2012 | 2013 | 2014 |
| Accounts Payable | 6.0% | 6.3% | 5.9% |
| Short-Term Notes Payable | 6.6% | 8.9% | 10.8% |
| Other Current Liabilities | 6.3% | 6.3% | 6.7% |
| Total Current Liabilities | 18.8% | 21.6% | 23.4% |
| Long-Term Debt | 15.9% | 13.7% | 13.7% |
| Other Long-Term Liabilities | 17.3% | 15.8% | 14.9% |
| Total Liabilities | 52.0% | 51.1% | 52.0% |
| Retained Earnings | 57.0% | 57.6% | 58.9% |
| Other Equity | -9.0% | -8.7% | -10.9% |
| Total Equity | 48.0% | 48.9% | 48.0% |
| Total Liabilities & Equity | 100.0% | 100.0% | 100.0% |
Solution
Following can be interpreted about the company.
1. Company has made profit in 2012, 2013
Explanation: Retained as shown in the balance is the part of profit that company retails with itself and therefore it becomes part of equity in the subsequent year. The figure shown in the balance sheet is the profit that gets accumulated over years. In this example, retained earning increases in 2013 and 2014, which is possible when company makes profit in 2012 and 2013.
For 2014, we cannot conclude as any profit (i.e. incremental retained earning) will get reflected in balance sheet of year 2015, which is not shown here.
2. The company is running with a negative working capital, which means it is being dependent of its debtors. This could be a very alarming situation, as company may fail to pay its debtors.
Justification: Working capital is calculated as (Total Current Asset - Total Current Liability)
3. The company is able to efficently manage its inventory.
Justification: See, %values table. It shows a declining trend.
3. The company is
| Total Current Assets | $21,910 | $23,990 | $31,617 |
| Total Current Liabilities | $24,907 | $30,037 | $33,726 |
| Working capital | ($2,997) | ($6,047) | ($2,109) |
