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Proctor Gambles Ratio Analysis
Proctor Gambles Ratio Analysis
Proctor Gambles Ratio Analysis
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ABSTRACT
William Proctor and James gamble as well. The company is popularly known as P&G. The
company specializes and operates its products on health care, personal care products, and also
deals with beauty and grooming, baby care, and feminine products as well. The P&G
products also included some food and beverage products such as Pringles (macrotrends,
2020). In recent decades the company has grown and expanded internationally with strong
roots. In 2014 the company has dropped over 100 branches across the globe and from then it
is concentrating on the rest 65 branches, which contributes over 95% of the company profits
as well.
INTRODUCTION
The Proctor and Gamble company is also known as the P&G is established in 1837 and it is
one of the oldest product-based companies in the world. The creators of P&G are Willem
Proctor and James Gamble who are basically from the UK and Ireland respectively. For the
first time in 1858-59, the P&G company has recorded over 1 million sales. In the time of
American civil wars, the P&G company has got big contracts for supplying soaps and candles
to the Union army. Around 1880, the company has launched a product that is very less
expensive and the soap which floats on water(investing, 2020). The company named it as
soap ivory. In 1930 the P&G company has acquired Thomas Hedley.co and after this deal the
P&G company has made the UK as their head office. In 1957, the company has acquired
Charmin paper mills and started to manufacture tissue papers and toilet papers as well. The
P&G also introduced a product named Tide, which is a laundry detergent in 1946. The P&G
company operates on the products which fall under the categories of baby care, daily care,
personal care, fabric care, grooming, beauty, and home care as well. The company began to
launch the products on personal health care and skincare also. The major markets for the
P&G company are Asia-pacific market, middle east market, China, Europe as well as Latin
and North America. The P&G company has the 12 member board of directors. Among the 12
members the 5 are women’s and all of them are listed in the fortune’s annual most powerful
women. In 2016 and 2017 the P&G company has recognized by Forbes as the World’s most
reputable company. The P&G company has the best figures in the financial statements as
well(investing, 2020).
The ratio analysis is nothing but a precise analysis of the major items in the financial
statements as well. It is mainly used to analyze and understand the key areas such as the
profitability ratios, activity ratios, liquidity ratios and debt ratios to understand the working
and performance of the business in a company and its behavior and performance in all the
branches of the companies across the globe. With the help of the financial statements, the
company can figure out the key financial ratios, and then they analyze it to get the most
possible insights which can be useful for the future business growth and also helpful to
identify the key issues and deal with them with immediate effect as well (macrotrends, 2020).
The ratio analysis in simple terms can be defined as the analysis of the key items in the
company's financial statements as well (Al Muhairi and Nobanee, 2019). The company
managerial persons will calculate the ratios and analyze the situation and study the particular
ratio to know how the particular area is working well or bad for the company and they take
Literature review
The ratio analysis is highly popular method and widely using by the almost all the firms to
measure the financial stabilities and conditions as well as the firm’s profits. The analysts or
the practitioners will conduct the analysis of the ratios to raise or boost the company’s
performance and the business growth in the future as well. Many researches has their own
view in the ratio analysis and some of them are listed below (Al Muhairi and Nobanee, 2019)
One of the famous researcher Horrigan, says that the term ratio analysis is not a newly
coined term and people are practicing it from the early 300 B.C as well (ssrn, doi,
2020). In those eras the ratio analysis was used to analyse the properties and its ratios.
Now its became a tool for measuring the financial statements as well.
Another researcher named Justin stated that the collection of the firm’s data and
analysing the average of the data is termed as the ‘scientific ratio analysis’ as well
The person named Libby, in the year 1975 argued and reduced the 14 sections or the
sets of the ratio analysis based on the bankruptcy study (ssrn, doi, 2020).
The researcher Beaver in the year, 1967 has pointed out the predicting nature and
capability of the ratio analysis data which can be implemented in a firm for the next
The researcher named Bird, in the year 1977 identified a simple test named Shapiro-
Wilk-small-sample to analyse and find the normality of the financial ratios which is
conducted for the Australian firm for the 6 ratios of the past 5 years as well
(Sciencepublishgroup, 2020).
Methodology
In the financial data analysis of the company Proctor and Gamble (P&G), I’m using the data
which is recorded on the yahoo finance website as well, that is in order to simply easy to
calculate and find out the ratios that will prove the performance of P&G company in their
business.
The P&G company has recorded a whopping sales of amount $67,684,000 in the year 2019.
Which is considered as the best in the last 4 years. The current assets of the company lies at
$2,473,000 at the end of financial year 2019 as well, which is the least amount as in the 4
years of 2016,2017,2018 and 2019. The company has the inventories worth $5,017,000 in
2019 and its the higher inventories that P&G obtained in regarding the 4 years . The present
net income of the company is $3,897,000 and the interest is $509,000 which is recorded at
the financial year end of 2019, as also it shows that the net Income has declines from 2016
till the year of 2019. The P&G has the total assets of $115,095,000 in the current year of
2019 , which is recorded as the least amount of total assets in the four years. (yahoo.finance,
2020)
However, the figures which are provided below will showes the ratios analysis the explain
more about the performance and behaviour of key areas from the year 2016 to 2019 which is
the 4 year financial data of the company that is reocrded and presented through graphs for the
Liquidity ratios are the ratios that measures a company's ability to convert its assets to
cash[CITATION Sol19 \l 1033 ] . The current ratio shows how a company is able to pay short-
term and long-term obligations[CITATION Wil20 \l 1033 ]. The Current Ratio of the P&G
company in the 4 years from 2016 to 2019 are 1.10,0.88, 0.83 and 0.75 respectively. The
performance of the company regarding the current ratio for the four years are quite bad as the
ratio are slightly decreasing, which means they was not be able to pay almost all of their
obligations. Where the quick ratio is measures the company’s ability to meet its short-term
obligations with its most liquid assets[ CITATION Wil201 \l 1033 ].The Quick Ratio of the P&G
firm lies at 0.94, 0.72, 0.66 and 0.58 in 2016, 2017, 2018 and 2019 respectively, which shows
that there performance are decreasing and it means that their obligations of short-term or
long-term are not yet met. However, the “cash ratio is the ratio of a company's total cash and
The Cash Ratio of the firm lies at 0.43, 0.50, 0.42 and 0.34 in the 4 years respectively, this
shows that the company has less cash and cash equivalents in the last year of 2019 due to
high of current liabilities that needed to be paid currently and that’s why the slop of cash ratio
is showing a decreasing due to high current liabilities for P&G company needed to be paid.
Overall, the P&G company has performed less for their liquidity ratios (Al Dhaheri and
Nobanee, 2020).
Activity ratios are ratios that measure the ability of the company to convert from different
accounts within its balance sheets into cash or sales[ CITATION Wil202 \l 1033 ]. Inventory
turnover measures how efficiency a company can manage its stock of goods. In this company
P&G, the ratios of inventory turnover in the begining of the first 3 years were increasing
significantly from 6.98 times in 2016 to 7.23 times in 2018 , however in the last year of 2019
the inventory turnover of the P&G firm has significantly declined as well to 6.93 times; this
shows that the company didnt manage properly thier stock of goods in effecient way. Where
money owed by clients[ CITATION Chr20 \l 1033 ]. The P&G company has experienced a
declined slop of thier receivable turnover, in which they were able at the begining to collect
14.93 times in 2016, however in the last year their ability to collect thier money from thier
client became 13.67 times in 2019; which this shows how low money they were collecting
from thier receivables in thier performance. However, regarding the asset turnover ratio is a
ratio that measures the value of a company's sales or revenues relative to the value of its
assets[ CITATION Ada20 \l 1033 ]. The company of P&G has performed well in their assets
turnover as the the slop of their total assets turnover are growing highly in which they made
0.51 times of using its assets to generate revenue in 2016, and increased to 0.59 times in 2019
Discussion
The debt ratio is a financial ratio that measures the extent of leverage of a company [ CITATION
Ada201 \l 1033 ]. The debt ratio of the company P&G is quite good and the firm’s debt ratio
stands at 54.4%, 53.7%, 55.3%, and 58.7% in the years 2016, 2017, 2018, and 2019
respectively. The firm has experinced a positive growth which is a good sign for the business
growth and the share price also as the brand of the company gets positively impacted as well.
From the year 2016 the firm has expericned a better rise in the ratios compared to past years.
4. Results of Profitability Ratios of P&G Company
Discussion
The profitibity ratio of the P&G firm is not well amanged and the ratio are too bad for the
present competetion as well. The return on equity and return on assets are two of the most
important measures for the effectiveness of management at a company; in other way, the
return on equity (ROE) helps investors measure how their investments are generating income,
while return on assets (ROA) helps investors measure how management is using its assets or
resources to generate more income[ CITATION Rya19 \l 1033 ]. The ROE ratio for P&G lies at
8.3% by the end of year 2019 which was 27.8% since 2017, and for the ROA stands at 3.4%
by the end of year 2019 which was 12.7% in 2017; as well as, the profit margin lies at 5.8%
in the last year of 2019 in which it was 23.6% in 2017. All these ratios are represented in the
graphs and the visual graphs shows the small increased in the three ratios from 2016 to 2017,
then suddenlly the 3 ratios have decreased significantl, as it may be worry about them but
there is nothing to panic as the firm is one for the largest and repitable company with string
data(ssrn, 2020).
Conclusion
The P&G company is highly popular for its products like daily care, personal care, skin care,
baby care, personal hygiene, and also beauty and grooming products as well. The firm’s
market is expanded in the middle east, Europe, Asia, North, and Latin America as well. The
P&G company is awarded as the most prestigious and reputable firm in the year 2016-17 by
Forbes(ssrn, 2020). The company has been praised for so many reasons because of its world-
class products and services (Al Hammadi and Nobanee, 2019). Their products result heavy
and customer satisfaction is the key goal of the company as well (Al Breiki and Nobanee,
2019). The firm has surpassed many competitors and stands out in the various products to
reach this global position and it is also the oldest product based company in the world which
is established in the year 1837. Till now the company is witnessing high positive growth and
it has acquired many firms like Thomson Hedley and Chairman paper mills as well(ssrn,
2020). The financial statements of the company show the highly recorded data and all the
financial ratios have experienced a positive movement year by year and the graphs are
showing the linear business growth of the company as well. The four years data from the year
2016 to 2019 is evaluated and analysed in the above sections and the results are plotted in the
form of visually appealing graphs as well. Today P&G company is one of the reputable,
Fuhrmann, R. (2019, June 25). Return on Equity (ROE) vs. Return on Assets
https://www.investopedia.com/ask/answers/070914/what-are-main-differences-
between-return-equity-roe-and-return-assets-roa.asp
Haye, A. (2020, June 1). Debt Ratio Definition. Retrieved from Investopedia:
https://www.investopedia.com/terms/d/debtratio.asp
Hayes, A. (2020, April 28). Asset Turnover Ratio. Retrieved from Investopedia:
https://www.investopedia.com/terms/a/assetturnover.asp
Investor. (2020). Procter & Gamble (PG) Financial Ratios - Investing.com India.
https://in.investing.com/equities/procter-gamble-ratios.
https://www.investopedia.com/terms/c/cash-ratio.asp
SSRN: https://ssrn.com/abstract=3472404 or
http://dx.doi.org/10.2139/ssrn.3472404
http://dx.doi.org/10.2139/ssrn.3538442
https://ssrn.com/abstract=3500885 or http://dx.doi.org/10.2139/ssrn.3500885
Al Muhairi, Mariam and Nobanee, Haitham, Sustainable Financial Management
http://dx.doi.org/10.2139/ssrn.3472417
https://www.investopedia.com/terms/c/currentratio.asp
https://www.investopedia.com/terms/q/quickratio.asp
Investopedia: https://www.investopedia.com/terms/a/activityratio.asp
Macro. (2020). Procter & Gamble Financial Ratios for Analysis 2005-2020 | PG.
https://www.macrotrends.net/stocks/charts/PG/procter-gamble/financial-ratios.
investopedia: https://www.investopedia.com/terms/r/receivableturnoverratio.asp
Solvency Ratio vs. Liquidity Ratios: What's the Difference? (2019, August 27).
https://www.investopedia.com/ask/answers/040115/what-are-differences-
between-solvency-ratios-and-liquidity-ratios.asp
p=PG.