QUESTION 7. Continued. The SCF on the preceding page is from Procter & Gamble’s

Question

QUESTION 7. Continued.

The SCF on the preceding page is from Procter & Gamble’s 2017 10K.

7-1. In what life stage do you think P&G is, based on its SCF? WHY???

7-2. The change in inventories for 2017 was an increase or decrease? Explain why it was added or subtracted from net income.

7-3. The change in A/P for 2017 was an increase or decrease? Explain why it was added or subtracted from net income.

7-4. How much was the book value of assets sold?

7-5. 2017 Sales on P&G’s income statement was $65,058 (in millions). How much cash did they collect from customers?

7-6. Why is the change in short-term debt reported in the Financing section and not the Operating section? Are there any short-term loans that would be reported in operating? If so, what?

Consolidated Statements of Cash Flows ars ended June 2017 2016 2015 mounts in millions CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR OPERATING ACTIVITIES S 7,102S 6,836 8,548 10,604 3,078 Net earnings Depreciation and amortization Loss on early extinguishment of debt Share-based compensation expense Deferred income taxes Gain on sale of assets Venezuela deconsolidation charge Goodwill and intangible asset impairment charges Change in accounts receivable Change in inventories Change in accounts payable, accrued and other liabilities Change in other operating assets and liabilities Other 15,411 2,820 543 351 7,144 3,134 (803) (766) 2,028 2,174 349 313 928 (976) 746 14,608 (5,490) 450 35 116 1,285 204 184 15,435 (322) 71 (43) 162 12,753 TOTAL OPERATING ACTIVITIES INVESTING ACTIVITIES (3,384) 571 Capital expenditures Proceeds from asset sales Cash related to deconsolidated Venezuela operations Acquisitions, net of cash acquired Purchases of short-term investments Proceeds from sales and maturities of short-term investments Pre-divestiture addition of restricted cash related to the Beauty Brands divestiture Cash transferred at closing related to the Beauty Brands divestiture Release of restricted cash upon closing of the Beauty Brands divestiture Cash transferred in Batteries divestiture Change in other investments (3,736) 4,498 (908) (137) 3,647) 1,203 (3,314) (16) (4,843) 1,488 (874) (475) .870 (186) (2,815) 1,354 (996) (26) 93 (163)

Explanation / Answer

7-2) under cash flow statement in indirect method we have to adjust for the changes in working capital to the net profit.

therefore in the given question we have been asked whether there was any change in inventories and if there is whether there was any increase or decrease. Inventories have decreased as in the cash flow statement the change in inventory has been added.

Justification : Inventories when decreases to the initial level this represents that there has been sales more than what has been produced this year therefore theres an additional cash inflow from selling from opening stock.

7-3) In the above statement, it represents account payable has decreased

Justification : accounts payable represents liability to be paid by the entity and hence as per the negative value corresponding to the accounts payable item represents decrease in accounts payable.

it is subtracted from the cash flow statement as when accounts payable account is reduced it represents payment has been made that was outstanding in addition to payment outstanding for the year.

7-4) To calculate book balue of assets sold

Book value = Cash flow from sale of assets +/(-) profit/ loss from sale of such assets

2015= 4498 + 766

= 5264 ($)

for 2016 = 432 + 41

= 473 ($)

for 2017 = 571 +5490

= 6061 ($)

7-5) sales for P&g's income statement was 65058 $ millions

we have to determine cash collected from customers. Therefore, cash collected = sales +/- changes in accounts receivable

= 65058 - 322

= 64736 ($)

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