Describe the major trends or observations that this balance sheet analysis highl

Question

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%

Explanation / Answer

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)

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