Account Receivables Turnover Ratio Analysis P&G
Account Receivables Turnover Ratio Analysis
2010
The A/R turnover ratio for 2010 was 14.80, which was a monumental increase from 8.45 in 2009. One reason for this increase was due to a conscious effort by Proctor and Gamble to improve collection times for incoming payments. In 2009, they incurred too much short-term debt due to the delayed collection of payments for their products and ended up decreasing their A/R account by almost $500 million. Their sales also increased in 2010 due to the expansion of the Beauty, Grooming, and Health segments during the year. A combination of their sales increase and a decrease in A/R led to the increase in their A/R turnover. In order to compare P&G to the industry, we had to define what industry a company as large as P&G belongs apart of. After our research, we determined that the industry average A/R turnover is 9.2. P&G’s 14.80 A/R turnover compares very favorably to the industry average of 9.2.
2011
The A/R turnover ratio for 2011 was 13.16, which was decrease from 14.80 in 2010. One factor that led to this was P&G’s increased involvement in international sales. The company determined to expand sales, they needed to make a more significant prescense abroad. However, when involving in international sales, any country that has any level of economic turmoil makes it extremely difficult to collect on credit sales in a timely fashion. P&G’s A/R increased by $940 million due to these international credit transactions. To prevent a significant decrease in their A/R turnover ratio however, they were able to experience a $3,621 million increase in sales the ratio decrease. Nearly $3,000 of their increase in sales can be attributed to their international sales. P&G could afford to decrease their A/R turnover ratio slightly because they still compare favorably to the industry average, which is 9.9.
2012
The A/R turnover ratio for 2012 was 13.79, which happened to be a slight increase from 13.16 of the previous year. The increase
2010
The A/R turnover ratio for 2010 was 14.80, which was a monumental increase from 8.45 in 2009. One reason for this increase was due to a conscious effort by Proctor and Gamble to improve collection times for incoming payments. In 2009, they incurred too much short-term debt due to the delayed collection of payments for their products and ended up decreasing their A/R account by almost $500 million. Their sales also increased in 2010 due to the expansion of the Beauty, Grooming, and Health segments during the year. A combination of their sales increase and a decrease in A/R led to the increase in their A/R turnover. In order to compare P&G to the industry, we had to define what industry a company as large as P&G belongs apart of. After our research, we determined that the industry average A/R turnover is 9.2. P&G’s 14.80 A/R turnover compares very favorably to the industry average of 9.2.
2011
The A/R turnover ratio for 2011 was 13.16, which was decrease from 14.80 in 2010. One factor that led to this was P&G’s increased involvement in international sales. The company determined to expand sales, they needed to make a more significant prescense abroad. However, when involving in international sales, any country that has any level of economic turmoil makes it extremely difficult to collect on credit sales in a timely fashion. P&G’s A/R increased by $940 million due to these international credit transactions. To prevent a significant decrease in their A/R turnover ratio however, they were able to experience a $3,621 million increase in sales the ratio decrease. Nearly $3,000 of their increase in sales can be attributed to their international sales. P&G could afford to decrease their A/R turnover ratio slightly because they still compare favorably to the industry average, which is 9.9.
2012
The A/R turnover ratio for 2012 was 13.79, which happened to be a slight increase from 13.16 of the previous year. The increase