Procter and Gamble Financial Review

TABLE OF CONTENTS

A. Industry and Sector Overview 2
1. External Analysis 3
a. Technology 3
b. Demographic 3
c. International Exposure 4
2. Economic Indicators 4
a. GDP Growth 4
b. Household Income 4
c. Foreign Exchange Risk 4
3. Competition within Sector 4
B. Procter and Gamble: Company Analysis 6
1. Activities and Products 6
2. Strategic Position and Competition 7
3. Financial Analysis 8
a. Review of Business Segments 8
 Health Care 8
 Fabric and Home Care 8
 Baby, Feminine and Family Care 8
 Beauty Care 8
 Food and Beverage 9
b. Operating Results of Procter and Gamble 9
 Volume and Net Sales 9
 Net Earnings 9
 Operating Costs 9
c. Financial Performance 10
 Profitability Analysis 10
 Investment Utilization 11
 Solvency and Short term Liquidity 13
 Return on Equity: The Dupont Analysis 14
 Z - Score for Bankruptcy 15
 Growth Analysis 15
d. Comparative Financial Analysis 16
 Industry Specific Analysis 17
 Profitability 17
 Asset Utilization 18
 Liquidity 18
 Solvency 19
e. Risk Analysis 20
 Business Risk 20
 Sales Variability 21
 Operating Leverage 21
f. Valuation of Procter and Gamble 21
 Dividend Discount Model 22
 Economic Value Added 22
 Earnings Multiplier Model 23
 Technical Analysis 23
g. Investment Appraisal 25
h. Working Notes 26
Working Note 1 26
Working Note 2 26
Working Note 3 26
Working Note 4 26
Working Note 5 27
Working Note 6 27
Working Note 7 27
Working Note 8 28
Working Note 9 29
APPENDIX 30
References 34 The Procter and Gamble was incorporated as a family owned partnership business by William Procter and James Gamble in 1837 with a paid up capital of USD 7,192. This was the period when American economy was in financial panic. There was a fear of civil war and a widespread concern that the United States was bankrupt. However, despite of this era of financial distress the forward looking and aggressive policies of the owners helped company to achieve the sales

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