Procter and Gamble Annual Report Analysis This project is based on Procter and Gamble company annual report please look at the attached files and read the

Procter and Gamble Annual Report Analysis This project is based on Procter and Gamble company annual report please look at the attached files and read the instructions that are provided for this project Enter Student’s Name Here:
Extra Credit Assignment (Based on Procter and Gamble Company 2018 Annual Report)
BE CAREFUL AND CERTAIN TO THOROUGHLY READ AND UNDERSTAND ALL INSTUCTIONS AND QUESTIONS.
Timely completion and uploading of this assignment may result in the awarding of extra credit points,
added to the student’s class attendance and participation grade for ACCT 301. A student can earn up to 2
additional class attendance and participation points, and possibly more for exceptional performance,
depending on the completeness and quality of the assignment, and compliance with the stated requirements
for the assignment. The course syllabus states that class attendance and participation accounts for 10% of the
course grade. This assignment provides an opportunity for the student to earn additional bonus points, added
to the class attendance and participation component of the course grade. The potential impact of the extra
credit points available for this assignment is illustrated as such: If a student earns 2 additional (bonus) class
attendance and participation points for this assignment the student’s course grade will increase by a full 2
percentage points; for example, increasing a course grade of 87, earned prior to the addition of extra credit
points, to 89, i.e. a B to a B+. More importantly, a student can realize a benefit from a very practical experiential
learning opportunity, working with an actual annual report of a large publicly-held corporation, applying and
connecting concepts studied in the course to the analysis of an authentic resource. This assignment is,
essentially, a mini-capstone assignment for the course. It is an extra-credit assignment because it was not
included as a required component in the course syllabus.
The assignment is based on Procter and Gamble Company’s 2018 Annual Report, which has been provided
to the students digitally via Moodle. The purpose for the assignment is to provide students with a learning
experience that connects the application of concepts learned to the understanding of an actual annual
report for a large publicly-held corporation. The student is asked to respond to a series of questions relating
to concepts studied in Intermediate Accounting. Some of those concepts may have been studied in ACCT 115
the course that precedes ACCT 301, or in another Intermediate . Some questions may relate to concepts for
which students may need to do a little research.
It is the instructor’s expectation that students utilize this opportunity for what it is and maximize the
provided learning experience. Students may work independently or may collaborate with up to three other
students to complete the assignment. If working collaboratively, all students on a team must strive to actively
and equally contribute to the effort. If the instructor discerns that assignment solutions submitted by
individuals working independently or by students working on different teams have copied answers of others,
i.e. cheated, all involved students will earn a grade of zero for the assignment.
If multiple students choose to collaborate, up to a maximum of four students per team, the uploaded
assignments for all team members must include identical answers for Questions 1 through 14, but each
student on the team must include his/her own personal answer for Question 15. Also, for any member of
a team to earn points for this assignment, all members of the team must upload a completed assignment
to Moodle by the due date. To ensure that all members of a collaborative team have identical answers, it
is suggested that one team member be designated to record the team’s answers for the first 14 questions
of the document and then that student shares a digital copy of the completed assignment with the other
team members and then each member individually completes Question 15 and each member separately
uploads the completed assignment.
Please also note that it is possible that one or more questions relating to the content of the Procter and Gamble
Company 2018 Annual Report may be included on the Final Exam. Memorization of report content should not be
required to successfully answer such questions. Familiarity with report content, acquired by earnestly working on
the assignment, should be sufficient for a student to correctly answer the exam questions.
Completed Assignments may not be submitted on paper or via email. All completed assignments must be
uploaded to the provided Moodle folder by no later than Thursday, May 2, 2019, at 11:59 PM. They must
be uploaded in Word format. Name your file: ACCT301-PGReport-LastName,FirstInitial
Page 1 of 6
Enter Student’s Name Here:
Extra Credit Assignment (Based on Procter and Gamble Company 2018 Annual Report)
Question 1 (1 point):
Notice that following the cover page of the annual report is the page that includes a brief table of contents
and a comparative five-year summary of Financial Highlights, stated in billions of dollars, with the exception
of the per share amounts. Why do you think the word “Unaudited” is included in the title for the Financial
Highlights? Enter your answer in the space that follows.
Answer:
Question 2 (2 points):
Following the aforementioned page that includes Financial Highlights is a letter to the shareowners from
David S. Taylor, Chairman of the Board, President and Chief Executive Officer. Mr. Taylor’s letter includes
multiple descriptions for the results of segments of the company. It specifically and liberally includes the
phrases “organic sales” and “organic sales growth” at least thirteen times. The phrases seem to be indicative
of a key thread or theme that pervades the letter. What is the meaning of “organic sales” and “organic sales
growth” and why is it that the phrases are obviously very relevant to the message of the letter and so
important that Mr. Taylor uses them so often? Enter your answer in the space that follows.
Answer:
Question 3 (2 points):
In his letter to the shareowners, Mr. Taylor spoke of P&G dependably generating cash and returning value to
the shareowners. The letter speaks of P&G returning more than $14 billion of value to the shareowners, in
two specific ways and, in the same paragraph, specifically references two truly marvelous indicators of
success for the business; achievements that may be unique to P&G, and possibly unmatched by any other
company. Explain what was done to return value to the shareowners and also include mention of the two
truly marvelous indicators of success. Enter your answers in the space that follows.
Answers:
Question 4 (1 point):
Page 2 of 6
Enter Student’s Name Here:
Extra Credit Assignment (Based on Procter and Gamble Company 2018 Annual Report)
Mr. Taylor’s letter to shareowners primarily speaks about results for Fiscal Year 2018, with some comparisons
to prior period results and then also some commentary about strategic initiatives intended to further the
financial successes of the business, i.e. “looking ahead.”
What was the end date for P&G’s Fiscal Year 2018? Enter your answer in the space provided below.
Answer:
Notice that the first (cover) page of the Form 10-K includes the headquarters address for the company, in
Cincinnati, Ohio, and that the state of incorporation for the business is Ohio. It also indicates that the
company’s Common Stock has no par value and that the shares of the company are listed on the New York
Stock Exchange and are also connected to NYSE Euronext-Paris, indicative of the global character of the
company. The first page of the 10-K includes additional information about the company, including the
aggregate market value of the voting stock held by non-affiliates on December 31, 2017 and the number of
shares of Common Stock outstanding at July 31, 2018. Interestingly, neither dates correspond to reporting
dates used elsewhere in the report. The purpose for reporting those statistics as of those dates is unclear.
Question 5 (1 point):
Reference the section at the bottom of the first (cover) page of the Form 10-K regarding Documents
Incorporated by Reference. It is noted that portions of the Proxy Statement for the 2018 Annual Meeting of
Shareholders are incorporated by reference into Part III of the report. What is a Proxy Statement and why is
it necessary for a publicly-traded company like The Procter & Gamble Company to schedule and hold annual
meetings for the shareholders? Enter your answer in the space provided below.
Answer:
Question 6 (2 points):
The second page of the Form 10-K, following the cover page, is a very detailed Table of Contents for the
report. Notice that Part II of the report includes the preponderance of its content. The content of the 10-K
begins on the first numbered page of the report. The second paragraph of Part I, Item 1. Business, includes a
short description of the business, as follows: “The Procter & Gamble Company is focused on providing
branded consumer packaged goods of superior quality and value to improve the lives of the world’s
consumers. The Company was incorporated in Ohio in 1905, having been built from a business founded in
1837 by William Procter and James Gamble. Today, our products are sold in more than 180 countries and
territories.” Also notice the reference to five reportable segments under U.S. GAAP [emphasis added] under
the section titled “Financial Information about Segments” and the comments relating to Research and
Development Expenditures on numbered Page 2. A following paragraph simply entitled “Employees”
includes a table that illustrates a decline in the number of employees, with reference to discontinued
operations. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
begins on Numbered Page 12. This section of the report provides valuable information for the reader, some
of which is reemphasized and explained in more detail in the notes to the financial statements that follow
later in the report. Find the section on Page number 25 entitled Cash Flow, Financial Condition and Liquidity.
Page 3 of 6
Enter Student’s Name Here:
Extra Credit Assignment (Based on Procter and Gamble Company 2018 Annual Report)
Regarding liquidity, note the statement made relating to the relationship of current liabilities to current
assets.
This question, Question 6, is actually two questions. The first relates to Operating Cash Flow. Note the
statement: “Operating cash flow provides the primary source of cash to fund operating needs and capital
expenditures.” Regarding Operating Cash Flow, Fiscal year 2018 compared with fiscal year 2017… what were
the sources of activity that resulted in operating cash flow of $14.9 billion? Enter your answer in the space
provided below. Hint: The Company’s Statement of Cash Flow for 2018 provides helpful information.
Answer:
Secondly, regarding liquidity…. A review of the Fiscal Year 2018 Balance Sheet, on Page 39, reveals that the
current ratio is 0.83, well below 1.0, and working capital is ($4.9 billion), that’s negative $4.9 billion, indicating
potential liquidity concerns for investors. Identify the causes for the possible liquidity concerns and P&G’s
expectations to work through the situation. Also notice that P&G maintains a line of credit (see bottom of
Page 26). Use this space for your answer:
Answer:
Question 7 (2 points):
Page 29 of the report includes a discussion about Goodwill and Intangible Assets. Read the first two
paragraphs of this section to learn about the company’s accounting practices for intangible assets. Later in
this section of the report, statements relating to determining the useful life of intangible assets, impairment
assessments, and the origin of Goodwill are made. Summarize these statements in the space provided below.
Note: it may be helpful to also review the discussion about Goodwill included in the Notes to Consolidated
Financial Statements.
Answer:
Page 31 of the report includes some intriguing content relating to Measures Not Defined by U.S. GAAP and
some helpful tables that provide relevant information for investors.
Page 4 of 6
Enter Student’s Name Here:
Extra Credit Assignment (Based on Procter and Gamble Company 2018 Annual Report)
Question 8 (1 point):
Item 8. Financial Statements and Supplementary Data begins on Page 34. Page 34 is a key document in the
report. Explain why this document is so important. Use the spaced provided below for your answer.
Answer:
Question 9 (1 point):
Pages 35 and 36 comprise the reports by an Independent Registered Public Accounting Firm. Who is the
accounting firm and did they issue a favorable or unfavorable report on their findings from their reviews of
P&G’s processes and financial reports? Enter your answers in the space provided below.
Answer:
Question 10 (2 points):
The comparative Consolidated Statements of Earnings (Income Statements) are found on Page 37 of the
report. Notice that P&G had net earnings relating to discontinued operations in both Fiscal Years 2017 and
2016, in the amounts of $5.2 billion and $577 million, respectively. To which former portions of the business
do these discontinued earnings relate? Hint: You will need to find the discussion about Discontinued
Operations in the Notes to Consolidated Financial Statements. Enter your answers in the space provided
below.
Answers:
Question 11 (1 point):
The Fiscal Year 2018 Balance Sheet includes $20.9 billion of Long-Term Debt. In what type of financial
instruments is the majority of that debt held? Enter your answer in the space provided.
Answer:
Question 12 (1 point):
Other Noncurrent Liabilities totaled $10.2 billion at June 30, 2018. List the items that comprised this category
of liabilities and the associated amounts. Enter your answer in the space that follows.
Answer:
Be certain to read the information about the determination of Fair Values on Page 59 of the report.
Question 13 (1 point):
Page 5 of 6
Enter Student’s Name Here:
Extra Credit Assignment (Based on Procter and Gamble Company 2018 Annual Report)
Which method does P&G use to prepare its Statements of Cash Flow? Direct or Indirect?
How do you know?
Answer:
Question 14 (2 points):
P&G used a significant amount of cash to purchase treasury stock. Why do think their Board of Directors
approved the purchases? Enter your answer in the space that follows.
Answer:
Question 15:
[This question is applicable only for those students who collaborated to complete the assignment.]
If multiple students collaborated to complete this assignment, each student on the team must independently
list the names of the team members in the order of their contributions to the work effort. Each student
should list, based on their personal assessment, the names of all contributing students in the order of greatest
contributor first, followed by the next greatest, and the next greatest, etc., and also indicate an estimate of
the percent of the total assignment effort contributed by each student (totaling 100%).
Collaborators (ranked) – Required:
Student 1:
Percent of Effort:
Student 2:
Percent of Effort:
Student 3:
Percent of Effort:
Student 4:
Percent of Effort:
Optional comments by the collaborator:
Page 6 of 6
2018
Annual Report
Table of Contents
Letter to Shareowners
i
Five Measures of
Noticeable Superiority
iv
P&G’s 10-Category Portfolio
xii
Form 10-K
xiii
Measures Not Defined
by U.S. GAAP
74
Company and
Shareholder Information
75
Company Leadership
76
Board of Directors
77
Recognition and Commitments
78
Citizenship
Inside Back Cover
FINANCIAL HIGHLIGHTS (UNAUDITED)
Amounts in billions, except per share amounts
2018
2017
2016
2015
2014
$66.8
$65.1
$65.3
$70.7
$74.4
$13.7
$14.0
$13.4
$11.0
$13.9
$9.8
$15.3
$10.5
$7.0
$11.6
14.8%
15.7%
15.4%
11.7%
14.3%
$3.67
$3.69
$3.49
$2.84
$3.63
Diluted Net Earnings per Common Share 1
$3.67
$5.59
$3.69
$2.44
$4.01
Operating Cash Flow
$14.9
$12.8
$15.4
$14.6
$14.0
Dividends per Common Share
$2.79
$2.70
$2.66
$2.59
$2.45
Net Sales
Operating Income
Net Earnings Attributable to P&G
Net Earnings Margin from Continuing Operations
Diluted Net Earnings per Common Share from Continuing Operations
2018 NET SALES BY
GEOGR APHIC REGION
2018 NET SALES BY
BUSINESS SEGMENT 2
Beauty
1
2018 NET SALES BY
MARKET MATURIT Y
19%
North America 3
44%
Developed Markets
65%
Grooming
10%
Europe
24%
Developing Markets
35%
Health Care
12%
Asia Pacific
9%
Fabric & Home Care
32%
Greater China
9%
Baby, Feminine & Family Care
27%
Latin America
7%
India, Middle East
& Africa (IMEA)
7%
(1) Diluted net earnings per common share are calculated based on net earnings attributable to Procter & Gamble.
(2) These results exclude net sales in Corporate.
(3) North America includes the United States, Canada and Puerto Rico.
VARIOUS STATEMENTS IN THIS ANNUAL REPORT, including estimates, projections, objectives and expected results, are “forward-looking statements” within
the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934 and are generally identified by the words “believe,” “expect,” “anticipate,” “intend,” “opportunity,” “plan,” “project,” “will,” “should,” “could,” “would,” “likely”
and similar expressions. Forward-looking statements are based on current assumptions that are subject to risks and uncertainties that may cause actual results
to differ materially from the forward-looking statements, including the risks and uncertainties discussed in Item 1A – Risk Factors of this Annual Report.
We undertake no obligation to update or revise publicly any forward-looking statements.
Dear Shareowners,
Fiscal year 2018 marked an important step
toward our goal of sustained, balanced
top-line growth, bottom-line growth and
cash generation, and leadership levels of
value creation for you, our shareowners.
We finished above the top end of our going-in
guidance range on core earnings per share, we
exceeded our cash targets with another strong
year of value returned to shareowners, and while
we were slightly below our target on sales growth,
we continued to improve market share trends.
We did all of this while facing market contractions,
currency devaluations, transportation disruptions
and trade inventory reductions, as well as rising
commodity and freight costs.
Core earnings per share were $4.22, an 8% increase,
above the high end of our going-in target range.
This includes headwinds from commodity costs
which rose throughout the year, as well as benefits
from the U.S. Tax Act. All-in GAAP earnings per share
were $3.67, a decline of 34% due to a fiscal year
2017 comparison period that includes a substantial
earnings gain from the Beauty Brands divestiture
and one-time non-core charges related to the
U.S. Tax Act in the current year.
years ago. This was significant progress in our second
largest market for both sales and profit. In addition,
India delivered double-digit organic sales growth,
while Mexico and Japan both delivered mid-singledigit organic sales growth.
Importantly, we improved market share trends in
seven of our 10 global product categories throughout
the year. In our largest countries, eight of the 15
improved versus the prior year, with fourth quarter
trends better than fiscal year average in 10 of 15.
In the U.S., which accounts for around 40% of sales,
all-outlet value share improved from a decline versus
prior year in fiscal year 2017 to in-line with prior
year in fiscal 2018, improving throughout the year
to overall share growth in the April–June quarter.
Our global e-commerce sales were strong, up
30% for the year, and accounted for nearly $4.5
billion of sales — about 7% of our total business.
For perspective, this is roughly the size of our
two largest e-comme…
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