FINANCIAL

ANALYSIS
SILA SAVAŞ
21058
CASH FLOW STATEMENT
OF P&G
Cash Flow From Operating Activities
Cash Flow From Investing Activities
Cash Flow From Financing Activities
BALANCE SHEET OF P&G
Current Assets
Noncurrent Assets
Liabilities
Shareholder’s Equity
INCOME STATEMENT OF
P&G
REVENUE
EXPENSES
NET INCOME
 Liquidity Ratios
Liquidity refers to the ability of a concern to meet its current obligations as and when these become due.

• Current ratio = Current assets ÷ Current liabilities

P&G's current ratio deteriorated from 2016 to 2017 and from 2017 to 2018.
• Cash ratio = Total cash assets ÷ Current liabilities
P&G's cash ratio improved from 2016 to 2017 but then deteriorated from 2017 to 2018.
• Acid test ratio = Quick ratio = Total quick assets ÷ Current liabilities
P&G's quick ratio improved from 2016 to 2017 but then slightly deteriorated from 2017 to 2018 not reaching 2016 level.
• Inventory turnover = Cost of products sold ÷ Inventories
P&G's inventory turnover improved from 2016 to 2017 and from 2017 to 2018.
• Accounts Receivables Turnover = Net sales ÷ Accounts receivable
P&G's receivables turnover deteriorated from 2016 to 2017 but then slightly improved from 2017 to 2018.
• Days Sales in Inventory = Cost of products sold ÷ Avg. Inventories
• Days Payables = Cost of products sold ÷ Avg. Payables
• Days Sales in Accounts Receivable = Cost of products sold ÷ Avg. Receivables
 Debt Paying Ability Ratios
• Debt Ratio = Total liabilities ÷ Total Assets
• Debt to equity = Total debt ÷ Shareholders' equity attributable to Procter & Gamble
The cornerstone of evaluating solvency is the Debt-to-Equity Ratio which looks at a firms
absolute debt level in terms of a multiple of total stockholders' equity. It’s low, so it is good
for the company in terms of avoiding financial distress.
P&G's debt-to-equity ratio deteriorated from 2016 to 2017 and from 2017 to 2018.
• Times Interest Earned Ratio =Income before interest and income taxes ÷ interest
expense
P&G’s income is ≃ 20 times higher than its interest expense through the years. Creditors
would favor P&G, because it can afford to pay its interest payments when they come due,
meaning it’s less risky.
Profitability Ratios
Profitability ratios or profitability margins are a good indicator of how efficient a company is
operating.

• Gross Profit Margin = 100 × Gross profit ÷ Net sales

The gross profit margin is a measurement of a company's manufacturing and distribution efficiency
during the production process.
P&G's gross profit margin improved from 2016 to 2017 but then deteriorated from 2017 to 2018.

• Return on Sales = Net profit margin = 100 × Net earnings attributable to P&G÷ Net sales
P&Gs net profit margin improved from 2016 to 2017 but then deteriorated from 2017 to 2018.
• Return on Assets = ROA = 100 × Net earnings attributable to Procter & Gamble ÷ Total assets
P&G's ROA improved from 2016 to 2017 but then deteriorated from 2017 to 2018.
• Return on (Common Stock) Equity = ROE = 100 × Net earnings attributable to P&G÷ Shareholders'
equity attributable to P&G
P&G's ROE improved from 2016 to 2017 and from 2017 to 2018.
Vertical Analysis for Income Statements
Growth ratios or growth rates tell us just how fast a company is growing.

Net Income:
Net income of P&G in 2018 was $9.75 billion as compared to last year’s $10.11 billion. Net income was down by (3.55%).

Vertical Ratio Analysis helps us with analyzing the historical trends.

*We note that gross profit margin (Gross Profit / Net Sales) has been in the range of 48%-50%, fluctuating.
Financial condition continues to be of high quality:
 Ability to generate substantial cash from operations
• Competitive rates.
 Operating cash flow provides the primary source of funds to finance operating needs and capital expenditures.
 Excess operating cash is used first to:
• Fund shareholder dividends
• Share repurchases
• Acquisitions to complement its portfolio of brands and geographies. As necessary, P&G may supplement operating cash flow with
debt to fund these activities.
 The overall cash position of the Company reflects its strong business results and a global cash management strategy that takes into
account liquidity management, economic factors and tax considerations.
• Operating Cash Flow Fiscal year 2018 compared with fiscal year 2017 Operating cash flow was $14.9 billion in 2018, a 17% increase
from the prior year. Net earnings, adjusted for non-cash items (depreciation and amortization, loss on extinguishment of debt,
share-based compensation, deferred income taxes and gain on sale of assets) generated $11.4 billion of operating cash flow.
Working capital and other impacts generated $3.5 billion of operating cash flow as summarized below.
• Fiscal year 2017 compared with fiscal year 2016 Operating cash flow was $12.8 billion in 2017, a 17% decrease from the prior year.
Net earnings, adjusted for non-cash items (depreciation and amortization, share-based compensation, deferred income taxes,
loss/(gain) on sale of assets and impairment charges) and the loss on early extinguishment of debt generated $13.0 billion of
operating cash flow. Working capital and other impacts used $281 million of operating cash flow.
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.
We delivered strong free cash flow results, generating $14.9 billion of operating cash flow. Free cash flow was $11.2 billion, with adjusted free cash flow productivity of 104%, well above our target
of 90%.
We targeted organic sales growth of 2% to 3% for the fiscal year. We delivered 1%. Collectively, eight of our 10 product categories grew organic sales over 3%. This growth was partially offset by
results in Baby Care and Grooming, both of which were down versus the prior year.
A number of our large markets had strong organic sales growth, with China being a bright spot as we continued our strong turnaround there. In China two years ago, organic sales were down 5%.
We finished this year up 7%, with accelerated sales growth as the year progressed — 6% in the first half and 8% in the second half, which included 10% organic sales growth in the fourth quarter. Six
of seven categories held or grew sales, up from one of seven categories two 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-single- digit 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-commerce competitors combined. And we held or built e-commerce value share in eight of 10 product categories. All-in sales grew 3%, including a net benefit from the impacts of foreign
exchange, acquisitions and divestitures.
We continued to dependably generate cash and return value to you, our shareowners. In total, P&G returned more than $14 billion of value to shareowners. We repurchased approximately $7
billion of stock and paid $7.3 billion in dividends. We increased our dividend by 4%, marking the 62nd consecutive annual increase and the 128th consecutive year P&G has paid a dividend — every
year since our incorporation in 1890.
In summary, we grew core earnings per share above our going-in target, we drove cash productivity ahead of target, we returned cash to shareowners, and we improved market share trends. We
grew sales, but modestly below our target range. Overall, we made important progress, but we have room to improve on all metrics — especially on top-line growth.
Going forward, our objective remains consistent and clear — balanced top-line growth, bottom-line growth and cash generation that consistently delivers total shareholder return in the top third of
our peer group. We’re confident that we have the right strategy and plans in place.
However, we’re operating in a very dynamic environment with changing government policies, geopolitical uncertainties, retail channel transformation, disruption of the media ecosystem, rising
input costs and foreign exchange headwinds, and we’re competing against highly capable multinational and local competitors.
That is why we are accelerating change to meet these challenges and further improve results. This will enable us to spot and capitalize on opportunities — and identify and fix issues — faster than
we ever have in the past. We will be the disrupters in our industry.
We are doubling down on the strategic choices we’ve made to win with consumers and create value for shareowners. We are investing to improve superiority, our margin of advantage. We are
making P&G ever more productive. We are structuring an organization and building a culture to lead change in this dynamic environment.

-DAVID S. TAYLOR
Chairman of the Board,
President and Chief Executive Officer
Future Plans of P&G
We continue to raise the bar to improve the lives of the world’s consumers with consumer-preferred brands and products and to deliver even
stronger results for you, our shareowners.
In the year ahead, we expect to grow organic sales 2% to 3%, grow core earnings per share 3% to 8% and deliver 90% or better adjusted free
cash flow productivity. And we expect to pay over $7 billion in dividends and repurchase up to $5 billion of common shares.
This is another step toward our goal of sustained, balanced top-line growth, bottom-line growth and cash generation, which yields operating
total shareholder return in the top third of our peer group.
While the current environment is highly dynamic, I’m confident in the determination and capability of P&G people to win in even the most
challenging of circumstances and serve consumers and shoppers better than anybody else in the world.
It’s through our efforts to extend our margin of competitive superiority, to drive productivity savings to fund investments for growth and
enhance our industry-leading margins, and to simplify our organization structure and increase accountability that we’ll win with consumers
and deliver balanced top- and bottom-line growth that creates value over the short, mid- and long term.
DAVID S. TAYLOR
Chairman of the Board,
President and Chief Executive Officer
RECOMMENDATION: INVEST!
 OPPORTUNITIES TO GROW IN EMERGING MARKETS
 FOCUS ON INVESTING IN PRODUCT INNOVATION
 PREDICTION OF SALES AND MARKET PRICE GROWTH
Appendix
• https://www.marketwatch.com/investing/stock/pg/financials
• https://www.pg.com/annualreport2018/static/PG-2018-Annual-
Report.pdf
• https://www.pg.com/annualreport2018/index.html#/Financial-
Highlights
• https://www.pg.com/annualreport2018/index.html#/Results-
Introduction
• https://www.pg.com/annualreport2018/index.html#/Raising-the-Bar