Read the Financial Reporting Problem, The Procter & Gamble Company (P & G) (located in Chapter 5: Balance Sheet and Statement of Cash Flows, Using Rations to Analyze Performance, Using Your Judgement

CASE DISCUSSION: THE PROCTER & GAMBLE COMPANY (P & G)

Read the Financial Reporting Problem, The Procter & Gamble Company (P & G) (located in Chapter 5: Balance Sheet and Statement of Cash Flows, Using Rations to Analyze Performance, Using Your Judgement on pages 254 and 255 of the textbook) and answer the questions below.

Answer one question at a time. Let the remainder of the class answer another question and then comment on the answers given, expressing why the answer was either correct or not correct and why.

Financial Reporting Problem: The Proctor & Gamble Company (P & G)

The financial statements of P & G are presented in Appendix B: Specimen Financial Statements: The Proctor & Gamble Company (of the textbook).  The company’s complete annual report, including the notes to the financial statements, is available online.

INSTRUCTIONS

Refer to P&G’s financial statements and the accompanying notes to answer the following questions.

What type of income statement format does P&G use? Indicate why this format might be used to present income statement information.

What are P&G’s primary revenue sources?

Compute P&G’s gross profit for each of the years 2012–2014. Explain why gross profit decreased in 2014.

Why does P&G make a distinction between operating and nonoperating revenue?

What financial ratios did P&G choose to report in its “Financial Summary” section covering the years 2009–2014?

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