Joseph Newport Joseph John Nicole Gulaszewski Kelly Susick Shannen Manfreda November 18, 2011

Chapter 5 Case Study #2

A. There are two types of balance sheet forms, Account form and Report form. These are also known as Horizontal and Vertical form respectively. Usually, all companies use Account for presenting their balance sheet, which goes for auditing before being submitted to IRS and other government authorities. Report form or vertical form lists accounts one after another on the same page, and it is presumed to be used for the layman, who make have less knowledge about the accounts on the balance sheet. P&G has adopted the Account form balance sheet when they prepared their financial statements. B. The techniques of disclosing pertinent information include (1) parenthetical explanations, (2) notes, (3) cross-reference and contra items, and (4) supporting schedules. P&G uses parenthetical explanations and notes and supporting schedules. C. P&G reports their investments on the Balance sheet as current assets. Investments are reported at fair value on the consolidated financial statements. On June 30, 2009 P&G has negative working capital of $8,996,000,000. And previously on June 30, 2008 P&G had negative working capital of $6,443,000,000. D. In 2009, cash flows from operations were $14,919,000,000., cash flows from investing were ($2,353,000,000), and cash flows from financing activities were ($10,814,000,000). The trend in net cash provided by operating activities was a small increase from 2007 to 2008, and then a small decrease from 2008 to 2009. Changes in accounts payable and in accrued and other liabilities is added to net income to arrive at net cash provided by operating activities because these items show up on the income statement but the cash may not have been received. E. Current Cash Debt Coverage Ratio Net Cash provided by operating activities/Average current liabilities 16,123,000,000/((30,901,000,000+30,958,000,000)/2) 16,123,000,000/30,925,000,000

Joseph Newport Joseph John Nicole Gulaszewski Kelly Susick Shannen Manfreda November 18, 2011
0.5213 Cash Debt Coverage Ratio Net Cash provided by operating activities/Average Total Liabilities 16,123,000,000/((71,734,000,000+74,498,000,000)/2) 16,123,000,000/73,116,000,000 .2205 Free Cash Flow for 2009 Net cash provided by operating activities-Capital ExpendituresDividends 16,123,000,000-3,238,000,000-5,044,000,000 $7,841,000,000 The current cash debt coverage ratio shows that P&G has a relatively low liquidity. A ratio closer to 1:1 would be advised. The cash debt coverage ratio is extremely low, which leads me to believe that P&G might have difficulty paying its debts if funds became limited or too expensive. The free cash flow for 2009 shows that P&G paid its dividends for the year, so they did not need to resort to external financing. Also, that P&G has such a high amount of free cash flow there are numerous options for investment, debt pay off and other options to increase liquidity.