Go to P&G’s website and print out a copy of the annual report for the period ending June 30, 2016. Your project must be typed and double spaced. Mark each response with the corresponding question number.
The project is worth a total of 100 points. It is comprehensive over the financial statements, which will include questions/topics that have been covered in previous Intermediate Accounting classes, in addition to this course.
You are required to reference the financial statement (Balance Sheet, Income Statement, Statement of Cash Flows) and/or footnote used in arriving at your answer. In addition you are required to reference the page number in the annual report where you found the information (use the actual page number from the document, this is not going to be the same if you are looking at the document electronically). State any assumptions and/or calculations used to come to your conclusions. Points will be deducted for failing to include references.
1) About how many times a year does P&G turn over their accounts receivable? About how many days on average does it take P&G to turn over their accounts receivable? Did the ratio improve or worsen from 2004 to 2016?
2) How are the various categories of inventories valued? What is the cost flow assumption used by P&G for the various categories of inventory?
3) What is P&G’s revenue recognition policy? When is revenue generally recognized? Does P&G use the designation F.O.B shipping point or F.O.B destination? How do we know this?
4) What depreciation method does P&G use for property, plant and equipment? When and how does P&G handle changes in estimated useful lives?
5) For the fiscal year ending June 30, 2016 what is the amount of sales generated by each dollar invested in assets for P&G? Did the ratio improve or worsen from 2004 to 2016? What does this ratio tell us?
6) How are the cost of intangible assets with determinable useful lives amortized? How does the company handle goodwill and indefinite lived intangibles?
7) How are patents, technology and other intangibles with contractual terms amortized? What life is used?
8) How does P&G treat advertising costs?
9) Calculate the current ratio for the fiscal years ended June 30, 2016 and 2004. Did the ratio improve or worsen from 2004 to 2016 and what does this ratio mean to P&G?
10) For the year ending June 30, 2016 P&G reported how much as the current portion of long term debt? When is this amount due? In answering refer to the amounts in the notes to the financial statements rather than the actual face of the balance sheet. I am only looking for the current portion of long-term debt – not the individual or total amounts of other short term debt.
11) Calculate the acid test ratio for the year ending June 30, 2016 and 2015. Did this ratio improve or worsen and what does this mean to P&G?
12) What type of investment securities does P&G hold and how are they reported on the balance sheet? Income Statement?
13) How much of P&G’s total assets have been provided by creditors for the year ending June 30, 2016 and 2015? Did P&G’s risk of meeting maturing obligations increase or decrease from 2015 to 2016?
14) Calculate the number of times interest was earned for the years ended June 30, 2016 and 2004. Did P&G’s ability to meet interest payments as the come due increase or decrease?
15) At June 30, 2016 is the sum of P&G’s timing differences that will result in future taxable amounts greater than or less than the sum of all timing differences that will result in future deductible amounts? How do we know this? In answering this question look at the balance sheet amounts and take into consideration what you know about required netting with regard to deferred tax amounts. Do not worry about the fact that the amounts in the footnotes do not tie to the amount on the face of the balance sheet. You can answer this question based on the balance sheet amounts alone.
16) It is more likely than not that some or all of P&G’s deferred tax asset will not be realized. Is this statement true of false for P&G? How do we know this? Read carefully and consider the appropriate financial statement treatment if it is determined that it is more likely than not that some or all may not be realized.
17) For U.S. employees what is the most prevalent type of pension plan offered? Who bears the risk of the ultimate benefits to be paid under this type of plan, the employee or P&G?
18) How many common shared can P&G issue? How many are issued and outstanding as of June 30, 2016?
19) Does P&G carry TRUE no par value stock? Explain why or why not. What are the two main advantages of carrying no par stock?
20) What preference do the Class A preferred stockholders have? What inherent right did the Class B preferred stockholders give up?
21) What are the components that make up Accumulated Other Comprehensive Income?
22) What type of stock compensation plans does P&G have? What are they?
23) For all new stock option grants, what are the accounting details? (Exercise price / timing details)
24) For the year ending June 30, 2016 why are certain outstanding stock options not included in the diluted earnings per share calculation? What assumption can we make about exercise price versus market price?
25) In regard to the calculation of diluted earnings per share for the year ended June 30, 2016 we made certain assumptions regarding the exercise price and the market price as answered above. Give your own mathematical example using the treasury stock method and the formula provided in your textbook to prove the incremental increase or decrease in shares outstanding?
26) What are the two dilutive securities considered in the diluted earnings per share calculation?
27) What change in accounting principle that occurred during the 2016 fiscal year? How was the change accounted for (retrospectively or prospectively)?
28) What is the amount of cash provided/(used) by P&G’s operating activities? What types of items are generally classified as operating activities?
29) What was the amount of cash provided/(used) by P&G’s investing activities?
30) What was the amount of cash provided/(used) by P&G’s financing activities?
31) Which method does P&G use to prepare the Statement of Cash Flows and how do we know this by looking at the statement itself?
32) Did the independent auditors issue a qualified or an unqualified opinion on the financial statements for the year ending June 30, 2016?
33.) In your opinion is P&G a good investment? Be as detailed as possible sighting examples in the face of the statements as well as the notes. There is not a right or wrong answer – just your opinion. However you MUST back it up with sound financial, accounting and business knowledge including current events if they would impact your decision.