The financial statements of P&G are presented in Appendix B. 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.

a. Which method of computing net cash provided by operating activities does P&G use? What were the amounts of net cash provided by operating activities for the years 2015, 2016, and 2017? Which two items were most responsible for the decrease in net cash provided by operating activities in 2017?

b. What was the most significant item in the cash flows used for investing activities section in 2017? What was the most significant item in the cash flows used for financing activities section in 2017?

c. Where is “deferred income taxes” reported in P&G’s statement of cash flows? Why does it appear in that section of the statement of cash flows?

d. Where is depreciation reported in P&G’s statement of cash flows? Why is depreciation added to net income in the statement of cash flows?