Question 1 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. Click here to view Appendix B Refer to these financial statements and the accompanying notes to answer the following questions. What were P&G's total assets at June 30, 2017? At June 30, 2016? June 30, 2017 June 30, 2016 Total assets $1 million million How much cash (and cash equivalents) did P&G have on June 30, 2017? Cash and cash equivalents million What were P&G's research and development costs in 2016? In 2017? 2017 2016 Research and development costs million million What were P&G's revenues in 2016? In 2017? 2017 2016 Net sales million million What were the amounts of P&G's depreciation and amortization expense in 2015, 2016, and 2017? 2017 2016 2015 Depreciation and amortization expense million $ million million Appendix B Specimen Financial Statements: The Procter & Gamble Company Once each year, a corporation communicates to its stockholders and other interested parties by issuing a complete set of audited financial statements. The annual report, as this communication is called, summarizes the financial results of the company's operations for the year and its plans for the future. Many annual reports are attractive, multicolored, glossy public relations pieces. containing pictures of corporate officers and directors as well as photos and descriptions of new products and new buildings. Yet the basic function of every annual report is to report financial information, almost all of which is a product of the corporation's accounting system. The content and organization of corporate annual reports have become fairly standardized. Excluding the public relations part of the report (pictures, products, etc.), the following are the traditional financial portions of the annual report: Financial Highlights Letter to the Stockholders - Management's Discussion and Analysis - Financial Statements Notes to the Financial Statements Management's Responsibility for Financial Reporting Management's Report on Internal Control over Financial Reporting . Report of Independent Registered Public Accounting Firm . Selected Financial Data The official SEC filing of the annual report is called a Form 10-K, which often omits the public relations pieces found in most standard annual reports. On the following pages, we present The Procter & Gamble Company (P&Gys financial statements taken from the company's 2017 Form 10-K. Consolidated Statements of Earnings Amounts in millions except per share amounts; Years ended June 30 NET SALES Cost of products sold Selling, general and administrative expense Venezuela deconsolidation charge OPERATING INCOME 2017 2016 2015 $ 65,058 $ 65,299 $ 70.749 32,535 32.909 37.056 18,568 18,940 20.616 = 13,955 13.441 2.028 11.040 828 Interest expense 465 579 171 182 149 (404) 325 440 13.257 13.369 11.012 3,063 3.342 2.725 10,194 10.027 8.287 5.217 577 (1,143) 15,411 10.604 7.144 85 90 108 $ 15,326 $ 10,508 $ 7.036 Interest income Other non-operating income (expense). net EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES Income taxes on continuing operations NET EARNINGS FROM CONTINUING OPERATIONS NET EARNINGSHLOSS) FROM DISCONTINUED OPERATIONS NET EARNINGS Less: Net earnings attributable to noncontrolling interests NET EARNINGS ATTRIBUTABLE TO PROCTER & GAMBLE BASIC NET EARNINGS PER COMMON SHARE: (1) Earnings from continuing operations Earnings/(loss) from discontinued operations BASIC NET EARNINGS PER COMMON SHARE DILUTED NET EARNINGS PER COMMON SHARE: (1) Earnings from continuing operations Earnings/(loss) from discontinued operations DILUTED NET EARNINGS PER COMMON SHARE DIVIDENDS PER COMMON SHARE $ 3.79 $ 3.59 $ 2.92 2.01 0.21 (0.42) $ 5.80 $ 3.80 $ 2.50 $ 3.69 $ 3.40 $ 2.84 1.90 10.20 (0.40) $ 5.59 $ 3.69 $ 2.44 $ 2.70 S 2.68 $ 2.59 (1) Basic net earnings per common share and Diluted net earnings per common share are calculated on Net earnings attributable to Procter & Gamble. Consolidated Statements of Comprehensive Income Amounts in millions; Years ended June 30 NET EARNINGS OTHER COMPREHENSIVE INCOMENLOSS), NET OF TAX 2017 2016 2015 $ 15,411 $ 10.604 $ 7.144 Financial statement translation 239 (1.679) (7.220) 1 1,234 (306) (59) 28 24 Unrealized gains/(losses) on hedges (net of S(186). S5 and $739 tax, respectively) Unrealized gains/(losses) on investment securities (net of S(6), $7 and 50 tax, respectively) Unrealized gains (losses) on defined benefit retirement plans (net of $551, $(621) and $328 tax, respectively) TOTAL OTHER COMPREHENSIVE INCOMENLOSS), NET OF TAX TOTAL COMPREHENSIVE INCOME Less: Total comprehensive income attributable to noncontrolling interests TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO PROCTER & GAMBLE 1,401 (1,477) 844 1,275 (3,127) (5,118) 16,686 7.477 2.026 85 98 108 $ 16,601 $ 7,381 $ 1.918 2017 2016 Consolidated Balance Sheets Amounts in millions; As of June 30 Assets CURRENT ASSETS Cash and cash equivalents Available-for-sale investment securities $ 5,569 S 7.102 9,568 6.248 4.594 4.373 1,308 1.188 Accounts receivable INVENTORIES Materials and supplies Work in process Finished goods Total inventories 529 2,787 4,624 563 2.965 4.710 1,507 Deferred income taxes Prepaid expenses and other current assets Current assets held for sale 19,893 TOTAL CURRENT ASSETS PROPERTY, PLANT AND EQUIPMENT, NET GOODWILL TRADEMARKS AND OTHER INTANGIBLE ASSETS, NET OTHER NONCURRENT ASSETS TOTAL ASSETS Liabilities and Shareholders' Equity CURRENT LIABILITIES 2,139 2.653 7.185 26,494 33.782 19.385 44,699 44,350 24.187 24.527 5,133 5.092 $ 120,406 $ 127,138 Accounts payable $ Accrued and other liabilities 13,554 Current liabilities held for sale Debt due within one year TOTAL CURRENT LIABILITIES LONG-TERM DEBT DEFERRED INCOME TAXES OTHER NONCURRENT LIABILITIES 9,632 S 9,325 7,024 7.449 2.343 11.653 30,210 30.770 18,038 18.945 8,126 9,113 8.254 10.325 64,628 69.153 TOTAL LIABILITIES CHINDCUALDERCLCALITV 64.628 69.153 1,006 1.038 4,009 4009 63,714 TOTAL LIABILITIES SHAREHOLDERS' EQUITY Convertible Class A preferred stock, stated value $1 per share (600 shares authorized) Non-Voting Class B preferred stock, stated value $1 per share (200 shares authorized) Common stock, stated value $1 per share (10,000 shares authorized: shares issued: 2017 - 4.009.2. 2018 - 4.009.2) Additional paid-in capital Reserve for ESOP debt retirement Accumulated other comprehensive income (loss) Treasury stock, at cost (shares held: 2017 - 1,455.9, 2016 - 1,341.2) Retained earnings Noncontrolling interest TOTAL SHAREHOLDERS' EQUITY TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (1.200) 63,641 (1,249) (14,632) (93,715) (15,907) (82,176) 87.953 96,124 594 842 55.778 57.983 $ 120,406 S 127,138 Consolidated Statements of Shareholders' Equity Accumulated Total Common Non- Common Preferred Treasury Retained Share- Dollars in millions Shares in thousands Shares Additional Reserve for Other Paid-In ESOP Debt Comprehensive Capital Retirement Income! controlling Stock Stock Stock Earnings holders' Outstanding Interest Equity (Loss) 2,710.800 $4,009 $1,111 $83.911 (51,340) ($7,662) ($75,805) $84.990 $762 $89.978 7.036 108 7.144 (5.118) (5.118) (7.028) (7,028) (250) (259) (54,670) 54.100 (4,604) 3.153 (4,604) 3.309 156 4,335 (34) 4 30 20 68 88 (239) (458) (219) $63.852 2,714,571 $4.009 $1.077 ($1,320) ($12,780) ($77,226) $84.807 $631 $63.050 BALANCE JUNE 30, 2014 Net earnings Other comprehensive loss Dividends to shareholders: Common Preferred, net of tax benefits Treasury purchases Employee plan issuances Preferred stock conversions ESOP debt impacts Noncontrolling interest. net BALANCE JUNE 30, 2015 Net earnings Other comprehensive loss Dividends to shareholders: Common Preferred, net of tax benefits Treasury purchases (1) Employee plan issuances Preferred stock conversions ESOP debt impacts Noncontrolling interest, net BALANCE JUNE 30, 2016 Net earnings Other comprehensive loss 10.508 98 10.604 (3,127) (3,127) (7,181) (255) (7.181) (255) (8,217) (103,449) (8,217) 52.089 (144) 3.234 3.090 4,863 (39) 6 33 30 74 104 (85) (85) 2.608.074 $4,009 $1.038 $63.714 ($1.290) ($15.907) ($82,176) $87.952 $642 $57.983 15,326 85 15,411 1,275 1,275 41 81 122 ESOP debt impacts Noncontrolling interest.net BALANCE JUNE 30, 2017 (133) (133) $594 $55,778 2,553 297 $4.009 $1,006 $63.641 ($1,249) ( ($14,632) ($93,715) $96,124 (1) Includes $4.213 of treasury shares acquired in the divestiture of the Batteries business (see Note 13).2) Includes $9.421 of treasury shares received as part of the share exchange in the Beauty Brands transaction (see Note 13). See accompanying Notes to Consolidated Financial Statements. Consolidated Statements of Cash Flows 2017 2016 2015 $ 7,102 6.836 S 8.548 10.804 7.144 15,411 2,820 543 3.078 3.134 351 335 337 (815) (803) (601) (5,490) (41) (768) 2.028 450 2.174 (322) 35 349 71 118 313 1.285 928 (149) (43) 162 204 (978) 184 748 12,753 15.435 14.808 (3.314 (3.736) (3,384) 571 432 Amounts in millions; Years ended June 30 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR OPERATING ACTIVITIES Net earnings Depreciation and amortization Loss on early extinguishment of debt Share-based compensation expense Deferred income taxes Gain on sale of assets Venezuela deconsolidation charge Goodwill and intangible asset impairment charges Change in accounts receivable Change in inventories Change in accounts payable, accrued and other liabilities Change in other operating assets and liabilities Other TOTAL OPERATING ACTIVITIES INVESTING ACTIVITIES Capital expenditures Proceeds from asset sales Cash related to deconsolidated Venezuela operations Acquisitions, net of cash acquired Purchases of short-term investments Proceeds from sales and maturities of short-term investments Pre-divestiture addition of restricted cash related to the Beauty Brands divestiture Cash transferred at closing related to the Beauty Brands divestiture Release of restricted cash upon closing of the Beauty Brands divestiture Cash transferred in Batteries divestiture Change in other investments TOTAL INVESTING ACTIVITIES FINANCING ACTIVITIES Dividends to shareholders Change in short-term debt Additions to long-term debt Reductions of long-term debt Treasury stock purchases Treasury stock from cash infused in Batteries divestiture Impact of stock options and other TOTAL FINANCING ACTIVITIES EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 4.498 (908) (16) (4,843) (186) (2.815) (137) (3,647) 1,488 1.203 1.354 (998) (874) (475) 1,870 (143) (26) 93 (163) (2.890) (5,689) (5.575) (7,236) (7.438) (7.287) 2,727 3,603 (4.931) (1) (5,204) (418) (2.580) 3.916 2.138 ( (2,213) (3.512) (4,004) (4,604) (1.730) 2.872 2.820 (9,213) (13.019) 2.473 (8,568) (29) (381) (411) 268 EQUIVALENTS (29) (381) (411) CHANGE IN CASH AND CASH EQUIVALENTS (1,533) (1,712 CASH AND CASH EQUIVALENTS, END OF YEAR $ 5,569 $ 7,102 S 6.836 SUPPLEMENTAL DISCLOSURE Cash payments for interest $ 518 5 569 $ 878 Cash payment for income taxes 3,714 3.730 4.558 Divestiture of Batteries business in exchange for shares of P&G stock 2) 4.213 Divestiture of Beauty business in exchange for shares of P&G stock and assumption of debt 11,360 Assets acquired through non-cash capital leases are immaterial for all periods