Question No: 4 (Total marks for question 15, 10 for 'a' and 5 for 'b') The consolidated statement of earnings and balance sheets are presented for the Procter and Gamble Company and subsidiaries. Consolidated statements of earnings *Amounts in Millions of $ except per share amount 1998 1997 1996 Net sales 37.154 35,764 35,284 Cost of products sold 21.064 20.510 20.938 Marketing research and administrative expenses 10,035 9.766 9.531 Operating income 6,055 5,488 4,815 Interest expense 548 457 484 Other income. Net 201 218 338 Earnings before Income Taxes 5.708 5.249 4.669 Income Taxes 1,928 1.834 1,623 Net earnings 3.780 3,415 3,046 Basic net earnings per common share 2.74 2.43 2.14 Diluted earnings per common share Dividend per common share 2.56 1.01 2.28 0.90 2.01 0.80 Consolidated Balance sheet "Amounts in Millions of Sexcept per share amount 1998 1997 15,490 857 2.781 2.350 760 2.738 Assets Current assets Cash and cash equivalents Investment securities Account receivable Inventories Material and supplies Work in process Finished goods deferred income taxes Prepaid expenses and other current assets Total current assets Property, plant and equipment Buildings Machinery and equipment Land 1.225 343 1.716 595 1.511 10,577 1.131 228 1.728 661 1,190 10,786 3,660 15,953 539 20,152 (7.972) 12,180 3,409 14.646 570 18.625 (7,249) 11.376 Accumulated depreciation Total property plant and equipment Goodwill and other intangible assets Goodwill Trademarks and other intangible assets 7,023 1.157 8.180 (1.169) 7,011 1.198 30,966 3.915 1,085 5.000 (1.051) 3,949 1.433 27,544 Accumulated depreciation Total goodwill and other intangible assets Other non-current assets Total assets Liabilities and shareholder's equity Current liabilities Account payable Accrued and other liabilities Taxes payable Debt due within one year Total current liabilities Long term debt Deferred income taxes Other non-current liabilities Total liabilities Convertible preferred stock, stated value $ I per share (600) shares Common stock, stated value $1 per share (5000 shares outstanding) Additional paid in capital Reserve for employee stock ownership plan debt retirement 2.051 3,942 976 2.281 9.250 5,765 428 3.287 18,730 1.821 1,337 907 (1.616) 2.203 3,802 944 849 7,798 4.143 559 2,928 15,498 1.859 1.351 559 (1.634) 12.180 11,376 Total property plant and equipment Goodwill and other intangible assets Goodwill Trademarks and other intangible assets 7,023 1,157 8,180 (1.169) 7,011 1.198 30,966 3,915 1.085 5,000 (1,051) 3,949 1,433 27,544 Accumulated depreciation Total goodwill and other intangible assets Other non-current assets Total assets Liabilities and shareholder's equity Current liabilities Account payable Accrued and other liabilities Taxes payable Debt due within one year Total current liabilities Long term debt Deferred income taxes Other non-current liabilities Total liabilities Convertible preferred stock, stated value $1 per share (600) shares Common stock, stated value $1 per share (5000 shares outstanding) Additional paid in capital Reserve for employee stock ownership plan debt retirement Accumulated other comprehensive income retained earnings 2,051 3.942 976 2,281 9.250 5,765 428 3.287 18.730 1.821 1.337 907 (1.616) (1.357) 2,203 3.802 944 849 7,798 4.143 559 2,928 15,498 1.859 1.351 559 (1.634) (819) Retained earnings Shareholder's equity Total Liabilities and shareholder's equity 11.144 12.236 30,966 10.730 12.046 27,544 Note: Preferred dividends, net of tax benefit of S104 in 1997 and 1998 Required: A. Compute the following for the year 1997 and 1998: 1. Net profit margin 2. Total asset turnover (use year-end assets) 3. Return on assets (use year-end assets) 4. Operating income margin 5. Return on operating assets (use year-end assets) Sales to fixed assets (use year-end assets) 7. Return on investment (use year-end assets) 8. Return on total equity (use year-end assets) 9. Return on common equity (use year-end assets) 10. Gross profit margin B. Comment on trends in found in (A), please discuss the results of each ratio. 6 Question No: 4 (Total marks for question 15, 10 for 'a' and 5 for 'b') The consolidated statement of earnings and balance sheets are presented for the Procter and Gamble Company and subsidiaries. Consolidated statements of earnings *Amounts in Millions of $ except per share amount 1998 1997 1996 Net sales 37.154 35,764 35,284 Cost of products sold 21.064 20.510 20.938 Marketing research and administrative expenses 10,035 9.766 9.531 Operating income 6,055 5,488 4,815 Interest expense 548 457 484 Other income. Net 201 218 338 Earnings before Income Taxes 5.708 5.249 4.669 Income Taxes 1,928 1.834 1,623 Net earnings 3.780 3,415 3,046 Basic net earnings per common share 2.74 2.43 2.14 Diluted earnings per common share Dividend per common share 2.56 1.01 2.28 0.90 2.01 0.80 Consolidated Balance sheet "Amounts in Millions of Sexcept per share amount 1998 1997 15,490 857 2.781 2.350 760 2.738 Assets Current assets Cash and cash equivalents Investment securities Account receivable Inventories Material and supplies Work in process Finished goods deferred income taxes Prepaid expenses and other current assets Total current assets Property, plant and equipment Buildings Machinery and equipment Land 1.225 343 1.716 595 1.511 10,577 1.131 228 1.728 661 1,190 10,786 3,660 15,953 539 20,152 (7.972) 12,180 3,409 14.646 570 18.625 (7,249) 11.376 Accumulated depreciation Total property plant and equipment Goodwill and other intangible assets Goodwill Trademarks and other intangible assets 7,023 1.157 8.180 (1.169) 7,011 1.198 30,966 3.915 1,085 5.000 (1.051) 3,949 1.433 27,544 Accumulated depreciation Total goodwill and other intangible assets Other non-current assets Total assets Liabilities and shareholder's equity Current liabilities Account payable Accrued and other liabilities Taxes payable Debt due within one year Total current liabilities Long term debt Deferred income taxes Other non-current liabilities Total liabilities Convertible preferred stock, stated value $ I per share (600) shares Common stock, stated value $1 per share (5000 shares outstanding) Additional paid in capital Reserve for employee stock ownership plan debt retirement 2.051 3,942 976 2.281 9.250 5,765 428 3.287 18,730 1.821 1,337 907 (1.616) 2.203 3,802 944 849 7,798 4.143 559 2,928 15,498 1.859 1.351 559 (1.634) 12.180 11,376 Total property plant and equipment Goodwill and other intangible assets Goodwill Trademarks and other intangible assets 7,023 1,157 8,180 (1.169) 7,011 1.198 30,966 3,915 1.085 5,000 (1,051) 3,949 1,433 27,544 Accumulated depreciation Total goodwill and other intangible assets Other non-current assets Total assets Liabilities and shareholder's equity Current liabilities Account payable Accrued and other liabilities Taxes payable Debt due within one year Total current liabilities Long term debt Deferred income taxes Other non-current liabilities Total liabilities Convertible preferred stock, stated value $1 per share (600) shares Common stock, stated value $1 per share (5000 shares outstanding) Additional paid in capital Reserve for employee stock ownership plan debt retirement Accumulated other comprehensive income retained earnings 2,051 3.942 976 2,281 9.250 5,765 428 3.287 18.730 1.821 1.337 907 (1.616) (1.357) 2,203 3.802 944 849 7,798 4.143 559 2,928 15,498 1.859 1.351 559 (1.634) (819) Retained earnings Shareholder's equity Total Liabilities and shareholder's equity 11.144 12.236 30,966 10.730 12.046 27,544 Note: Preferred dividends, net of tax benefit of S104 in 1997 and 1998 Required: A. Compute the following for the year 1997 and 1998: 1. Net profit margin 2. Total asset turnover (use year-end assets) 3. Return on assets (use year-end assets) 4. Operating income margin 5. Return on operating assets (use year-end assets) Sales to fixed assets (use year-end assets) 7. Return on investment (use year-end assets) 8. Return on total equity (use year-end assets) 9. Return on common equity (use year-end assets) 10. Gross profit margin B. Comment on trends in found in (A), please discuss the results of each ratio. 6