Microsoft Excel LibreOffice Calc

Procter & Gamble Co. (PG)

Analysis of Short-term (Operating) Activity Ratios

Difficulty: Beginner

Activity ratios measure how efficiently a company performs day-to-day tasks, such us the collection of receivables and management of inventory.

Short-term Activity Ratios (Summary)

Procter & Gamble Co., short-term (operating) activity ratios

Microsoft Excel LibreOffice Calc
Jun 30, 2019 Jun 30, 2018 Jun 30, 2017 Jun 30, 2016 Jun 30, 2015 Jun 30, 2014
Turnover Ratios
Inventory turnover 6.93 7.23 7.04 6.98 7.13 6.28
Receivables turnover 13.67 14.26 14.16 14.93 15.69 13.01
Payables turnover 3.09 3.31 3.38 3.53 4.71 5.02
Working capital turnover — — — 21.68 — —
Average No. Days
Average inventory processing period 53 50 52 52 51 58
Add: Average receivable collection period 27 26 26 24 23 28
Operating cycle 80 76 78 76 74 86
Less: Average payables payment period 118 110 108 103 78 73
Cash conversion cycle -38 -34 -30 -27 -4 13

Based on: 10-K (filing date: 2019-08-06), 10-K (filing date: 2018-08-07), 10-K (filing date: 2017-08-07), 10-K (filing date: 2016-08-09), 10-K (filing date: 2015-08-07), 10-K (filing date: 2014-08-08).

Short-term activity ratio Description The company
Inventory turnover An activity ratio calculated as cost of goods sold divided by inventory. Procter & Gamble Co.’s inventory turnover ratio improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019.
Receivables turnover An activity ratio equal to revenue divided by receivables. Procter & Gamble Co.’s receivables turnover ratio improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019.
Payables turnover An activity ratio calculated as cost of goods sold divided by payables. Procter & Gamble Co.’s payables turnover ratio declined from 2017 to 2018 and from 2018 to 2019.
Working capital turnover An activity ratio calculated as revenue divided by working capital.
Short-term activity ratio Description The company
Average inventory processing period An activity ratio equal to the number of days in the period divided by inventory turnover over the period.
Average receivable collection period An activity ratio equal to the number of days in the period divided by receivables turnover.
Operating cycle Equal to average inventory processing period plus average receivables collection period.
Average payables payment period An estimate of the average number of days it takes a company to pay its suppliers; equal to the number of days in the period divided by payables turnover ratio for the period. Procter & Gamble Co.’s number of days of payables outstanding increased from 2017 to 2018 and from 2018 to 2019.
Cash conversion cycle A financial metric that measures the length of time required for a company to convert cash invested in its operations to cash received as a result of its operations; equal to average inventory processing period plus average receivables collection period minus average payables payment period.

Inventory Turnover

Procter & Gamble Co., inventory turnover calculation, comparison to benchmarks

Microsoft Excel LibreOffice Calc
Jun 30, 2019 Jun 30, 2018 Jun 30, 2017 Jun 30, 2016 Jun 30, 2015 Jun 30, 2014
Selected Financial Data (US$ in millions)
Cost of products sold 34,768  34,268  32,535  32,909  38,876  42,460 
Inventories 5,017  4,738  4,624  4,716  5,454  6,759 
Short-term Activity Ratio
Inventory turnover1 6.93 7.23 7.04 6.98 7.13 6.28
Benchmarks
Inventory Turnover, Industry
Consumer Goods — 7.31 7.18 7.37 7.35 7.53

Based on: 10-K (filing date: 2019-08-06), 10-K (filing date: 2018-08-07), 10-K (filing date: 2017-08-07), 10-K (filing date: 2016-08-09), 10-K (filing date: 2015-08-07), 10-K (filing date: 2014-08-08).

1 2019 Calculation
Inventory turnover = Cost of products sold ÷ Inventories
= 34,768 ÷ 5,017 = 6.93

Short-term activity ratio Description The company
Inventory turnover An activity ratio calculated as cost of goods sold divided by inventory. Procter & Gamble Co.’s inventory turnover ratio improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019.

Receivables Turnover

Procter & Gamble Co., receivables turnover calculation, comparison to benchmarks

Microsoft Excel LibreOffice Calc
Jun 30, 2019 Jun 30, 2018 Jun 30, 2017 Jun 30, 2016 Jun 30, 2015 Jun 30, 2014
Selected Financial Data (US$ in millions)
Net sales 67,684  66,832  65,058  65,299  76,279  83,062 
Accounts receivable 4,951  4,686  4,594  4,373  4,861  6,386 
Short-term Activity Ratio
Receivables turnover1 13.67 14.26 14.16 14.93 15.69 13.01
Benchmarks
Receivables Turnover, Industry
Consumer Goods — 13.85 13.54 13.71 14.04 12.70

Based on: 10-K (filing date: 2019-08-06), 10-K (filing date: 2018-08-07), 10-K (filing date: 2017-08-07), 10-K (filing date: 2016-08-09), 10-K (filing date: 2015-08-07), 10-K (filing date: 2014-08-08).

1 2019 Calculation
Receivables turnover = Net sales ÷ Accounts receivable
= 67,684 ÷ 4,951 = 13.67

Short-term activity ratio Description The company
Receivables turnover An activity ratio equal to revenue divided by receivables. Procter & Gamble Co.’s receivables turnover ratio improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019.

Payables Turnover

Procter & Gamble Co., payables turnover calculation, comparison to benchmarks

Microsoft Excel LibreOffice Calc
Jun 30, 2019 Jun 30, 2018 Jun 30, 2017 Jun 30, 2016 Jun 30, 2015 Jun 30, 2014
Selected Financial Data (US$ in millions)
Cost of products sold 34,768  34,268  32,535  32,909  38,876  42,460 
Accounts payable 11,260  10,344  9,632  9,325  8,257  8,461 
Short-term Activity Ratio
Payables turnover1 3.09 3.31 3.38 3.53 4.71 5.02
Benchmarks
Payables Turnover, Industry
Consumer Goods — 5.02 4.80 5.06 5.53 6.05

Based on: 10-K (filing date: 2019-08-06), 10-K (filing date: 2018-08-07), 10-K (filing date: 2017-08-07), 10-K (filing date: 2016-08-09), 10-K (filing date: 2015-08-07), 10-K (filing date: 2014-08-08).

1 2019 Calculation
Payables turnover = Cost of products sold ÷ Accounts payable
= 34,768 ÷ 11,260 = 3.09

Short-term activity ratio Description The company
Payables turnover An activity ratio calculated as cost of goods sold divided by payables. Procter & Gamble Co.’s payables turnover ratio declined from 2017 to 2018 and from 2018 to 2019.

Working Capital Turnover

Procter & Gamble Co., working capital turnover calculation, comparison to benchmarks

Microsoft Excel LibreOffice Calc
Jun 30, 2019 Jun 30, 2018 Jun 30, 2017 Jun 30, 2016 Jun 30, 2015 Jun 30, 2014
Selected Financial Data (US$ in millions)
Current assets 22,473  23,320  26,494  33,782  29,646  31,617 
Less: Current liabilities 30,011  28,237  30,210  30,770  29,790  33,726 
Working capital (7,538) (4,917) (3,716) 3,012  (144) (2,109)
 
Net sales 67,684  66,832  65,058  65,299  76,279  83,062 
Short-term Activity Ratio
Working capital turnover1 — — — 21.68 — —
Benchmarks
Working Capital Turnover, Industry
Consumer Goods — — 20.79 23.50 14.31 366.66

Based on: 10-K (filing date: 2019-08-06), 10-K (filing date: 2018-08-07), 10-K (filing date: 2017-08-07), 10-K (filing date: 2016-08-09), 10-K (filing date: 2015-08-07), 10-K (filing date: 2014-08-08).

1 2019 Calculation
Working capital turnover = Net sales ÷ Working capital
= 67,684 ÷ -7,538 = —

Short-term activity ratio Description The company
Working capital turnover An activity ratio calculated as revenue divided by working capital.

Average Inventory Processing Period

Procter & Gamble Co., average inventory processing period calculation, comparison to benchmarks

Microsoft Excel LibreOffice Calc
Jun 30, 2019 Jun 30, 2018 Jun 30, 2017 Jun 30, 2016 Jun 30, 2015 Jun 30, 2014
Selected Financial Data
Inventory turnover 6.93 7.23 7.04 6.98 7.13 6.28
Short-term Activity Ratio (no. days)
Average inventory processing period1 53 50 52 52 51 58
Benchmarks (no. days)
Average Inventory Processing Period, Industry
Consumer Goods — 50 51 50 50 48

Based on: 10-K (filing date: 2019-08-06), 10-K (filing date: 2018-08-07), 10-K (filing date: 2017-08-07), 10-K (filing date: 2016-08-09), 10-K (filing date: 2015-08-07), 10-K (filing date: 2014-08-08).

1 2019 Calculation
Average inventory processing period = 365 ÷ Inventory turnover
= 365 ÷ 6.93 = 53

Short-term activity ratio Description The company
Average inventory processing period An activity ratio equal to the number of days in the period divided by inventory turnover over the period.

Average Receivable Collection Period

Procter & Gamble Co., average receivable collection period calculation, comparison to benchmarks

Microsoft Excel LibreOffice Calc
Jun 30, 2019 Jun 30, 2018 Jun 30, 2017 Jun 30, 2016 Jun 30, 2015 Jun 30, 2014
Selected Financial Data
Receivables turnover 13.67 14.26 14.16 14.93 15.69 13.01
Short-term Activity Ratio (no. days)
Average receivable collection period1 27 26 26 24 23 28
Benchmarks (no. days)
Average Receivable Collection Period, Industry
Consumer Goods — 26 27 27 26 29

Based on: 10-K (filing date: 2019-08-06), 10-K (filing date: 2018-08-07), 10-K (filing date: 2017-08-07), 10-K (filing date: 2016-08-09), 10-K (filing date: 2015-08-07), 10-K (filing date: 2014-08-08).

1 2019 Calculation
Average receivable collection period = 365 ÷ Receivables turnover
= 365 ÷ 13.67 = 27

Short-term activity ratio Description The company
Average receivable collection period An activity ratio equal to the number of days in the period divided by receivables turnover.

Operating Cycle

Procter & Gamble Co., operating cycle calculation, comparison to benchmarks

No. days

Microsoft Excel LibreOffice Calc
Jun 30, 2019 Jun 30, 2018 Jun 30, 2017 Jun 30, 2016 Jun 30, 2015 Jun 30, 2014
Selected Financial Data
Average inventory processing period 53 50 52 52 51 58
Average receivable collection period 27 26 26 24 23 28
Short-term Activity Ratio
Operating cycle1 80 76 78 76 74 86
Benchmarks
Operating Cycle, Industry
Consumer Goods — 76 78 77 76 77

Based on: 10-K (filing date: 2019-08-06), 10-K (filing date: 2018-08-07), 10-K (filing date: 2017-08-07), 10-K (filing date: 2016-08-09), 10-K (filing date: 2015-08-07), 10-K (filing date: 2014-08-08).

1 2019 Calculation
Operating cycle = Average inventory processing period + Average receivable collection period
= 53 + 27 = 80

Short-term activity ratio Description The company
Operating cycle Equal to average inventory processing period plus average receivables collection period.

Average Payables Payment Period

Procter & Gamble Co., average payables payment period calculation, comparison to benchmarks

Microsoft Excel LibreOffice Calc
Jun 30, 2019 Jun 30, 2018 Jun 30, 2017 Jun 30, 2016 Jun 30, 2015 Jun 30, 2014
Selected Financial Data
Payables turnover 3.09 3.31 3.38 3.53 4.71 5.02
Short-term Activity Ratio (no. days)
Average payables payment period1 118 110 108 103 78 73
Benchmarks (no. days)
Average Payables Payment Period, Industry
Consumer Goods — 73 76 72 66 60

Based on: 10-K (filing date: 2019-08-06), 10-K (filing date: 2018-08-07), 10-K (filing date: 2017-08-07), 10-K (filing date: 2016-08-09), 10-K (filing date: 2015-08-07), 10-K (filing date: 2014-08-08).

1 2019 Calculation
Average payables payment period = 365 ÷ Payables turnover
= 365 ÷ 3.09 = 118

Short-term activity ratio Description The company
Average payables payment period An estimate of the average number of days it takes a company to pay its suppliers; equal to the number of days in the period divided by payables turnover ratio for the period. Procter & Gamble Co.’s number of days of payables outstanding increased from 2017 to 2018 and from 2018 to 2019.

Cash Conversion Cycle

Procter & Gamble Co., cash conversion cycle calculation, comparison to benchmarks

No. days

Microsoft Excel LibreOffice Calc
Jun 30, 2019 Jun 30, 2018 Jun 30, 2017 Jun 30, 2016 Jun 30, 2015 Jun 30, 2014
Selected Financial Data
Average inventory processing period 53 50 52 52 51 58
Average receivable collection period 27 26 26 24 23 28
Average payables payment period 118 110 108 103 78 73
Short-term Activity Ratio
Cash conversion cycle1 -38 -34 -30 -27 -4 13
Benchmarks
Cash Conversion Cycle, Industry
Consumer Goods — 3 2 5 10 17

Based on: 10-K (filing date: 2019-08-06), 10-K (filing date: 2018-08-07), 10-K (filing date: 2017-08-07), 10-K (filing date: 2016-08-09), 10-K (filing date: 2015-08-07), 10-K (filing date: 2014-08-08).

1 2019 Calculation
Cash conversion cycle = Average inventory processing period + Average receivable collection period – Average payables payment period
= 53 + 27 – 118 = -38

Short-term activity ratio Description The company
Cash conversion cycle A financial metric that measures the length of time required for a company to convert cash invested in its operations to cash received as a result of its operations; equal to average inventory processing period plus average receivables collection period minus average payables payment period.