Vladi FAF Financial Report

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Financial Data Analysis

Colgate-Palmolive Company

And

Procter & Gamble Company

Vladislav Dimitrov

11/02/2011ID# 0102413

y Working capital management and assets efficiencyy Profitabilityy Financial structurey O verall evaluation

You will summarize in two pages which company you would recommendto investing and your reasons for those decisions.

Introduction

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P rofitability Ratios

Colgate has a higher operating profit margin than P&G. However in 2006 the operating profitmargin declined as there was restructuring charges under the 2004 Restructuring Program that alsoreduced Colgates gross profit by $196 million. P&G have a very steady operating profit margin andthere was not much fluctuation between 2005 and 2009.Saying that the Net profit margin on P&G is

greater than Colgate, butfairly consistent through the years in the two companies.

The Cash Flow Margin is a measure of how efficiently a company converts its sales dollars to cash.Since expenses and purchases of assets are paid from cash, this is an extremely useful and importantprofitability ratio. Colgates operating cash flow in years prior to 2009 has been restated as a result of the Companys adoption of an update to the Consolidation T opic of the FASB Codification onJanuary 1, 2009. P&G is showing a higher O perating cash flow margin than Colgate in all the fiveyears report, which is a very good sign. P&G cash position is consistently strong because theyrelentlessly focus on working-capital management. For example, P&G is the receivables leader of theindustry, operating more efficiently with fewer days of receivables outstanding than any consumer products competitor. T hey are equally rigorous about managing costs and have reduced overheadcosts as a percentage of sales by more than 300 basis points since 2001, and continue to focus onreducing overhead costs consistently and steadily year after year.

Return on Equity - Colgate is showing significant higher return on equity compared to P&G. Abusiness that has a high return on equity is more likely to be one that is capable of generating cashinternally. It is critical for shareholder to have a good return on their investment and Colgate hasproven that can deliver.Cash return on assets ratio is higher with Colgate consistently over the 5 years period averagingaround 20%. O n the other hand Debt to Equity ratio has a lower percentage with P&G compared toColgate. T his makes P&G a safer company to invest. T he reason is because P&G has greater totalassets/ total liabilities ratio which does make a difference in terms of equity available in the company

Times Interest Earned .A high ratio can indicate that a company has an undesirable lack of debt or ispaying down too much debt with earnings that could be used for other projects. In our case Colgatehas much higher interest rate earned ratio, especiallyin 2008 and 2009 when they had an increase of

current portions of long term debt from 91mil in 2008 to 326mil in 2009, also Colgates financialsshowingan increase in accrued in income taxes and other accruals

Asset ManagementFixed asset turnover andtotal asset turnover is greater in Colgate compared to P&G, but P&Gaccount receivable ratio is higherthan Colgate. P&G have been trying to get more new system inplace to help withcollectingtheir account receivable and also working on reducing the collecting timefor outstanding balance.

Earnings per share

Return to Investors

Higher interest earned ratio for Colgate indicates the company has an undesirable lack of debt or ispaying down too much debt with earnings even though they had good operating profit. Whereas P&Ghas a fair and healthy result to meet its debt obligations compared to Colgate reason being thecompany receives greater returns by investing its earnings into other projects and borrowing less.

Financial Structure

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O verall Evaluation