Maria Alejandra Ramirez ACG Annual Report

Executive Summary In 2007, Procter and Gamble achieved a 5% increase on its Organic Sales Growth, and a 15% increase on its Earnings per Share. Beauty and Health Care Sales have doubled just in the past six years. The company’s stock price has increased, as well as the investors’ confidence in the company. Also, the stock’s return to the investors increased. A negative change was that Receivables turnover and Days’ inventory on hand decreased. But overall, the company seems to show good performance and increased business. Procter & Gamble’s 2007 Annual Report

IntroductionIntroduction ALAN G. (A.G.) LAFLEY Chairman of the Board and Chief Executive Officer CORPORATE HEADQUARTERS The Procter & Gamble Company P.O. Box 599 Cincinnati, OH Ending date of latest fiscal year: June 30 th P&G is a recognized leader in the development, distribution and marketing of superior Fabric & Home Care, Baby Care, Feminine Care, Family Care, Beauty Care, Health Care, and Snacks & Coffee products. About half of P&G sales come from North America and half from other 47 countries around the world.

Audit Report Procter & Gamble’s independent auditors: Deloitte & Touche LLP In 2007, Deloitte & Touche LLP concluded that P&G’s financial statements presented fairly the company’s financial position, according to the accounting principles generally accepted in the United States of America. In addition, the auditors opinion was that P&G’s internal controls over financial statements were effective.

Stock Market Information As of June 30 th, 2007: Company’s stock price: $ Dividend per share: $0.35 Twelve month trading range of the company’s stock (June 30 th, 2006 – June 30 th, 2007) High: $ Low: $55.25 November 28 th,2007 Closing Price: $73.91 PG has strong market share and a balanced portfolio of brands. Currently, either buying or holding this investment would be a good choice.

Industry Situation and Company Plans PG's competitive strengths are a diverse portfolio of businesses, scale, strong brands and a strong focus on product innovation. Combined with geographic diversity, category diversity provides PG with a consistent revenue stream. P&G expects to grow globally, and increase consumer usage frequency. Also, they expect to enter categories they are not currently competing in. The company expects to increase 3% to 4% its beauty and health markets. Procter & Gamble recently announced plans to invest approximately $300 million to begin Phase I construction in early 2008, of a manufacturing facility in Box Elder County, Utah, to be operational by with-great-potential p

Income Statement P&G uses the Multistep Income Statement format In millions of USD06/30/0706/30/06 Gross Profit39, , Income from Operations 14, , Net Income10, , Gross Profit increased by $4,693. Income from Operations increased by $2,297 Net Income increased by $ 1,656. Clearly, Procter & Gamble has been growing and developing for the last two years.

Balance Sheet Between 2006 and 2007, the Assets account increased by $2,319 and the Liabilities account decreased by $1,533. As a result, Stockholders’ Equity increased by $3,852. Assets = Liabilities + Stockholders Equity 06/30/07138, , , /30/06135, , , in millions of USD

Statement of Cash Flows Cash flows from operations are more than net income for the past two years (2006 and 2007) In 2007, Acquisitions used $492 million of cash for transactions primarily in Beauty and Health Care. On October 2005, P&G acquired the Gillette Company. P&G’s first discretionary use of cash is dividend payments. There are also long-term and short-term debts, as well as treasury purchases. Overall, P&G’s cash has decreased over the past two years

Accounting Policies Significant accounting policies: Revenue recognition: Sales are recognized when revenue is realized or realizable and has been earned. The revenue recorded is presented net of sales and other taxes P&G collects on behalf of governmental authorities and includes shipping and handling costs. Cash Equivalents: Highly liquid investments with remaining stated maturities of three months or less when purchased are considered cash equivalents and recorded at cost. Inventory Valuation: are valued at the lower cost or market value. Product-related inventories are primarily maintained on the first-in, first-out method. Property, Plant, and Equipment: are recorded at cost. Depreciation expense is recognized over the assets’ estimated useful lives using the straight-line method. 1. Significant accounting policies 2. Acquisition 3. Goodwill and intangibles assets 4. Supplemental Financial Information 5. Short-term and Long-term Debt 6. Risk Management Activities 7. Earnings Per Share 8. Stock-based Compensation 9. Postretirement Benefits and Employee Stock Ownership Plan 10. Income Taxes 11. Commitments and Contingencies 12. Segment Information Topics of the notes to the financial statements:

Financial Analysis Liquidity Ratios Working Capital4,344(6,686) Current Ratio Receivable turnover Average days’ sales uncollected3031 Inventory turnover Average days’ inventory on hand6770 A negative change was that Receivables turnover decreased, and, as a result, days’ sales uncollected increased. The same happened with Inventory turnover and Days’ inventory on hand.

Financial Analysis Profitability Ratios Profit margin Asset turnover Return on assets Return on equity The company managed better its costs per dollar of sales, since the Profit Margin ratio increased. Also, the Asset Turnover increased which led to an increase in the Return on Assets. The Return on Equity percentage also increased.

Financial Analysis Solvency Ratio Debt to Equity Since the ratio is lower than 1 in both years, the company’s assets are mostly financed by its investors.

Financial Analysis Market Strength Ratios Price Earnings Dividend Yield1.79%1.9% The increase in the Price Earnings ratio, signals the investor may have more confidence in the company. Also, the stock’s return to the investors increased.