Procter & Gamble Company (PG)

Short-term

Turnover ratios

The activity ratios for Procter & Gamble, based on the provided data, reveal several insights into the company's operational efficiency over the reviewed period.

Inventory Turnover: The inventory turnover ratio has shown a relatively consistent pattern, fluctuating between approximately 5.52 and 6.41 times annually. The highest turnover was observed on June 30, 2020, at 6.41, indicating efficient inventory management at that time. Over subsequent periods, the ratio experienced slight declines, reaching as low as 5.52 by March 31, 2025. This slight downward trend suggests that inventory is turning over less frequently, which could imply either an increase in inventory holdings, slower sales, or strategic inventory buildup. Nonetheless, the ratios remain within a stable range, indicating a generally efficient inventory management system without significant disruptions.

Receivables Turnover: The receivables turnover ratio evidenced variability but remained within a range of approximately 13.25 to 16.98 times annually. The highest ratio was recorded on June 30, 2020, at 16.98, indicative of prompt collection of receivables. Over time, the ratio has demonstrated a decreasing trend, reaching as low as 13.25 by December 31, 2023. The reduction in receivables turnover suggests a slight elongation in the collection period, which could reflect changes in credit policies, customer payment behaviors, or market conditions. Despite this, the ratios still portray a generally effective credit management process.

Payables Turnover: The payables turnover ratio fluctuated between approximately 2.66 and 3.11, with the highest on March 31, 2023, at 3.11. The ratio displayed minor oscillations over the period, which may correspond to shifts in supplier credit terms or payment strategies. Notably, a dip to 2.66 occurred on June 30, 2024, possibly indicating a lengthening of payment terms or delayed payments, followed by a slight recovery. These fluctuations suggest flexible management of supplier payments, potentially optimizing cash flow.

Working Capital Turnover: Data for working capital turnover were not available in the provided period, precluding analysis of this ratio. Its absence indicates that either the ratio was not calculated, or data were not reported during this timeframe.

Overall Assessment: The activity ratios present a picture of relatively stable operational efficiency. Inventory turnover remains steady, suggesting effective inventory management. Receivables turnover indicates a trend toward slightly longer collection periods but within acceptable ranges, while payables turnover reflects moderate variation, with potential strategic adjustments to payment cycles. The ratios collectively depict a company managing its working capital and operational cycles with consistent effectiveness over the period reviewed.

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Average number of days

The activity ratios for Procter & Gamble over the specified period reveal insights into its operational efficiency related to inventory management, receivables collection, and payables payments.

Days of Inventory on Hand (DOH):
The company’s inventory holding period has experienced fluctuations throughout the fiscal years examined. Starting at approximately 56.93 days on June 30, 2020, inventories increased to a peak of around 64.97 days by September 30, 2022. Since then, a gradual decrease is observed, with the most recent figure at approximately 62.69 days on June 30, 2024. The overall trend indicates a period of increased inventory levels during 2021 and 2022, possibly reflecting adjustments in production or inventory policies, before a slight reduction in the subsequent period. Persistent inventory levels around 62-66 days suggest a relatively steady inventory cycle, aligning with the company's consumer goods production cycle.

Days of Sales Outstanding (DSO):
Receivables outstanding has remained relatively stable over the analyzed period, primarily fluctuating between roughly 21.49 days and 27.54 days. The lowest DSO was recorded around June 30, 2020, while the highest was approximately 27.54 days on December 31, 2023. This consistency points to effective receivables collection procedures and a stable credit policy, minimizing the risk of extended receivables and aligning with industry standards for consumer product firms.

Number of Days of Payables:
Procter & Gamble’s payables period exhibits notable variability. Initially, the company extended payment terms for approximately 124-135 days, with a peak of 137.43 days during September 2024. Conversely, periods such as March 2023 recorded shorter payables cycles around 117-121 days. The significant increase in the payable period toward 2024 suggests a strategic extension of payment terms, possibly as a means of managing working capital or due to negotiated supplier terms. However, the overall average appears to hover around 120-130 days, indicating a balanced approach to settling obligations without risking supplier relationships.

Summary:
Procter & Gamble has maintained relatively stable receivables management, with minimal fluctuation in days of sales outstanding. Inventory levels have experienced moderate increases, particularly during 2021 and 2022, before slightly declining in recent periods. The company’s payables period has fluctuated more noticeably, with a tendency towards extended payment durations in recent years, potentially reflecting strategic liquidity management or supplier negotiations. These activity ratios collectively depict a company with steady operational efficiency, balancing inventory and receivables while strategically managing payables to optimize working capital.

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See also:

Procter & Gamble Company Short-term (Operating) Activity Ratios (Quarterly Data)

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Long-term

The analysis of Procter & Gamble Company's long-term activity ratios reveals the following trends and insights:

Fixed Asset Turnover:
This ratio measures the efficiency with which the company utilizes its fixed assets to generate sales. Over the period, the ratio exhibits a gradual upward trend, starting from 3.29 on June 30, 2020, and increasing to a peak of 3.91 on September 30, 2022. After this peak, the ratio slightly declines to 3.79 at the end of 2022 and remains relatively stable through 2023, with values around 3.74 to 3.85. The data for 2024 and 2025, indicates a stabilization with ratios close to or slightly above 3.7. This indicates that the company has maintained consistent efficiency in utilizing its fixed assets over time, with a slight improvement observed until late 2022, followed by stabilization.

Total Asset Turnover:
This ratio reflects the effectiveness of the entire asset base in generating sales revenue. The ratio demonstrates a steady upward trend from 0.59 on June 30, 2020, to 0.70 on December 31, 2023. Specifically, the ratio increased gradually, reaching 0.66 by September 30, 2022, and stabilizing around 0.68 to 0.70 in subsequent periods. The data for 2024 shows a slight fluctuation, with the ratio decreasing to 0.66 in September 2024 before rising back to 0.69 by December 2024. For the first quarter of 2025, it remains stable at 0.68. This pattern indicates a consistent improvement in the overall utilization efficiency of the company's total assets over the analyzed period.

In summary, Procter & Gamble’s long-term asset activity ratios suggest sustained and incremental improvements in operational efficiency. The fixed asset turnover ratio indicates effective deployment of fixed assets with marginal gains, while the total asset turnover ratio reveals ongoing enhancements in overall asset utilization, reflecting the company's ability to generate increased sales with its asset base. The stabilization observed post-2022 may imply maturity in asset utilization, aligning with steady operational performance.

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See also:

Procter & Gamble Company Long-term (Investment) Activity Ratios (Quarterly Data)