Question

Income Statement for Fiscal Years Endings
(in Millions, except per share amounts)

Report Date	06/30/2019	06/30/2018	06/30/2017
Net sales	$67,684	$66,832	$65,058
Cost of products sold	34,768	34,268	32,535
Gross profit	$32,916	$32,564	$32,523
Selling, general & administrative expense	19,084	18,853	18,568
Goodwill & indefinite lived intangible asset impairment charges	8,345	0.00	0.00
Operating income	$5,487	$13,711	$13,955
Interest expense	509	506	465
Interest income	220	247	171
Other non-operating income (expense), net	871	-126	-404
Earnings from continuing operations before income taxes	$6,069	$13,326	$13,257
Income taxes expense on continuing operations	2,103	3,465	3,063
Net earnings from continuing operations	$3,966	$9,861	$10,194
Net earnings (loss) from discontinued operations	0.00	0.00	5,217
Net income (loss)	$3,966	$9,861	$15,411
Less: net earnings attributable to noncontrolling interests	-69	-111	-85
Net earnings attributable to Procter & Gamble Co.	$3,897	$9,750	$15,326
	Earning per share information:
Earnings (loss) per share from continuing operations - basic	$1.45	$3.75	$3.79
Earnings (loss) per share from discontinued operations - basic	0.00	0.00	2.01
Net earnings (loss) per share - basic	$1.45	$3.75	$5.80
Earnings (loss) per share from continuing operations - diluted	$1.43	$3.67	$3.69
Earnings (loss) per share from discontinued operations - diluted	0.00	0.00	1.90
Net earnings (loss) per share - diluted	$1.43	$3.67	$5.59
	Other Key Metrics
Dividends per common share	$2.90	$2.79	$2.70
Total number of employees	97,000	92,000	95,000

Vertical Analysis for Fiscal Years Endings
(in Millions, except per share amounts)

	For Fiscal Years Ending			Percentages of Annual Revenue
Report Date	06/30/2019	06/30/2018	06/30/2017	06/30/2019	06/30/2018	06/30/2017
Net sales	$67,684	$66,832	$65,058	100.00%	100.00%	100.00%
Cost of products sold	34,768	34,268	32,535	51.37%	51.27%	50.01%
Gross profit	$32,916	$32,564	$32,523	48.63%	48.73%	49.99%
Selling, general & administrative expense	19,084	18,853	18,568	28.20%	28.21%	28.54%
Goodwill & indefinite lived intangible asset impairment charges	8,345	0.00	0.00	12.33%	0.00%	0.00%
Operating income	$5,487	$13,711	$13,955	8.11%	20.52%	21.45%
Interest expense	509	506	465	0.75%	0.76%	0.71%
Interest income	220	247	171	0.33%	0.37%	0.26%
Other non-operating income (expense), net	871	-126	-404	1.29%	-0.19%	-0.62%
Earnings from continuing operations before income taxes	$6,069	$13,326	$13,257	8.97%	19.94%	20.38%
Income taxes expense on continuing operations	2,103	3,465	3,063	3.11%	5.18%	4.71%
Net earnings from continuing operations	$3,966	$9,861	$10,194	5.86%	14.75%	15.67%
Net earnings (loss) from discontinued operations	0.00	0.00	5,217	0.00%	0.00%	8.02%
Net income (loss)	$3,966	$9,861	$15,411	5.86%	14.75%	23.69%
Less: net earnings attributable to noncontrolling interests	-69	-111	-85	-0.10%	-0.17%	-0.13%
Net earnings attributable to Procter & Gamble Co.	$3,897	$9,750	$15,326	5.76%	14.59%	23.56%

briefly summarize your observations about changes, i.e. financial trends, in the following Income Statement line items for the Vertical Analysis:

1. Net sales,
2. Operating income, and
3. Net earnings attributable to the company

Answer 1

From the above income statement for the year 2017 , 2018 and 2019, it can be clearly observed that even though there had been marginal growth in the net sales of Procter and Gamble, operating profit witnessed a considerable decline primarily because of Goodwill impairment charge of $8,345 in the year 2018.

• It shows that fair value of goodwill has dropped below the previously recorded value from the time of an acquisition. Impairment may occur if the assets acquired no longer generate the financial results that were previously expected of them at the time of purchase.

Hence, Procter and Gamble's operating profit declined from $13,995 to $8,345 that is from 21.5% to 8.11%

Thereafter, Net Income witnessed a downfall of around 9% from 2018 to 2019.

Procter and Gambel's writing down of Gillette is associated with devaluation of its goodwill significantly which in turn resulted in the decline.

The company said that currency devaluations since the carrying values were first established in 2005 played a significant role. Over the last decade, currency has hurt its global business.

P&G’s second reason for the write-down is the market contraction of blades and razors, primarily in developed markets. In countries like the United States, growing beards is more popular, leading fewer men to buy razors.