Determination of the company's financial health
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Determination of the company's financial health
The financial health of Procter and Gamble Company is a substantial contributor to its success with a market cap of US$196.14b. The company cannot fail because it is too big, making it secure as well as a stable investment. In the past year, there was an accumulation of debt from $30.41b to $35.30b. That includes the current as well as long-term arrears. This growth in debt has made levels of short-term investments and current cash equal to US$15.53b to invest in the business. The operating cash flows for the same period are US$14.36b bringing about a 40.67% operating cash to total debt ratio. That implies that the functioning money at Procter and Gamble Company is adequate to offset its debts. This ratio shows there is operational efficiency as a substitute to return on asset (Jablonsky & Barsky, 2001).
Procter and Gamble Company is capable of a 64.24% ratio of debt to equity where dues are cheaper than equity due to the tax-deductible interest payments. Most of the time, large companies incur less cost of capital because it is easy to obtain financing, which is an added advantage compared to smaller companies. Even if the debt of the company is high, this is not a challenge on the condition that it can cover interest payments. Procter and Gamble Company generate earnings after paying tax and interest three times the net pay of interest, making it financially healthy. The coverage of high interest is a safe as well as responsible practice, which makes many investors prefer large-caps such as Procter and Gamble Company, where the investment is safe (Jablonsky & Barsky, 2001).
Based on your financial review, determine the risk level of the stock from an investor's point of view.
There is no guarantee that the money for investment will bring good returns in the future. Facts concerning savings and investment need intelligent plans to have financial security and enjoy the benefits of proper management of the money. Evaluation of the comfort zone is necessary when taking a risk because there is some degree of risk in all investments. It is significant to understand that there is a possibility of losing some money before you begin to invest in stocks. There is no federal insurance of money whose investment is in the securities. There can be a loss of the principal amount in use for investment can be lost.
There are categories of assets that either moves up or down under different conditions of the market. That requires the investor to consider mixing those investments appropriately because one property may do well while another brings low returns depending on the market conditions. Due to the uncertainty in the market, investment in different asset categories will minimize the risk of losing money. Asset allocation will help to meet the financial goal where the portfolio needs to include enough probability so that the return on investment is enough to meet the goal.
When determining the risk level, be careful not to invest heavily in the stock of the employer but consider diversification of investments. Selecting the right investment limit losses as well as fluctuations of investments and does not sacrifice the possible financial gains. There is greater exposure to risk if an employee invests heavily in stocks from the employer or individual. The deficient performance of the commodities or bankruptcy of the company results in the loss of jobs and money.
The circumstances that lead to fraud are risky, and it is paramount to avoid them. The artists who engage in scams also read updates as well as listen to the news to have the opportunity of luring potential investors. It is advisable that you ask questions, and the source of answers is unbiased before engaging in any investment. Conversations with friends whom you trust and members of the family provide reliable information before investing (Hampton, 2009).
Key strategies that you may use to minimize these perceived risks
Portfolio diversification minimizes the perceived risks by selecting different investments in each class of assets to reduce risk in the investment as well as lessen the effect of market swings. Investment in stock of one company has is risky due to relying on that specific company performance for the investment to grow. Therefore, considering the purchase of stock in several different companies reduce the possibility of substantial loss. When one investment fails to generate good returns and another one has high returns, this helps to neutralize the one performing poorly.
Averaging the cost of a dollar involves discipline in the investment strategy that reduces the consequence of market fluctuations of the stock. This approach entails setting aside a specific amount of dollars for purchasing the stock continuously. That will help to acquire more shares at a low price and buy less at high prices. After some time cost of allocation, on average, will be less compared to the average price, which helps to avoid emotional investment decisions.
Speculate with finances you feel no problem in losing so that if the stocks in the company collapse, it does not drag you down into financial ruin. Consider reinvesting the dividends so that you compound the investment gains. Reinvesting dividends instead of having cash in the account reduces the opportunity cost as well as losses due to inflation. It is important to take cover before a crash, transfer your funds to defensive sectors so that you do not lose all the money (Hampton, 2009).
Recommendations of this stock as an investment opportunity
The first recommendation is to get a reliable online broker who is well informed about the company and can provide all the necessary information. The broker should allow you access to the stocks of the company so that you can buy them. The broker should grant you the opportunity to open an account at a standard fee or free so that you can be buying shares any time you want. There is a recommendation to choose the right broker by use of the company's questionnaire to guide you in the right direction. The factors for consideration when recommending a broker are the platform for trading, accessibility of market to trade, and broker's fees.
The next step is opening an account just like an ordinary bank account through the online process. That takes a short moment, but sometimes there is a need to do a background check before verification of the statement. Deposit money using cash or buying stock from Procter and Gamble Company. This cash deposit to the bank account of the broker is quick and straightforward. The usual method for use when depositing the money is credit or debit card as well as bank transfers. When using a broker, deposits for investments use electronic wallets. Once the cash deposits are in the account, and you know the shares you target to buy, press the buy button for Procter and Gamble's shares to specify the number of shares to buy. There are different order types for the stock where market order provides the actual price in the market while limit orders show the exact price you wish to buy.
There is a recommendation to review the position of Procter and Gamble Company regularly for monitoring your investment. That involves making a follow-up of the investment strategy, participating during annual meetings, and gathering current updates concerning the company. When you want to sell your stock immediately after a price increase, the target price is necessary so that you profit after selling the shares. When you decide to start an investment, know that a Company with more money on its balance sheet is better than the one with lots of debt. It is paramount for any portfolio to have diversification over many sectors that perform differently at different times (Jablonsky & Barsky, 2001).
Literature review
Procter and Gamble Company is an exceptional manufacturer of consumer goods with a big plant for manufacturing soap at Hub Balochistan. The company uses not only hi-tech production and manufacturing units but also a revolutionary system to protect the environment. Procter and Gamble do not only produce consumer goods to make a profit but also works together with non-profit making organizations. The chairman of Health Oriented Preventive Education (HOPE) DR.Mubina praised Procter and Gamble Company for helping to build as well as improve communities that are in need.
Procter and Gamble Company the best in producing household products and was the first to create awareness about its products to the customers nationally. Besides, it was the one that was responsible for creating the concept of soap operas through sponsoring radio dramas as well as television. The estimate of the amount of money for advertising in the year 2003 was $5.8b making Procter and Gamble Company the number one advertiser in the whole world. Marketing is significant for any business to be successful, where the introduction of different techniques for customer satisfaction makes the company victorious. That mainly happens by the ability to attract as well as retain old, existing, and new customers through the production of high-quality products (Brown, 2010).
Getting feedback from customers on the quality of the products is far beyond any formal survey or research-based statistics. It is good to concentrate on bringing together first-hand data. The assembling of this data involves employees who interact with potential customers to know their preferences. The workers who provide door to door sales services get a chance to recognize the opinion of customers.
The survey of 216 industrial units indicates that physical distribution helps in distributional planning while the channels of distribution provide the utility of place and time. Procter and Gamble Company gains a competitive advantage through an effective system of physical distribution and excellent means of transport. The advertisement aims at reaching many customers where it has 200,000 employees in advertising according to the estimate of the American Association of Advertising Agency. The study shows that the average expenditures for advertising were 1.06% of sales from products and services of different companies (Faizan, Hafiz & Shazia, 2016).