How has the recession (2008-2009) affected companies’ balance sheets?

In the Household and Personal Products industry, we see a wide range of products at a variety of prices. As a result, when the recession hit, we see a loss of profits and net income in the big brands. For this post, we will be looking at P&G and Clorox. These two companies sell similar products, have recognizable brand names, and are easily comparable.

P&G


2008 Report | 2009 Report |

First, looking at the the years 2008 and 2009, we see a few differences. First, looking at the assets, we see that in cash assets, P&G has increased them by about $1,000. Meaning that from 2008, they have gone from about $3,000 to about $4,000. In the same on the balance sheet, we see an decrease in inventories. Overall, total inventories decrease from $8,000 to $5,000 in that one year period. This is fairly important, because P&G is a distributor of their own products. Which means that if their inventories are decreasing, they might be trying to scale back. When we look at total current assets, largely because of this huge decrease, we see that current total assets have gone from $24,000 to $21,000. Another telling factor of the recession is in the decrease in property, plants, and equipment. Overall, it decreased by about $2,000, which could be worse. But since P&G owns quite a few plants, the fact that they may have had to sell some or have lost them affects their overall output. Finally, when we look at their total assets, there is a decrease of almost $10,000.

When we start looking at losses, one of the most telling factors is the fact that debt due within one year has gone from $13,000 to $16,000. This means that P&G is borrowing more, but when you look at total current liabilities from 2008 to 2009, they have stayed fairly consistent. Additionally, long term debt has gone down from P&G, which is overall better for the company. So even though the assets for P&G had decreased to respond to the recession and it appears that they are borrowing more, the company is trying to keep risk low.

Clorox Company


2009 Report


Much like P&G, we see a decrease in assets and liabilities. However, this one is not nearly as telling as P&G's report. Instead of a $10,000 loss, we see a lost of about $200. This is likely resulting from the fact that Clorox is simply not as big as P&G and thus has less to lose. From 2008 to 2009, there is about a $8 decrease in cash assets. Furthermore, their inventory decreases from $384 to $366. This means that like P&G, Clorox is scaling back on their inventory. When we look at Clorox's property, plants, and equipment, it remains fairly consistent from 2008 to 2009, with only about a $5 decrease. This means that even though they may be scaling back inventory production, they aren't closing very many plants.

When we start looking at liabilities, we first see a drop in notes and loans payable from $755 to $421. What this tells me is that the company is paying off their debts. On the other hand, just below, we see that long-term debts owed within the years goes up $500 from the nothing that was last year. So even though we see the company trying to pay off some of it's debts, it has long-term debt to account for. Clorox has reported a $300 increase in total current liabilities, which means that even as the company is scaling back slightly, they are still gaining debt. Total liabilities, on the other hand, have decreased about $300. This is likely due to the decrease in long-term debt. Clorox during the recession was basically trying to scale back production while simultaneously paying off more debt.