The 2015 annual report of the Procter & Gamble Company (P&G) is available at www.pginvestor.com. After reviewing P&G’s annual report, respond to the following questions:

a. How does P&G value its inventory? What costs does P&G include in its cost of products sold? Do you agree with these policy decisions? How much of P&G’s total assets are represented by its inventory?

b. Calculate P&G’s inventory turnover ratio, inventory-on-hand period, accounts payable turnover ratio, and days’ payable period for 2014 and 2015. What can you conclude from these ratios?

c. Assume that P&G needs to maintain an inventory of about \($5.45\) billion in 2016, the gross margin percentage remains the same as in 2015, and that in 2016, the company is able to raise its inventory turnover rate to 7.5 times. How much would its gross margin increase as a result of the improvement in the inventory turnover?