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Essay / Financial Ratio Analysis: Financial Stability and...
For example, last year P&G issued product recalls affecting the Iams and Eukanuba pet food brands “after its own inspections revealed the potential for salmonella contamination in a separate batch” (Barney, 2013, para. 2). The recalls came almost after the Food and Drug Administration's on-site inspection revealed cases of Salmonella in the company's Natura pet food. With the pet food industry being one of P&G's slowing divisions due to weak sales, the company has now divested it; thus, reduce costs and increase financial figures. Although there were no reports of illnesses, or worse, deaths, the recall was enough to cause the company's sales to decline; in addition, the possibility of creating doubt among consumers regarding other brands of P&G products. Several additional recalls have been issued in previous years regarding faulty child-resistant packaging, incompatible expiration dates, and other forms of bacteria found in healthcare products (Procter & Gamble, 2014, paragraph 1). These types of expenses disrupt financial performance because product recalls involve replacing defective products and increase the risk of life-threatening lawsuits..