Colgate-Palmolive Company (CL)

Activity ratios

Short-term

Turnover ratios

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Inventory turnover	4.20	3.72	4.16	3.86	4.55
Receivables turnover	12.27	11.95	13.43	13.03	10.90
Payables turnover	4.79	4.98	4.76	4.63	5.15
Working capital turnover	36.17	16.20	50.35	—	111.30

The activity ratios for Colgate-Palmolive Co. provide valuable insights into the efficiency of the company's operations over the past five years.

1. Inventory Turnover:
- The inventory turnover ratio measures how many times a company sells and replaces its inventory within a specific period.
- Colgate-Palmolive Co.'s inventory turnover has fluctuated but generally remained within a healthy range from 2019 to 2023. This indicates that the company manages its inventory effectively, with the ability to convert inventory into sales.
- The increase in 2023 compared to 2022 suggests improved efficiency in managing inventory levels.

2. Receivables Turnover:
- The receivables turnover ratio indicates how efficiently a company is collecting on its credit sales.
- Colgate-Palmolive Co. has consistently maintained a high receivables turnover ratio over the five-year period. This signifies that the company efficiently collects payments from its customers on credit sales.
- The relatively stable and high turnover ratios reflect effective credit management practices.

3. Payables Turnover:
- The payables turnover ratio reveals how quickly a company pays its suppliers for credit purchases.
- Colgate-Palmolive Co.'s payables turnover ratio has fluctuated but generally remained relatively stable over the five-year period.
- The ratios indicate that the company manages its accounts payable effectively and maintains a balance between timely payments and managing cash flow.

4. Working Capital Turnover:
- The working capital turnover ratio measures how efficiently a company utilizes its working capital to generate sales.
- Colgate-Palmolive Co.'s working capital turnover has shown significant fluctuations, with a substantial increase in 2023 compared to the previous years.
- The sharp increase in 2023 indicates a more efficient utilization of working capital to support sales growth and operations.

Overall, the activity ratios suggest that Colgate-Palmolive Co. has demonstrated consistent efficiency in managing its inventory, receivables, payables, and working capital to support its operations and generate revenue over the analyzed period.

Average number of days

		Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Days of inventory on hand (DOH)	days	86.82	98.07	87.65	94.61	80.24
Days of sales outstanding (DSO)	days	29.75	30.55	27.17	28.01	33.49
Number of days of payables	days	76.22	73.34	76.62	78.78	70.90

Activity ratios provide insights into how efficiently a company manages its assets and liabilities to generate sales. Let's analyze Colgate-Palmolive Co.'s activity ratios based on the provided data:

1. Days of Inventory on Hand (DOH):
- DOH measures how long, on average, it takes for the company to sell its inventory. A lower DOH is preferred as it indicates faster inventory turnover.
- Colgate-Palmolive Co.'s DOH has fluctuated over the years, ranging from a low of 80.24 days in 2019 to a high of 98.07 days in 2022.
- The decreasing trend from 2022 to 2023 (98.07 days to 86.82 days) is positive, suggesting improved inventory management efficiency.

2. Days of Sales Outstanding (DSO):
- DSO indicates the average number of days it takes for the company to collect its accounts receivable. A lower DSO is favorable as it implies faster cash collection.
- Colgate-Palmolive Co.'s DSO has varied over the years, with the lowest at 27.17 days in 2021 and the highest at 33.49 days in 2019.
- The decreasing trend from 2021 to 2023 (27.17 days to 29.75 days) is generally positive, indicating improved sales collection efficiency.

3. Number of Days of Payables:
- This ratio reflects the average number of days it takes for the company to pay its suppliers. A higher number of days is beneficial as it implies the company is utilizing trade credit effectively.
- Colgate-Palmolive Co.'s number of days of payables has fluctuated, with the highest at 78.78 days in 2020 and the lowest at 70.90 days in 2019.
- The increasing trend from 2020 to 2023 (78.78 days to 76.22 days) suggests a slightly lengthened payment period to suppliers.

In conclusion, Colgate-Palmolive Co. has shown improvements in inventory management efficiency and sales collection over the years, while also slightly extending its payment period to suppliers. However, further analysis and comparison with industry benchmarks would provide a more comprehensive understanding of the company's performance in managing its working capital.

Long-term

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Fixed asset turnover	4.25	4.17	4.67	4.43	4.18
Total asset turnover	1.19	1.14	1.16	1.03	1.04

The long-term activity ratios for Colgate-Palmolive Co., specifically the fixed asset turnover and total asset turnover, provide insight into how efficiently the company is utilizing its assets to generate sales.

The fixed asset turnover ratio increased from 4.18 in 2019 to 4.25 in 2023, indicating that Colgate-Palmolive Co. is generating more sales relative to its investment in fixed assets over the years. This signifies improved efficiency in utilizing its long-term assets such as property, plant, and equipment to generate revenue.

Similarly, the total asset turnover ratio has shown a positive trend, increasing from 1.04 in 2019 to 1.19 in 2023. This suggests that the company is generating more sales relative to its total assets, including both long-term and short-term assets. The increase in total asset turnover indicates an improvement in overall asset utilization efficiency.

Overall, the increasing trend in both fixed asset turnover and total asset turnover ratios reflects Colgate-Palmolive Co.'s ability to efficiently generate sales from its long-term assets, which is a positive indicator of the company's operational efficiency and financial performance.