Colgate-Palmolive Company (CL)

Activity ratios

Short-term

Turnover ratios

	Dec 31, 2024	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020
Inventory turnover	4.00	4.20	3.72	4.16	3.86
Receivables turnover	13.22	12.27	11.95	13.43	13.03
Payables turnover	4.40	4.79	4.98	4.76	4.63
Working capital turnover	—	36.17	16.20	50.35	—

Based on the provided data for Colgate-Palmolive Company, we can analyze the activity ratios as follows:

1. Inventory Turnover:
- The inventory turnover ratio measures how efficiently the company manages its inventory. A higher ratio indicates better inventory management.
- Colgate-Palmolive's inventory turnover has shown fluctuations over the years:
- It increased from 3.86 in 2020 to 4.16 in 2021, indicating a better utilization of inventory.
- It dipped to 3.72 in 2022 but improved significantly to 4.20 in 2023 before declining slightly to 4.00 in 2024.

2. Receivables Turnover:
- The receivables turnover ratio reflects how efficiently the company collects its receivables from customers. A higher ratio suggests better receivables management.
- Colgate-Palmolive's receivables turnover has been relatively stable and healthy:
- It ranged between 11.95 and 13.43 from 2020 to 2024, showing consistent collection of receivables.

3. Payables Turnover:
- The payables turnover ratio indicates how quickly the company pays its suppliers. A higher ratio implies efficient management of payables.
- Colgate-Palmolive's payables turnover has also been fairly consistent:
- It ranged from 4.40 to 4.98 from 2020 to 2024, indicating a stable payment cycle with suppliers.

4. Working Capital Turnover:
- The working capital turnover ratio assesses the efficiency of utilizing working capital to generate sales. A higher ratio is generally favorable.
- Colgate-Palmolive's working capital turnover has shown significant variability:
- It was not available in 2020 and 2024, but in 2021 and 2023, it was 50.35 and 36.17, respectively, suggesting efficient utilization of working capital. However, it dropped to 16.20 in 2022, indicating a potential issue with working capital management that year.

In conclusion, Colgate-Palmolive has generally demonstrated sound activity ratios, particularly in terms of managing inventory, receivables, and payables effectively. Monitoring these ratios can provide insights into the company's operational efficiency and effectiveness in managing its resources.

Average number of days

		Dec 31, 2024	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020
Days of inventory on hand (DOH)	days	91.34	86.82	98.07	87.65	94.61
Days of sales outstanding (DSO)	days	27.62	29.75	30.55	27.17	28.01
Number of days of payables	days	82.98	76.22	73.34	76.62	78.78

Based on the provided data for Colgate-Palmolive Company's activity ratios, let's analyze the key metrics:

1. Days of Inventory on Hand (DOH):
- In 2020, Colgate-Palmolive had 94.61 days worth of inventory on hand, which decreased to 87.65 days in 2021.
- The trend then reversed as the DOH increased to 98.07 days by the end of 2022 but dropped to 86.82 days in 2023 and increased slightly to 91.34 days by 2024.
- Lower DOH indicates that Colgate-Palmolive is managing its inventory efficiently, with a faster turnover of goods, while a higher DOH suggests a need to streamline inventory management to prevent overstocking.

2. Days of Sales Outstanding (DSO):
- The DSO for Colgate-Palmolive was 28.01 days in 2020, which reduced to 27.17 days in 2021.
- However, there was an increase to 30.55 days in 2022, followed by a decrease to 29.75 days in 2023 and a further decline to 27.62 days in 2024.
- A lower DSO indicates that Colgate-Palmolive collects its accounts receivable efficiently, converting credit sales to cash quickly, while a higher DSO could point to potential issues with credit policies or collection procedures.

3. Number of Days of Payables:
- Colgate-Palmolive's number of days of payables decreased from 78.78 days in 2020 to 76.62 days in 2021.
- The trend continued with further decreases to 73.34 days in 2022 and 76.22 days in 2023 before increasing to 82.98 days in 2024.
- A lower number of days of payables indicates that the company is paying its suppliers more quickly, which can be beneficial in maintaining good relationships, although it may also increase strain on cash flows.

In conclusion, the analysis of Colgate-Palmolive's activity ratios over the years shows fluctuations in its efficiency in managing inventory, collecting receivables, and paying its suppliers. Monitoring these ratios can provide insights into the company's operational efficiency and working capital management.

Long-term

	Dec 31, 2024	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020
Fixed asset turnover	4.55	4.25	4.17	4.67	4.43
Total asset turnover	1.25	1.19	1.14	1.16	1.03

The Fixed Asset Turnover ratio measures the efficiency of Colgate-Palmolive Company in generating sales revenue from its fixed assets. The trend over the past five years indicates an increasing efficiency in utilizing fixed assets, with a ratio of 4.43 in 2020 improving to 4.55 in 2024. This suggests that the company is effectively using its long-term assets to generate sales.

On the other hand, the Total Asset Turnover ratio assesses the company's ability to generate sales from all its assets. The trend shows a consistent improvement in asset utilization efficiency, with the ratio increasing from 1.03 in 2020 to 1.25 in 2024. This indicates that Colgate-Palmolive has been successful in generating more sales relative to its total assets over the years.

Overall, both the Fixed Asset Turnover and Total Asset Turnover ratios demonstrate that Colgate-Palmolive Company has been efficiently utilizing its assets to drive sales growth, which is a positive indicator of the company's operational efficiency and effectiveness in managing its asset base.