Colgate-Palmolive Company (CL)

The liquidity ratios of Colgate-Palmolive Co. provide insights into the company's ability to meet its short-term obligations.

The current ratio measures the company's ability to cover its short-term obligations with its current assets. Over the past five years, Colgate-Palmolive Co.'s current ratio has shown some fluctuation, ranging from 0.99 to 1.28, with the most recent ratio at 1.11 as of December 31, 2023. A current ratio above 1 indicates that the company has more current assets than current liabilities. While the current ratio has decreased from the previous year, it still suggests that the company is able to cover its short-term obligations.

The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. Colgate-Palmolive Co.'s quick ratio has also fluctuated over the past five years, ranging from 0.61 to 0.76, with the most recent ratio at 0.71 as of December 31, 2023. A quick ratio below 1 indicates that the company may have difficulty meeting its short-term obligations without relying on inventory sales. The slight decrease in the quick ratio from the previous year may suggest a lower ability to cover immediate liabilities with its most liquid assets.

The cash ratio focuses solely on a company's ability to cover its short-term liabilities with its cash and cash equivalents. Colgate-Palmolive Co.'s cash ratio has also shown variability over the past five years, ranging from 0.32 to 0.38, with the most recent ratio at 0.37 as of December 31, 2023. A cash ratio below 1 indicates that the company may not have enough cash to cover its current liabilities. The company's cash ratio has remained relatively stable over the years, although it has decreased slightly from the previous year.

In summary, Colgate-Palmolive Co.'s liquidity ratios indicate that the company generally has the ability to meet its short-term obligations. However, the decreasing trend in some ratios, such as the quick ratio and the current ratio, may warrant further monitoring to ensure the company's liquidity position remains strong.

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See also:

Colgate-Palmolive Company Liquidity Ratios

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Additional liquidity measure

The cash conversion cycle for Colgate-Palmolive Co. has fluctuated over the past five years, reflecting the company's efficiency in managing its cash flow and working capital. In 2023, the cash conversion cycle decreased to 40.35 days, suggesting an improvement in the company's ability to convert its investments in inventory into cash. This is a positive trend compared to the previous year where the cycle was longer at 55.28 days.

Looking back over the past five years, there have been variations in the cash conversion cycle, with the lowest cycle recorded in 2021 at 38.21 days. This indicates that Colgate-Palmolive Co. was able to optimize its working capital and manage its inventory and receivables effectively during that period.

However, in 2022 and 2020, the cash conversion cycle was longer at 55.28 days and 43.85 days respectively, which could indicate potential inefficiencies in the company's working capital management during those years. In 2019, the cycle was at 42.84 days, showing a relatively stable performance compared to the surrounding years.

Overall, the trend in Colgate-Palmolive Co.'s cash conversion cycle highlights the importance of optimizing working capital management to enhance operational efficiency and cash flow generation. The company should continue monitoring and improving its cash conversion cycle to ensure a healthy and sustainable financial position.