Colgate-Palmolive Company (CL)
Solvency ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Debt-to-assets ratio | 0.45 | 0.50 | 0.56 | 0.48 | 0.46 |
| Debt-to-capital ratio | 0.97 | 0.93 | 0.96 | 0.92 | 0.91 |
| Debt-to-equity ratio | 34.38 | 13.50 | 21.80 | 11.81 | 9.87 |
| Financial leverage ratio | 75.69 | 26.92 | 39.23 | 24.70 | 21.43 |
The solvency ratios of Colgate-Palmolive Company indicate its ability to meet its long-term financial obligations.
1. Debt-to-assets ratio: The trend shows an increase from 0.46 in 2020 to 0.56 in 2022, reflecting a higher proportion of assets financed by debt. Although it decreased to 0.45 in 2024, it is essential for the company to monitor and manage its debt levels relative to its total assets to maintain financial stability.
2. Debt-to-capital ratio: This ratio increased from 0.91 in 2020 to 0.97 in 2024, indicating a rising reliance on debt for financing operations compared to equity. It is important for the company to strike a balance between debt and equity financing to ensure sustainability and reduce financial risk.
3. Debt-to-equity ratio: This ratio had a significant spike in 2022 to 21.80, indicating that the company had substantially higher debt relative to equity that year. The ratio decreased in the following years but remained elevated at 34.38 in 2024. Colgate-Palmolive needs to carefully manage its debt levels compared to equity to avoid potential financial distress.
4. Financial leverage ratio: The trend shows fluctuations, with a notable spike in 2022 to 39.23, indicating a high level of financial leverage that year. This ratio dropped in 2024 but remained relatively high at 75.69, suggesting that the company has a significant portion of its assets financed by debt. Colgate-Palmolive should focus on reducing its financial leverage to enhance financial flexibility and reduce the risk associated with high debt levels.
Overall, Colgate-Palmolive's solvency ratios suggest a need for effective debt management to ensure long-term financial health and stability. Monitoring and adjusting the company's leverage levels will be crucial in maintaining financial sustainability.
Coverage ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Interest coverage | 14.62 | 13.88 | 17.32 | 17.35 | 21.23 |
The interest coverage ratio measures a company's ability to meet its interest expenses with its operating income. Looking at Colgate-Palmolive Company's interest coverage over the years, we observe a gradual decline from 2020 to 2024.
In 2020, the interest coverage ratio stood at 21.23, indicating that the company earned 21.23 times the amount needed to cover its interest payments. However, this ratio decreased to 17.35 in 2021 and remained relatively stable at around 17 in 2022 and 2023.
By 2024, the interest coverage ratio decreased further to 14.62, suggesting a slight decrease in the company's ability to cover its interest expenses with its operating income. This trend may raise concerns about Colgate-Palmolive's ability to generate sufficient earnings to meet its interest obligations in the future.
Overall, a declining interest coverage ratio could indicate increasing financial risk, as the company may be approaching a point where it has limited room to maneuver if operating profits were to decline. Investors and stakeholders should closely monitor this trend to assess Colgate-Palmolive's financial health and sustainability.