Colgate-Palmolive Company (CL)

Interest coverage

		Dec 31, 2024	Sep 30, 2024	Jun 30, 2024	Mar 31, 2024	Dec 31, 2023	Sep 30, 2023	Jun 30, 2023	Mar 31, 2023	Dec 31, 2022	Sep 30, 2022	Jun 30, 2022	Mar 31, 2022	Dec 31, 2021	Sep 30, 2021	Jun 30, 2021	Mar 31, 2021	Dec 31, 2020	Sep 30, 2020	Jun 30, 2020	Mar 31, 2020
Earnings before interest and tax (EBIT) (ttm)	US$ in thousands	4,267,000	4,276,000	4,240,000	4,122,000	3,984,000	3,114,000	3,032,000	2,942,000	2,893,000	3,056,000	3,076,000	3,188,000	3,332,000	3,936,000	3,987,000	3,937,000	3,885,000	3,847,000	3,685,000	3,627,000
Interest expense (ttm)	US$ in thousands	174,000	236,000	238,000	236,000	232,000	225,000	207,000	180,000	153,000	129,000	187,000	181,000	183,000	209,000	147,000	157,000	164,000	139,000	138,000	141,000
Interest coverage		24.52	18.12	17.82	17.47	17.17	13.84	14.65	16.34	18.91	23.69	16.45	17.61	18.21	18.83	27.12	25.08	23.69	27.68	26.70	25.72

December 31, 2024 calculation

Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $4,267,000K ÷ $174,000K
= 24.52

The interest coverage ratio is a measure of a company's ability to cover its interest expenses with its earnings before interest and taxes (EBIT). A higher interest coverage ratio indicates that the company is more capable of meeting its interest obligations.

Analyzing the interest coverage ratio of Colgate-Palmolive Company based on the provided data shows fluctuations over the quarters. The interest coverage ratio ranged from a high of 27.68 in September 2020 to a low of 13.84 in September 2023. Generally, a ratio above 2 is considered healthy, indicating that the company can easily cover its interest payments.

Colgate-Palmolive's interest coverage ratio peaked in mid-2020 and has since experienced fluctuations, showing a downward trend from that point onwards. The declining trend from 2021 to 2024 may raise concerns about the company's ability to meet its interest obligations solely based on its operating income.

A sustained decline in the interest coverage ratio could indicate increasing financial risk for Colgate-Palmolive, as it may struggle to cover its interest expenses from its operating profits. It is important for stakeholders and investors to closely monitor this ratio to assess the company's financial health and ability to service its debt.