Colgate Palmolive Financial Analysis - 967 Words

COLGATE-PALMOLIVE ANALYSIS Section I - Business Overview Colgate-Palmolive is a leading consumer products company with businesses in two main product segments – Oral, Personal and Home Care; and Pet Nutrition. The company operates in more than 200 countries and this geographic diversity and balance help to reduce the Company’s exposure to businesses and other risks in any one country or part of the world. The company’s main competitors are Proctor amp; Gamble (PG), Johnson amp; Johnson (JNJ), Church Dwight amp; Company (CHD) and Clorox amp; Company (CLX). Section II – Ratio Analysis Return On Equity (ROE) The ROE has declined for Colgate-Palmolive from 93% in 2008 to 72% in 2010. But the debt to equity ratio has declined from†¦show more content†¦Though current ratio does not take into account future sales and other cash inflows in future, the declining trend might be a problem if it continues in the future. Quick Ratio The quick ratio reflects on a company’s ability to meet its current liabilities without liquidating inventories that could require markdowns. It is a more stringent test of liquidity than the current ratio and may provide more insight into company liquidity in some cases. For Colgate-Palmolive, the quick ratio has declined from 0.73 in 2008 to 0.58 in 2010. While this does not necessarily mean a problem, a higher current ratio and quick ratio analysis will mean that the company will not have difficulty in meeting its short-term obligations from its operations and not by liquidating its assets. Section IV Conclusions The ratio analysis indicates mostly positive outlook for Colgate-Palmolive as most of the measures look healthy. The ROE has reduced by increasing assets and reducing liabilities, the cash conversion cycle has decreased and the days payables outstanding has increased. But Dupont analysis indicates that profitability and efficiency have become lower. 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