Colgate Palmolive Financial Analysis
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 & Gamble (PG), Johnson & Johnson (JNJ), Church Dwight & Company (CHD) and Clorox & 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 4.19 to 2.96 during the same period. The total liabilities have increased 3.6% from 2008 to 2010 but they have increased at the same rate as its assets that have increased by 11.9%. So the reduction in ROE is not necessarily bad for Colgate-Palmolive as the ROE has dropped due to increase in assets and reduction in liabilities.
DuPont Ratio Components
Profitability
Profitability has increased from 12.7% in 2008 to 14.9% in 2009 and has dropped to 14.1% in 2010. So to understand the reason behind the drop in profitability, we need to look at total sales and net income. Total sales have increased from $15.3 billion in 2009 to $15.6 billion in 2010 but net income has dropped from $2.3 billion to $2.2 billion. So this means that the increased sales have come at the expense of diminishing profit margins for Colgate-Palmolive in 2010.
Efficiency
The asset turnover ratio has dropped from 1.52 in 2008 to 1.39 in 2010. So every dollar of asset generated roughly 8% less sales revenue in 2010 compared to 2008.
LT Debt to Assets Ratio
The financial leverage of Colgate-Palmolive has reduced from 4.77 in 2008 to 3.67 in 2010. Since this ratio measures the extent to which a company relies on debt financing in its capital structure, a
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 & Gamble (PG), Johnson & Johnson (JNJ), Church Dwight & Company (CHD) and Clorox & 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 4.19 to 2.96 during the same period. The total liabilities have increased 3.6% from 2008 to 2010 but they have increased at the same rate as its assets that have increased by 11.9%. So the reduction in ROE is not necessarily bad for Colgate-Palmolive as the ROE has dropped due to increase in assets and reduction in liabilities.
DuPont Ratio Components
Profitability
Profitability has increased from 12.7% in 2008 to 14.9% in 2009 and has dropped to 14.1% in 2010. So to understand the reason behind the drop in profitability, we need to look at total sales and net income. Total sales have increased from $15.3 billion in 2009 to $15.6 billion in 2010 but net income has dropped from $2.3 billion to $2.2 billion. So this means that the increased sales have come at the expense of diminishing profit margins for Colgate-Palmolive in 2010.
Efficiency
The asset turnover ratio has dropped from 1.52 in 2008 to 1.39 in 2010. So every dollar of asset generated roughly 8% less sales revenue in 2010 compared to 2008.
LT Debt to Assets Ratio
The financial leverage of Colgate-Palmolive has reduced from 4.77 in 2008 to 3.67 in 2010. Since this ratio measures the extent to which a company relies on debt financing in its capital structure, a