Colgate Palmolive Case

Q1 Ratio Analysis

Analysis Of Colgate Palmolive Company

Ratio Analysis

Ratio A. Profitability Ratio Profit Margin Return on Assets Return on Equity B. Activity Ratios Asset Turnover Day's Recievable Inventory Turnover C. Leverage Ratio Debt to equity Ratio Times Interest Earned Days Payable D. Liquidity Ratios Current Ratio Quick Ratio ( Monetory curr. Assets = current assets - inventory -other assets) E. Market Ratio Price Earning Ratio Dividend yield

Latest Year(1994)

Previous Year(1993)

Industry

7.646% 9.44% 31.83%

2.659% 3.29% 10.13%

11.97% 12.48% 31.53%

net inc. / net sales rev. net inc / total asset net inc / total share holder equity

1.235 50.4 5.481

1.239 50.51 5.501

1.03 57 3.61

sales rev. / total Assets acc. Reciev. * 365 /sales rev. cost of sales / inventory

2.37 11.19 64.814

2.07 18.86 58.64

1.92 20.15 78

Debt/equity (pre-tax income + interest)/interest (Acc. Payable*365)/cost of sales

1.424

1.485

1.42

curr. Asset / curr. Liabilities

0.9572

0.8604

0.77

monetory curr. Asset / curr. Liabilites

Q2 . A Common Size Balance Sheet Analysis

Analysis Of Colgate Palmolive Company

Common Size Balance Sheet Analysis
Latest year (1994) 35.45% 32.36% 32.19% 100% 24.89% 28.51% 4.80% 12.10% 70.30% 9.63% 16.61% 40.64% -23.84% -13.40% 29.64% 100.00% Previous year (1993) 35.93% 30.65% 33.42% 100% 24.20% 26.56% 4.62% 12.04% 67.42% 10.37% 17.37% 37.55% -19.50% -13.24% 32.55% 100.00%

Total Current assets Land, building and equipment Other assets Total Assets Total current liabilities long term debts Differed income taxes Other Liabilities Total Liabilities Preffered and common stock Additional paid in capital Retained Earning Common Stock in Treasury Cumulative foreign exchange and earning adjustment and other equity adjustment Total Equity Total liabilities and stockholders equity

Q2.B How does Colgate- Palmolives balance sheet compare with those of other consumer products companies? Ans 1. The Current Assets of the Colgate- Palmolive is less compared to others probably this is probably due to lower day receivable ratio it has which is good for the company. 2. Colgate- Palmolive has a higher fixed assets than other s but lower return on assets so it should cut down its assets and try to increase return on assets 3. Current liabilities of Colgate- Palmolive is less than industry average thats a good sign. 4. Long term debt of Colgate- Palmolive is higher than others it should try to reduce tham. 5. The total equity of Colgate- Palmolive is less than others .

Q3.a Common size income statement analysis:

Analysis Of Colgate Palmolive Company

Common Size Income Statment Analysis
Latest year (1995) Sales Cost & Expense Cost of Sales SG&A Depriciation and ammortization Interest Expense Other Expense Total Cost And Expense Earning From continous operation befor tax Income Tax Earning From continous operation Discontinued Operation after Tax Net Earning Latest year (1994) 100.0% -51.6% -34.6% -1.1% -1.1% -88.4% 11.6% -3.9% 7.7% 7.7% Previous year (1993) 100.0% -52.2% -34.4% -1.0% -0.7% -88.3% 11.7% -4.0% 7.7% 2.7%

Q3.b How does Colgate-Palmolives income statement compare with those of other products companies? Ans 1. Cost of sales for Colgate-Palmolive is high compared to industry. It should try to reduce the same. 2. Selling, general & administrative expense for Colgate-Palmolive is less than the industry average thats a good sign. 3. Total cost and expense for Colgate-Palmolive is high compared to the industry it should try to cut it down. 4. Net income from the operation is low compared to the industry average.

Q4 What were the primary sources and uses for Colgate-Palmolive in the latest fiscal year? Ans Source: 1. Sales Revenue 2. Sale Of marketable security 3. Debt

Use : 1. Capital Expenses 2. Payment for acquisitions 3. Dividend Paid

Q5.a How would you go about choosing comparable companies to Colgate- Palmolive? How would you calculate an industry average.

Ans: 1. Selected company should be in same business as Colgate-Palmolive 2. If the business line has diverse portfolio than company with similar portfolio should be selected 3. Size of the company should be comparable with Colgate-Palmolive Industry Average can be calculated as simple arithmetic average.

Q5.b How well positioned is Colgate-Palmolive to meet the financial goals stated in the Management Interview? Ans 1. 2. 3. 4. Sales of the company is continuously increasing thats a good sign. But it has higher cost of sales as compared to other in the industry which should be reduced Reliance on long term debt should be reduced Finance of the company seems to be sufficient to meet its interest liabilities this will help it get further financing if required

Q5.c What are Colgate-Palmolives prospects for future growth? Can the company continue at its present growth rate? Ans 1. Company already has a good chunk of debt on its balance sheet so it should refrain from raising any further debt. 2. The total equity component is less compared to the others so it should try to raise more equity. 3. To raise further equity the company should improve its operations and reduce cost of sales and increase profitability . 4. Company has a low return on asset ratio so may be it can sell some of assets to generate capital.