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Microsoft Excel LibreOffice Calc


Analysis of Inventory

Difficulty: Advanced


Inventory Accounting Policy

The cost of approximately 75% of inventories is determined using the first-in, first-out ("FIFO") method, which is stated at the lower of cost or net realizable value. The cost of all other inventories, in the U.S. and Mexico, is determined using the last-in, first-out ("LIFO") method, which is stated at the lower of cost or market.

Source: Colgate-Palmolive Co., Annual Report


Inventory Disclosure

Colgate-Palmolive Co., Statement of Financial Position, Inventory

USD $ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Raw materials and supplies hidden hidden hidden hidden hidden
Work-in-process hidden hidden hidden hidden hidden
Finished goods hidden hidden hidden hidden hidden
Inventories hidden hidden hidden hidden hidden

Source: Based on data from Colgate-Palmolive Co. Annual Reports

Item Description The company
Raw materials and supplies Aggregated amount of unprocessed materials to be used in manufacturing or production process and supplies that will be consumed. Colgate-Palmolive Co.'s raw materials and supplies increased from 2015 to 2016 and from 2016 to 2017.
Work-in-process Carrying amount as of the balance sheet date of merchandise or goods which are partially completed, are generally comprised of raw materials, labor and factory overhead costs, and which require further materials, labor and overhead to be converted into finished goods, and which generally require the use of estimates to determine percentage complete and pricing.
Finished goods Carrying amount as of the balance sheet date of merchandise or goods held by the company that are readily available for sale. Colgate-Palmolive Co.'s finished goods declined from 2015 to 2016 but then increased from 2016 to 2017 exceeding 2015 level.
Inventories Carrying amount (lower of cost or market) as of the balance sheet date of inventories less all valuation and other allowances. Excludes noncurrent inventory balances (expected to remain on hand past one year or one operating cycle, if longer). Colgate-Palmolive Co.'s inventories declined from 2015 to 2016 but then increased from 2016 to 2017 exceeding 2015 level.

Adjustment to Inventory: from LIFO to FIFO

Adjusting LIFO Inventory to FIFO (Current) Cost

USD $ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Adjustment to Inventories
Inventories at LIFO (as reported) hidden hidden hidden hidden hidden
Add: Inventory LIFO reserve hidden hidden hidden hidden hidden
Inventories at FIFO (adjusted) hidden hidden hidden hidden hidden
Adjustment to Current Assets
Current assets (as reported) hidden hidden hidden hidden hidden
Add: Inventory LIFO reserve hidden hidden hidden hidden hidden
Current assets (adjusted) hidden hidden hidden hidden hidden
Adjustment to Total Assets
Total assets (as reported) hidden hidden hidden hidden hidden
Add: Inventory LIFO reserve hidden hidden hidden hidden hidden
Total assets (adjusted) hidden hidden hidden hidden hidden
Adjustment to Total Colgate-Palmolive Company Shareholders' Equity
Total Colgate-Palmolive Company shareholders' equity (as reported) hidden hidden hidden hidden hidden
Add: Inventory LIFO reserve hidden hidden hidden hidden hidden
Total Colgate-Palmolive Company shareholders' equity (adjusted) hidden hidden hidden hidden hidden
Adjustment to Net Income Attributable To Colgate-Palmolive Company
Net income attributable to Colgate-Palmolive Company (as reported) hidden hidden hidden hidden hidden
Add: Increase (decrease) in inventory LIFO reserve hidden hidden hidden hidden hidden
Net income attributable to Colgate-Palmolive Company (adjusted) hidden hidden hidden hidden hidden

Colgate-Palmolive Co.'s inventory value on Dec 31, 2017 would be $1,284  (in millions) if the FIFO inventory method was used instead of LIFO. Colgate-Palmolive Co.'s inventories, valued on a LIFO basis, on Dec 31, 2017 were $1,221 . Colgate-Palmolive Co.'s inventories would have been $63  higher than reported on Dec 31, 2017 if the FIFO method had been used instead.


Adjusted Ratios: LIFO vs. FIFO (Summary)

Colgate-Palmolive Co., adjusted ratios

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Current Ratio
Reported current ratio (LIFO) hidden hidden hidden hidden hidden
Adjusted current ratio (FIFO) hidden hidden hidden hidden hidden
Net Profit Margin
Reported net profit margin (LIFO) hidden% hidden% hidden% hidden% hidden%
Adjusted net profit margin (FIFO) hidden% hidden% hidden% hidden% hidden%
Total Asset Turnover
Reported total asset turnover (LIFO) hidden hidden hidden hidden hidden
Adjusted total asset turnover (FIFO) hidden hidden hidden hidden hidden
Financial Leverage
Reported financial leverage (LIFO) hidden hidden hidden hidden hidden
Adjusted financial leverage (FIFO) hidden hidden hidden hidden hidden
Return on Equity (ROE)
Reported ROE (LIFO) hidden% hidden% hidden% hidden% hidden%
Adjusted ROE (FIFO) hidden% hidden% hidden% hidden% hidden%
Return on Assets (ROA)
Reported ROA (LIFO) hidden% hidden% hidden% hidden% hidden%
Adjusted ROA (FIFO) hidden% hidden% hidden% hidden% hidden%
Ratio Description The company
Adjusted current ratio A liquidity ratio calculated as adjusted current assets divided by current liabilities. Colgate-Palmolive Co.'s adjusted current ratio improved from 2015 to 2016 and from 2016 to 2017.
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. Colgate-Palmolive Co.'s adjusted net profit margin improved from 2015 to 2016 but then slightly deteriorated from 2016 to 2017.
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Colgate-Palmolive Co.'s adjusted total asset turnover deteriorated from 2015 to 2016 and from 2016 to 2017.
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders' equity.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Colgate-Palmolive Co.'s adjusted ROA improved from 2015 to 2016 but then slightly deteriorated from 2016 to 2017.

Adjusted Current Ratio

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Current assets (USD $ in millions) hidden hidden hidden hidden hidden
Current liabilities (USD $ in millions) hidden hidden hidden hidden hidden
Current ratio1 hidden hidden hidden hidden hidden
Adjusted: from LIFO to FIFO
Adjusted current assets (USD $ in millions) hidden hidden hidden hidden hidden
Current liabilities (USD $ in millions) hidden hidden hidden hidden hidden
Adjusted current ratio2 hidden hidden hidden hidden hidden

2017 Calculations

1 Current ratio = Current assets ÷ Current liabilities
= hidden ÷ hidden = hidden

2 Adjusted current ratio = Adjusted current assets ÷ Current liabilities
= hidden ÷ hidden = hidden

Ratio Description The company
Adjusted current ratio A liquidity ratio calculated as adjusted current assets divided by current liabilities. Colgate-Palmolive Co.'s adjusted current ratio improved from 2015 to 2016 and from 2016 to 2017.

Adjusted Net Profit Margin

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Net income attributable to Colgate-Palmolive Company (USD $ in millions) hidden hidden hidden hidden hidden
Net sales (USD $ in millions) hidden hidden hidden hidden hidden
Net profit margin1 hidden% hidden% hidden% hidden% hidden%
Adjusted: from LIFO to FIFO
Adjusted net income attributable to Colgate-Palmolive Company (USD $ in millions) hidden hidden hidden hidden hidden
Net sales (USD $ in millions) hidden hidden hidden hidden hidden
Adjusted net profit margin2 hidden% hidden% hidden% hidden% hidden%

2017 Calculations

1 Net profit margin = 100 × Net income attributable to Colgate-Palmolive Company ÷ Net sales
= 100 × hidden ÷ hidden = hidden%

2 Adjusted net profit margin = 100 × Adjusted net income attributable to Colgate-Palmolive Company ÷ Net sales
= 100 × hidden ÷ hidden = hidden%

Ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. Colgate-Palmolive Co.'s adjusted net profit margin improved from 2015 to 2016 but then slightly deteriorated from 2016 to 2017.

Adjusted Total Asset Turnover

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Net sales (USD $ in millions) hidden hidden hidden hidden hidden
Total assets (USD $ in millions) hidden hidden hidden hidden hidden
Total asset turnover1 hidden hidden hidden hidden hidden
Adjusted: from LIFO to FIFO
Net sales (USD $ in millions) hidden hidden hidden hidden hidden
Adjusted total assets (USD $ in millions) hidden hidden hidden hidden hidden
Adjusted total asset turnover2 hidden hidden hidden hidden hidden

2017 Calculations

1 Total asset turnover = Net sales ÷ Total assets
= hidden ÷ hidden = hidden

2 Adjusted total asset turnover = Net sales ÷ Adjusted total assets
= hidden ÷ hidden = hidden

Ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Colgate-Palmolive Co.'s adjusted total asset turnover deteriorated from 2015 to 2016 and from 2016 to 2017.

Adjusted Financial Leverage

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Total assets (USD $ in millions) hidden hidden hidden hidden hidden
Total Colgate-Palmolive Company shareholders' equity (USD $ in millions) hidden hidden hidden hidden hidden
Financial leverage1 hidden hidden hidden hidden hidden
Adjusted: from LIFO to FIFO
Adjusted total assets (USD $ in millions) hidden hidden hidden hidden hidden
Adjusted total Colgate-Palmolive Company shareholders' equity (USD $ in millions) hidden hidden hidden hidden hidden
Adjusted financial leverage2 hidden hidden hidden hidden hidden

2017 Calculations

1 Financial leverage = Total assets ÷ Total Colgate-Palmolive Company shareholders' equity
= hidden ÷ hidden = hidden

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted total Colgate-Palmolive Company shareholders' equity
= hidden ÷ hidden = hidden

Ratio Description The company
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Net income attributable to Colgate-Palmolive Company (USD $ in millions) hidden hidden hidden hidden hidden
Total Colgate-Palmolive Company shareholders' equity (USD $ in millions) hidden hidden hidden hidden hidden
ROE1 hidden% hidden% hidden% hidden% hidden%
Adjusted: from LIFO to FIFO
Adjusted net income attributable to Colgate-Palmolive Company (USD $ in millions) hidden hidden hidden hidden hidden
Adjusted total Colgate-Palmolive Company shareholders' equity (USD $ in millions) hidden hidden hidden hidden hidden
Adjusted ROE2 hidden% hidden% hidden% hidden% hidden%

2017 Calculations

1 ROE = 100 × Net income attributable to Colgate-Palmolive Company ÷ Total Colgate-Palmolive Company shareholders' equity
= 100 × hidden ÷ hidden = hidden%

2 Adjusted ROE = 100 × Adjusted net income attributable to Colgate-Palmolive Company ÷ Adjusted total Colgate-Palmolive Company shareholders' equity
= 100 × hidden ÷ hidden = hidden%

Ratio Description The company
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders' equity.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Net income attributable to Colgate-Palmolive Company (USD $ in millions) hidden hidden hidden hidden hidden
Total assets (USD $ in millions) hidden hidden hidden hidden hidden
ROA1 hidden% hidden% hidden% hidden% hidden%
Adjusted: from LIFO to FIFO
Adjusted net income attributable to Colgate-Palmolive Company (USD $ in millions) hidden hidden hidden hidden hidden
Adjusted total assets (USD $ in millions) hidden hidden hidden hidden hidden
Adjusted ROA2 hidden% hidden% hidden% hidden% hidden%

2017 Calculations

1 ROA = 100 × Net income attributable to Colgate-Palmolive Company ÷ Total assets
= 100 × hidden ÷ hidden = hidden%

2 Adjusted ROA = 100 × Adjusted net income attributable to Colgate-Palmolive Company ÷ Adjusted total assets
= 100 × hidden ÷ hidden = hidden%

Ratio Description The company
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Colgate-Palmolive Co.'s adjusted ROA improved from 2015 to 2016 but then slightly deteriorated from 2016 to 2017.