Colgate-Palmolive Co. (NYSE:CL)

Current Ratio

The current ratio demonstrated a fluctuating yet overall upward trend over the five-year period. It started at 1.14 in 2018 and decreased to a low of 0.99 in 2020, indicating a dip below the ideal threshold of 1, which could suggest reduced short-term liquidity at that point. Subsequently, the current ratio improved, rising to 1.09 in 2021 and further to 1.28 in 2022. The increase in the last two years points to an enhanced ability to cover current liabilities with current assets, reflecting improving liquidity conditions.

Quick Ratio

The quick ratio showed a consistent decline from 2018 through 2020, falling from 0.64 to 0.49. This trend indicates a decreasing level of liquid assets (excluding inventory) available to meet short-term obligations. After 2020, a modest recovery took place, with the ratio increasing to 0.53 in 2021 and further to 0.57 in 2022. Despite this recovery, the quick ratio remained below the 2018 level, suggesting a cautious improvement in immediate liquidity.

Cash Ratio

The cash ratio remained relatively stable over the analyzed period, fluctuating narrowly between 0.19 and 0.22. Starting at 0.22 in 2018 and 2019, it slightly decreased to 0.20 in 2020, followed by minor variations with 0.21 in 2021 and 0.19 in 2022. This pattern indicates a consistent but limited cash reserve relative to current liabilities, reflecting a conservative cash holding policy with limited emphasis on cash liquidity expansion.

The analysis of the financial data over the five-year period reveals notable trends in the liquidity position of the company.

Current Assets

There is a consistent increase in current assets from 2018 to 2022. Beginning at approximately 3,793 million US dollars in 2018, current assets steadily rose each year, reaching 5,113 million US dollars by the end of 2022. This upward trajectory indicates the company has been accumulating more short-term assets over the period.

Current Liabilities

Current liabilities exhibited growth from 2018 through 2020, increasing from 3,341 million US dollars to 4,404 million US dollars. However, there was a decrease in 2021 to 4,051 million US dollars, with a further slight decline to 4,004 million US dollars in 2022. This suggests an effort to manage or reduce short-term obligations in the last two years of the period.

Current Ratio

The current ratio started at 1.14 in 2018, decreased to below 1.0 in 2020 (0.99), indicating that current liabilities slightly exceeded current assets that year. In 2021, the ratio improved to 1.09, and increased further to 1.28 in 2022. This improvement reflects a strengthening liquidity position, where current assets increasingly cover current liabilities.

Overall, the data reveals a strengthening liquidity profile, especially in the last two years. The increase in current assets combined with a reduction in current liabilities led to a better current ratio, suggesting improved short-term financial health and potentially greater operational flexibility.

The financial data reveals fluctuations in the liquidity position of the company over the five-year period ending December 31, 2022. Key components such as total quick assets and current liabilities provide insight into the company's short-term financial health as measured by the quick ratio.

Total Quick Assets

Total quick assets increased from $2,126 million at the end of 2018 to a peak of $2,323 million in 2019. Subsequently, this figure declined to $2,152 million in 2020 and remained relatively stable through 2021 at $2,129 million. By 2022, total quick assets experienced a moderate recovery, rising to $2,279 million. Overall, the asset base showed moderate volatility with a gradual upward trend towards the end of the period.

Current Liabilities

Current liabilities rose consistently from $3,341 million in 2018 to $4,404 million in 2020, marking a significant increase over two years. Thereafter, liabilities decreased modestly to $4,051 million in 2021 and slightly further to $4,004 million in 2022. This trend suggests an expansion in short-term obligations up to 2020 followed by a gradual deleveraging or better liability management in the subsequent years.

Quick Ratio

The quick ratio, which reflects the ability to meet short-term liabilities with liquid assets, showed a declining trend from 0.64 in 2018 to a low point of 0.49 in 2020. This decline corresponds with the increase in current liabilities outpacing growth in quick assets. From 2021 onward, the quick ratio improved, rising to 0.53 and further to 0.57 in 2022. Despite this recovery, the ratio remained below the level observed at the beginning of the period, indicating a relatively weaker liquidity position compared to 2018.

In summary, the company experienced increased short-term liabilities during the analyzed period, particularly around 2019-2020, which pressured its liquidity as reflected by a declining quick ratio. Although there was some improvement in quick assets and liquidity ratios in the latter years, the quick ratio did not return to its initial 2018 level, implying a cautious assessment of the company’s short-term financial flexibility is warranted.

Total Cash Assets

The total cash assets showed an increase from 726 million US dollars in 2018 to 888 million in 2020. However, there was a decline thereafter, falling to 832 million in 2021 and further to 775 million in 2022. This indicates a peak in cash holdings in 2020 followed by a gradual reduction over the subsequent two years.

Current Liabilities

Current liabilities displayed a rising trend from 3341 million US dollars in 2018 to a peak of 4404 million in 2020. Following this peak, liabilities decreased to 4051 million in 2021 and then slightly to 4004 million in 2022. This suggests that while the company’s short-term obligations increased significantly through 2020, some deleveraging or reduction in short-term debts occurred subsequently.

Cash Ratio

The cash ratio, a measure of liquidity indicating the company's ability to cover current liabilities with cash and cash equivalents, remained relatively stable but declined slightly over the period. It started at 0.22 in 2018 and 2019, dropped marginally to 0.20 in 2020, then modestly rose to 0.21 in 2021 before decreasing again to 0.19 in 2022. This marginal downtrend suggests a slight weakening in liquidity over time despite fluctuations in cash and liabilities.