Analysis of Solvency Ratios
Solvency ratios also known as long-term debt ratios measure a company ability to meet long-term obligations.
Solvency Ratios (Summary)
Debt Ratios
Coverage Ratios
Colgate-Palmolive Co., solvency ratios
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
The analysis of solvency metrics from 2018 to 2022 reveals a period of significant structural adjustment followed by a gradual increase in leverage. A notable deleveraging event occurred between 2019 and 2020, which substantially reduced the reliance on debt relative to equity and lowered overall financial leverage.
- Leverage and Equity Ratios
- The debt-to-equity ratio experienced a sharp contraction from 67.07 in 2019 to 10.23 in 2020, a trend mirrored by financial leverage, which dropped from 128.50 to 21.43 in the same period. Following this low point, both metrics trended upward, with the debt-to-equity ratio rising to 21.86 and financial leverage increasing to 39.23 by the end of 2022. The inclusion of operating lease liabilities consistently increases these ratios but maintains the same directional trajectory.
- Capital and Asset Proportions
- Debt to capital remained relatively stable throughout the period, fluctuating within a narrow range between 0.91 and 1.02. The debt-to-assets ratio demonstrated moderate stability at 0.52 in 2018 and 2019, declined slightly to 0.48 in 2020 and 2021, and subsequently increased to 0.56 in 2022. This indicates that total liabilities consistently represent a significant portion, often exceeding half, of the total asset base.
- Debt Servicing Capacity
- Interest coverage and fixed charge coverage ratios indicate a robust capacity to meet financial obligations, although a downturn is observed in the final year. Interest coverage peaked at 27.38 in 2021 before declining to 16.93 in 2022. Similarly, fixed charge coverage rose from 9.53 in 2018 to a peak of 12.92 in 2021, returning to 9.72 in 2022. The simultaneous decline in coverage ratios and the rise in leverage during 2022 suggest an increase in interest expenses or a relative decrease in operating earnings available for debt service.
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Debt to Equity
Colgate-Palmolive Co., debt to equity calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Notes and loans payable | 11) | 39) | 258) | 260) | 12) | |
| Current portion of long-term debt | 14) | 12) | 9) | 254) | —) | |
| Long-term debt, excluding current portion | 8,741) | 7,194) | 7,334) | 7,333) | 6,354) | |
| Total debt | 8,766) | 7,245) | 7,601) | 7,847) | 6,366) | |
| Total Colgate-Palmolive Company shareholders’ equity | 401) | 609) | 743) | 117) | (102) | |
| Solvency Ratio | ||||||
| Debt to equity1 | 21.86 | 11.90 | 10.23 | 67.07 | — | |
| Benchmarks | ||||||
| Debt to Equity, Competitors2 | ||||||
| Procter & Gamble Co. | 0.68 | 0.69 | — | — | — | |
| Debt to Equity, Industry | ||||||
| Consumer Staples | 1.08 | 1.07 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Debt to equity = Total debt ÷ Total Colgate-Palmolive Company shareholders’ equity
= 8,766 ÷ 401 = 21.86
2 Click competitor name to see calculations.
The solvency profile between 2018 and 2022 is characterized by significant volatility in both total debt and shareholders' equity, leading to fluctuating leverage ratios. A transition from a negative equity position in 2018 to a positive, though declining, equity base in subsequent years marks the primary shift in the capital structure.
- Total Debt Trends
- Total debt experienced a general upward trajectory, rising from 6,366 million US dollars in 2018 to a peak of 8,766 million US dollars by December 31, 2022. While a period of moderate reduction occurred between 2019 and 2021, the sharp increase in 2022 represents the highest debt level recorded during the analyzed period.
- Shareholders' Equity Analysis
- Shareholders' equity transitioned from a deficit of 102 million US dollars in 2018 to a positive balance of 117 million US dollars in 2019. A substantial peak was reached in 2020 at 743 million US dollars; however, this was followed by a consistent decline over the next two years, ending at 401 million US dollars in 2022.
- Debt to Equity Ratio Dynamics
- The debt to equity ratio reflects the combined impact of increasing liabilities and eroding equity. After a high of 67.07 in 2019, the ratio dropped significantly to 10.23 in 2020, coinciding with the peak in shareholders' equity. Subsequently, the ratio climbed to 11.90 in 2021 and further to 21.86 in 2022, indicating an increasing reliance on debt relative to equity.
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Debt to Equity (including Operating Lease Liability)
Colgate-Palmolive Co., debt to equity (including operating lease liability) calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Notes and loans payable | 11) | 39) | 258) | 260) | 12) | |
| Current portion of long-term debt | 14) | 12) | 9) | 254) | —) | |
| Long-term debt, excluding current portion | 8,741) | 7,194) | 7,334) | 7,333) | 6,354) | |
| Total debt | 8,766) | 7,245) | 7,601) | 7,847) | 6,366) | |
| Operating lease liabilities due in one year | 108) | 137) | 137) | 145) | —) | |
| Long-term operating lease liabilities | 397) | 451) | 476) | 491) | —) | |
| Total debt (including operating lease liability) | 9,271) | 7,833) | 8,214) | 8,483) | 6,366) | |
| Total Colgate-Palmolive Company shareholders’ equity | 401) | 609) | 743) | 117) | (102) | |
| Solvency Ratio | ||||||
| Debt to equity (including operating lease liability)1 | 23.12 | 12.86 | 11.06 | 72.50 | — | |
| Benchmarks | ||||||
| Debt to Equity (including Operating Lease Liability), Competitors2 | ||||||
| Procter & Gamble Co. | 0.69 | 0.71 | — | — | — | |
| Debt to Equity (including Operating Lease Liability), Industry | ||||||
| Consumer Staples | 1.20 | 1.19 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Debt to equity (including operating lease liability) = Total debt (including operating lease liability) ÷ Total Colgate-Palmolive Company shareholders’ equity
= 9,271 ÷ 401 = 23.12
2 Click competitor name to see calculations.
The solvency position from 2018 to 2022 is characterized by significant volatility in both total debt levels and the shareholders' equity base, resulting in substantial fluctuations in the debt-to-equity ratio.
- Total Debt Trends
- Total debt, including operating lease liabilities, exhibited an overall upward trajectory over the five-year period. Following a sharp increase from US$ 6,366 million in 2018 to US$ 8,483 million in 2019, debt levels remained relatively stable with a slight decrease through 2021, before rising to a period peak of US$ 9,271 million in 2022.
- Shareholders' Equity Fluctuations
- The equity position demonstrated extreme variance, starting from a negative balance of US$ 102 million in 2018. A recovery phase led to a peak of US$ 743 million in 2020, followed by a consistent decline over the subsequent two years, ending at US$ 401 million in 2022.
- Debt to Equity Ratio Analysis
- The debt-to-equity ratio reflects the instability of the underlying balances. A high ratio of 72.50 was recorded in 2019, indicating a highly leveraged position due to a thin equity base. This figure improved dramatically to 11.06 in 2020 as equity increased. However, the ratio trended upward again in 2021 and 2022, reaching 23.12, which signals an increase in financial leverage driven by the simultaneous rise in total debt and the reduction of shareholders' equity.
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Debt to Capital
Colgate-Palmolive Co., debt to capital calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Notes and loans payable | 11) | 39) | 258) | 260) | 12) | |
| Current portion of long-term debt | 14) | 12) | 9) | 254) | —) | |
| Long-term debt, excluding current portion | 8,741) | 7,194) | 7,334) | 7,333) | 6,354) | |
| Total debt | 8,766) | 7,245) | 7,601) | 7,847) | 6,366) | |
| Total Colgate-Palmolive Company shareholders’ equity | 401) | 609) | 743) | 117) | (102) | |
| Total capital | 9,167) | 7,854) | 8,344) | 7,964) | 6,264) | |
| Solvency Ratio | ||||||
| Debt to capital1 | 0.96 | 0.92 | 0.91 | 0.99 | 1.02 | |
| Benchmarks | ||||||
| Debt to Capital, Competitors2 | ||||||
| Procter & Gamble Co. | 0.40 | 0.41 | — | — | — | |
| Debt to Capital, Industry | ||||||
| Consumer Staples | 0.52 | 0.52 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Debt to capital = Total debt ÷ Total capital
= 8,766 ÷ 9,167 = 0.96
2 Click competitor name to see calculations.
Between 2018 and 2022, the solvency profile exhibited a period of initial deleveraging followed by a recent increase in total obligations. The debt to capital ratio reflects a volatile but generally controlled trajectory, although the absolute levels of debt reached a five-year peak by the end of the analyzed period.
- Total Debt Trends
- Total debt increased from US$ 6,366 million in 2018 to US$ 7,847 million in 2019. Following this increase, a two-year downward trend occurred, with debt falling to US$ 7,245 million by 2021. However, a significant increase was recorded in 2022, bringing total debt to its highest point in the period at US$ 8,766 million.
- Total Capital Movements
- Total capital grew from US$ 6,264 million in 2018 to US$ 8,344 million in 2020. A moderate contraction was observed in 2021, with capital dropping to US$ 7,854 million, before expanding to US$ 9,167 million in 2022.
- Debt to Capital Ratio Analysis
- The debt to capital ratio began at 1.02 in 2018, indicating that debt obligations exceeded total capital. A consistent downward trend was observed through 2020, during which the ratio reached its lowest point of 0.91. After remaining relatively stable at 0.92 in 2021, the ratio rose to 0.96 in 2022, signaling a return toward a more debt-reliant capital structure.
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Debt to Capital (including Operating Lease Liability)
Colgate-Palmolive Co., debt to capital (including operating lease liability) calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Notes and loans payable | 11) | 39) | 258) | 260) | 12) | |
| Current portion of long-term debt | 14) | 12) | 9) | 254) | —) | |
| Long-term debt, excluding current portion | 8,741) | 7,194) | 7,334) | 7,333) | 6,354) | |
| Total debt | 8,766) | 7,245) | 7,601) | 7,847) | 6,366) | |
| Operating lease liabilities due in one year | 108) | 137) | 137) | 145) | —) | |
| Long-term operating lease liabilities | 397) | 451) | 476) | 491) | —) | |
| Total debt (including operating lease liability) | 9,271) | 7,833) | 8,214) | 8,483) | 6,366) | |
| Total Colgate-Palmolive Company shareholders’ equity | 401) | 609) | 743) | 117) | (102) | |
| Total capital (including operating lease liability) | 9,672) | 8,442) | 8,957) | 8,600) | 6,264) | |
| Solvency Ratio | ||||||
| Debt to capital (including operating lease liability)1 | 0.96 | 0.93 | 0.92 | 0.99 | 1.02 | |
| Benchmarks | ||||||
| Debt to Capital (including Operating Lease Liability), Competitors2 | ||||||
| Procter & Gamble Co. | 0.41 | 0.41 | — | — | — | |
| Debt to Capital (including Operating Lease Liability), Industry | ||||||
| Consumer Staples | 0.54 | 0.54 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Debt to capital (including operating lease liability) = Total debt (including operating lease liability) ÷ Total capital (including operating lease liability)
= 9,271 ÷ 9,672 = 0.96
2 Click competitor name to see calculations.
The solvency profile over the five-year period reveals a fluctuating relationship between total debt and total capital, characterized by an initial peak in leverage followed by a period of relative stabilization and a subsequent increase in total obligations.
- Total Debt Trends
- Total debt, including operating lease liabilities, exhibited significant volatility. A sharp increase occurred between 2018 and 2019, where obligations rose from 6,366 million to 8,483 million. This was followed by a two-year contraction, reaching a period low of 7,833 million in 2021, before climbing to a five-year high of 9,271 million by the end of 2022.
- Total Capital Dynamics
- Total capital followed a similar trajectory to debt, increasing from 6,264 million in 2018 to 9,672 million in 2022. The capital base expanded most notably in 2019 and 2022, closely mirroring the movements in the total debt obligations.
- Debt to Capital Ratio Analysis
- The debt to capital ratio began at 1.02 in 2018, indicating that total debt exceeded total capital. A downward trend was observed through 2020, with the ratio reaching a minimum of 0.92, suggesting a period of improved solvency or a shift in the capital structure. However, this trend reversed slightly in the final two years, with the ratio increasing to 0.93 in 2021 and 0.96 in 2022.
The overall trajectory indicates a trend toward higher leverage toward the end of the analyzed period, although the ratio remains below the peak levels observed at the start of the sequence.
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Debt to Assets
Colgate-Palmolive Co., debt to assets calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Notes and loans payable | 11) | 39) | 258) | 260) | 12) | |
| Current portion of long-term debt | 14) | 12) | 9) | 254) | —) | |
| Long-term debt, excluding current portion | 8,741) | 7,194) | 7,334) | 7,333) | 6,354) | |
| Total debt | 8,766) | 7,245) | 7,601) | 7,847) | 6,366) | |
| Total assets | 15,731) | 15,040) | 15,920) | 15,034) | 12,161) | |
| Solvency Ratio | ||||||
| Debt to assets1 | 0.56 | 0.48 | 0.48 | 0.52 | 0.52 | |
| Benchmarks | ||||||
| Debt to Assets, Competitors2 | ||||||
| Procter & Gamble Co. | 0.27 | 0.27 | — | — | — | |
| Debt to Assets, Industry | ||||||
| Consumer Staples | 0.30 | 0.30 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Debt to assets = Total debt ÷ Total assets
= 8,766 ÷ 15,731 = 0.56
2 Click competitor name to see calculations.
The financial data reveals a fluctuating solvency profile between 2018 and 2022, characterized by a period of relative stability and temporary deleveraging followed by a notable increase in leverage in the final year of the analysis.
- Total Debt Dynamics
- Total debt exhibited significant volatility, rising from 6,366 million USD in 2018 to a peak of 8,766 million USD in 2022. A temporary downward trend was observed between 2019 and 2021, where debt decreased from 7,847 million USD to 7,245 million USD, before experiencing a sharp increase in the 2022 fiscal year.
- Total Asset Growth
- Total assets increased from 12,161 million USD in 2018 to a high of 15,920 million USD in 2020. Following a slight contraction in 2021 to 15,040 million USD, the asset base recovered to 15,731 million USD by the end of 2022, maintaining a higher baseline than that of 2018.
- Debt to Assets Ratio Trends
- The debt to assets ratio remained constant at 0.52 during 2018 and 2019. A trend toward improved solvency occurred in 2020 and 2021, as the ratio declined to 0.48, indicating a period where asset expansion or debt reduction strengthened the balance sheet. This trend reversed sharply in 2022, with the ratio rising to 0.56, the highest point in the analyzed period, reflecting a greater proportion of total assets being financed through debt.
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Debt to Assets (including Operating Lease Liability)
Colgate-Palmolive Co., debt to assets (including operating lease liability) calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Notes and loans payable | 11) | 39) | 258) | 260) | 12) | |
| Current portion of long-term debt | 14) | 12) | 9) | 254) | —) | |
| Long-term debt, excluding current portion | 8,741) | 7,194) | 7,334) | 7,333) | 6,354) | |
| Total debt | 8,766) | 7,245) | 7,601) | 7,847) | 6,366) | |
| Operating lease liabilities due in one year | 108) | 137) | 137) | 145) | —) | |
| Long-term operating lease liabilities | 397) | 451) | 476) | 491) | —) | |
| Total debt (including operating lease liability) | 9,271) | 7,833) | 8,214) | 8,483) | 6,366) | |
| Total assets | 15,731) | 15,040) | 15,920) | 15,034) | 12,161) | |
| Solvency Ratio | ||||||
| Debt to assets (including operating lease liability)1 | 0.59 | 0.52 | 0.52 | 0.56 | 0.52 | |
| Benchmarks | ||||||
| Debt to Assets (including Operating Lease Liability), Competitors2 | ||||||
| Procter & Gamble Co. | 0.28 | 0.28 | — | — | — | |
| Debt to Assets (including Operating Lease Liability), Industry | ||||||
| Consumer Staples | 0.33 | 0.33 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Debt to assets (including operating lease liability) = Total debt (including operating lease liability) ÷ Total assets
= 9,271 ÷ 15,731 = 0.59
2 Click competitor name to see calculations.
The solvency profile exhibits a period of fluctuation in leverage between 2018 and 2022, characterized by alternating cycles of debt accumulation and stabilization relative to the asset base.
- Total Debt Trends
- Total debt, including operating lease liabilities, experienced a substantial increase from US$ 6,366 million in 2018 to US$ 8,483 million in 2019. This was followed by a period of moderate decline through 2021, reaching US$ 7,833 million, before a significant surge in 2022 brought total liabilities to a five-year peak of US$ 9,271 million.
- Total Asset Progression
- Total assets showed an upward trend from 2018 to 2020, peaking at US$ 15,920 million. A contraction was observed in 2021, with assets decreasing to US$ 15,040 million, followed by a recovery to US$ 15,731 million by the end of 2022.
- Debt to Assets Ratio Interpretation
- The debt to assets ratio shifted from 0.52 in 2018 to 0.56 in 2019, before returning to and maintaining a level of 0.52 across 2020 and 2021. A notable increase in leverage occurred in 2022, where the ratio reached 0.59. This indicates that by the end of the analyzed period, a higher percentage of the asset base was financed through debt compared to previous years, marking the highest level of solvency risk within the five-year window.
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Financial Leverage
Colgate-Palmolive Co., financial leverage calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Total assets | 15,731) | 15,040) | 15,920) | 15,034) | 12,161) | |
| Total Colgate-Palmolive Company shareholders’ equity | 401) | 609) | 743) | 117) | (102) | |
| Solvency Ratio | ||||||
| Financial leverage1 | 39.23 | 24.70 | 21.43 | 128.50 | — | |
| Benchmarks | ||||||
| Financial Leverage, Competitors2 | ||||||
| Procter & Gamble Co. | 2.52 | 2.57 | — | — | — | |
| Financial Leverage, Industry | ||||||
| Consumer Staples | 3.59 | 3.59 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Financial leverage = Total assets ÷ Total Colgate-Palmolive Company shareholders’ equity
= 15,731 ÷ 401 = 39.23
2 Click competitor name to see calculations.
The financial structure between 2018 and 2022 is characterized by a significant transition in equity positioning and high volatility in financial leverage. While total assets remained relatively stable after an initial expansion phase, shareholders' equity experienced substantial fluctuations, directly impacting the solvency profile.
- Total Asset Trends
- Total assets grew from 12,161 million in 2018 to a peak of 15,920 million in 2020. Following this growth phase, asset values stabilized, ending the period at 15,731 million in 2022. This indicates a period of expansion followed by a plateau in the asset base.
- Shareholders' Equity Dynamics
- A negative equity position was recorded in 2018 at -102 million. This transitioned to a positive balance in 2019 and reached a peak of 743 million in 2020. However, a consistent decline was observed in the subsequent two years, with equity falling to 401 million by December 31, 2022, which represents a significant reduction from the 2020 high.
- Financial Leverage Analysis
- The financial leverage ratio exhibited extreme volatility, primarily driven by the fluctuations in equity. A ratio of 128.50 was recorded in 2019, reflecting a very high reliance on debt relative to a slim equity margin. This ratio improved drastically to 21.43 in 2020 as equity strengthened. From 2021 through 2022, the ratio trended upward again, reaching 39.23. This recent increase suggests a rising dependence on liabilities to finance assets as the equity base contracted.
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Interest Coverage
Colgate-Palmolive Co., interest coverage calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income attributable to Colgate-Palmolive Company | 1,785) | 2,166) | 2,695) | 2,367) | 2,400) | |
| Add: Net income attributable to noncontrolling interest | 182) | 172) | 165) | 160) | 158) | |
| Add: Income tax expense | 693) | 749) | 787) | 774) | 906) | |
| Add: Interest expense | 167) | 117) | 183) | 192) | 193) | |
| Earnings before interest and tax (EBIT) | 2,827) | 3,204) | 3,830) | 3,493) | 3,657) | |
| Solvency Ratio | ||||||
| Interest coverage1 | 16.93 | 27.38 | 20.93 | 18.19 | 18.95 | |
| Benchmarks | ||||||
| Interest Coverage, Competitors2 | ||||||
| Procter & Gamble Co. | 41.99 | 36.09 | — | — | — | |
| Interest Coverage, Industry | ||||||
| Consumer Staples | 15.69 | 11.46 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Interest coverage = EBIT ÷ Interest expense
= 2,827 ÷ 167 = 16.93
2 Click competitor name to see calculations.
The solvency profile from 2018 to 2022 reflects a period of volatility in interest coverage capacity. Although the company maintained a strong ability to service its debt throughout the five-year period, a notable decline in coverage occurred in the final year, following a peak in 2021.
- Earnings Before Interest and Tax (EBIT)
- Operational earnings exhibited a fluctuating trend, reaching a peak of US$ 3,830 million in 2020. Following this high, a consistent downward trend was observed, with EBIT falling to US$ 3,204 million in 2021 and further declining to US$ 2,827 million by the end of 2022, the lowest level in the analyzed period.
- Interest Expense
- Interest obligations remained relatively stable between 2018 and 2020, hovering around US$ 190 million. A significant reduction was recorded in 2021, where expenses dropped to US$ 117 million. However, this trend reversed in 2022, as interest expenses rose back to US$ 167 million.
- Interest Coverage Ratio
- The interest coverage ratio showed an upward trajectory between 2019 and 2021, peaking at 27.38. This peak was primarily driven by the substantial decrease in interest expenses during 2021, which offset the decline in EBIT. In 2022, the ratio contracted sharply to 16.93, a result of the combined impact of diminished operational earnings and increased interest costs.
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Fixed Charge Coverage
Colgate-Palmolive Co., fixed charge coverage calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income attributable to Colgate-Palmolive Company | 1,785) | 2,166) | 2,695) | 2,367) | 2,400) | |
| Add: Net income attributable to noncontrolling interest | 182) | 172) | 165) | 160) | 158) | |
| Add: Income tax expense | 693) | 749) | 787) | 774) | 906) | |
| Add: Interest expense | 167) | 117) | 183) | 192) | 193) | |
| Earnings before interest and tax (EBIT) | 2,827) | 3,204) | 3,830) | 3,493) | 3,657) | |
| Add: Operating lease cost | 138) | 142) | 155) | 169) | 213) | |
| Earnings before fixed charges and tax | 2,965) | 3,346) | 3,985) | 3,662) | 3,870) | |
| Interest expense | 167) | 117) | 183) | 192) | 193) | |
| Operating lease cost | 138) | 142) | 155) | 169) | 213) | |
| Fixed charges | 305) | 259) | 338) | 361) | 406) | |
| Solvency Ratio | ||||||
| Fixed charge coverage1 | 9.72 | 12.92 | 11.79 | 10.14 | 9.53 | |
| Benchmarks | ||||||
| Fixed Charge Coverage, Competitors2 | ||||||
| Procter & Gamble Co. | 18.38 | 16.85 | — | — | — | |
| Fixed Charge Coverage, Industry | ||||||
| Consumer Staples | 9.12 | 7.50 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Fixed charge coverage = Earnings before fixed charges and tax ÷ Fixed charges
= 2,965 ÷ 305 = 9.72
2 Click competitor name to see calculations.
The solvency profile regarding fixed charge coverage exhibited a general trend of improvement from 2018 through 2021, followed by a notable decline in 2022. This period was characterized by fluctuating earnings and a consistent reduction in fixed obligations until the final year of the analyzed period.
- Earnings Before Fixed Charges and Tax
- Earnings exhibited volatility, reaching a peak of 3,985 million US$ in 2020. A subsequent downward trajectory occurred, with values decreasing to 3,346 million US$ in 2021 and further declining to 2,965 million US$ by the end of 2022, representing a significant reduction from the 2020 high.
- Fixed Charges
- Fixed charges demonstrated a steady decrease from 406 million US$ in 2018 to a minimum of 259 million US$ in 2021. This downward trend was reversed in 2022, as charges increased to 305 million US$.
- Fixed Charge Coverage Ratio
- The coverage ratio rose from 9.53 in 2018 to a peak of 12.92 in 2021, indicating an increased capacity to meet fixed financial obligations. This improvement was primarily driven by the reduction in fixed charges. In 2022, the ratio contracted to 9.72, reflecting the combined impact of declining earnings and rising fixed charges.
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