Analysis of Long-term (Investment) Activity Ratios
Activity ratios measure how efficiently a company performs day-to-day tasks, such us the collection of receivables and management of inventory.
Long-term Activity Ratios (Summary)
Colgate-Palmolive Co., long-term (investment) activity 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 the provided financial ratios over the five-year period reveals several notable trends and variations in asset utilization and turnover efficiency.
- Net Fixed Asset Turnover
- This ratio demonstrates a general upward trend from 2018 to 2021, increasing from 4.01 to 4.67, indicating improving efficiency in generating sales from net fixed assets during this period. However, in 2022, there is a decline to 4.17, suggesting a reduction in asset turnover efficiency compared to the previous year.
- Net Fixed Asset Turnover Including Operating Lease (Right-of-Use Asset)
- Including operating lease assets, the ratio starts at 4.01 in 2018 but decreases significantly to 3.69 in 2019. It then gradually improves to 4.09 by 2021, though this level is still below the net fixed asset turnover ratio excluding leases. In 2022, the ratio decreases again to 3.75. This indicates that when considering leased assets, asset turnover efficiency is consistently lower and more volatile than when considering only owned fixed assets.
- Total Asset Turnover
- This ratio declines sharply from 1.28 in 2018 to 1.04 in 2019 and remains relatively flat around 1.03 in 2020, signaling a decrease in the firm's ability to generate sales from total assets during these years. A moderate recovery is observed in 2021 with a rise to 1.16, followed by a slight decline to 1.14 in 2022, reflecting some improvement but not a full return to the efficiency levels seen in 2018.
- Equity Turnover
- The equity turnover ratio shows a highly irregular pattern. Data for 2018 is unavailable, but it peaks dramatically at 134.13 in 2019, then drops substantially to 22.17 in 2020. In the subsequent years, it rises again to 28.61 in 2021 and further to 44.81 in 2022. This volatility might suggest fluctuations in equity levels or operational performance impacting equity efficiency, warranting further investigation for underlying causes.
Overall, the data indicate that asset turnover ratios, especially net fixed asset turnover, generally improved until 2021 before experiencing declines in 2022. The inclusion of leased assets results in consistently lower turnover ratios and greater volatility. Total asset turnover shows a decrease post-2018 with partial recovery, while equity turnover exhibits significant volatility, indicating instability in the utilization of equity to generate revenue.
Net Fixed Asset Turnover
Colgate-Palmolive Co., net fixed asset turnover 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 sales | 17,967) | 17,421) | 16,471) | 15,693) | 15,544) | |
| Property, plant and equipment, net | 4,307) | 3,730) | 3,716) | 3,750) | 3,881) | |
| Long-term Activity Ratio | ||||||
| Net fixed asset turnover1 | 4.17 | 4.67 | 4.43 | 4.18 | 4.01 | |
| Benchmarks | ||||||
| Net Fixed Asset Turnover, Competitors2 | ||||||
| Procter & Gamble Co. | 3.78 | 3.51 | 3.43 | 3.18 | — | |
| Net Fixed Asset Turnover, Industry | ||||||
| Consumer Staples | 5.21 | 5.06 | 4.37 | — | — | |
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
Net fixed asset turnover = Net sales ÷ Property, plant and equipment, net
= 17,967 ÷ 4,307 = 4.17
2 Click competitor name to see calculations.
- Net Sales
- The net sales showed a consistent upward trend over the five-year period. Beginning at $15,544 million in 2018, sales increased slightly to $15,693 million in 2019, followed by a more pronounced rise to $16,471 million in 2020. This growing momentum continued into 2021 with sales reaching $17,421 million, and further increased to $17,967 million in 2022. The data indicates steady revenue growth across the years.
- Property, Plant and Equipment, Net
- Net property, plant, and equipment values displayed a modest decline from $3,881 million in 2018 to $3,716 million in 2020, reflecting a reduction over the first three years. The value remained relatively stable in 2021 at $3,730 million before showing a notable increase to $4,307 million in 2022. The significant growth in 2022 could indicate recent capital investments or asset acquisitions.
- Net Fixed Asset Turnover
- The net fixed asset turnover ratio demonstrated an overall positive trend from 2018 to 2021, increasing from 4.01 in 2018 to a peak of 4.67 in 2021. This suggests improving efficiency in the utilization of fixed assets to generate sales during this period. However, in 2022, the ratio declined to 4.17, which may imply a decrease in asset utilization efficiency or could correlate with the large increase in net fixed assets that year.
Net Fixed Asset Turnover (including Operating Lease, Right-of-Use Asset)
Colgate-Palmolive Co., net fixed asset turnover (including operating lease, right-of-use asset) calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net sales | 17,967) | 17,421) | 16,471) | 15,693) | 15,544) | |
| Property, plant and equipment, net | 4,307) | 3,730) | 3,716) | 3,750) | 3,881) | |
| Operating lease right-of use assets (included in Other assets) | 478) | 527) | 521) | 502) | —) | |
| Property, plant and equipment, net (including operating lease, right-of-use asset) | 4,785) | 4,257) | 4,237) | 4,252) | 3,881) | |
| Long-term Activity Ratio | ||||||
| Net fixed asset turnover (including operating lease, right-of-use asset)1 | 3.75 | 4.09 | 3.89 | 3.69 | 4.01 | |
| Benchmarks | ||||||
| Net Fixed Asset Turnover (including Operating Lease, Right-of-Use Asset), Competitors2 | ||||||
| Procter & Gamble Co. | 3.65 | 3.38 | 3.29 | 3.18 | — | |
| Net Fixed Asset Turnover (including Operating Lease, Right-of-Use Asset), Industry | ||||||
| Consumer Staples | 4.69 | 4.55 | 3.90 | — | — | |
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
Net fixed asset turnover (including operating lease, right-of-use asset) = Net sales ÷ Property, plant and equipment, net (including operating lease, right-of-use asset)
= 17,967 ÷ 4,785 = 3.75
2 Click competitor name to see calculations.
- Net Sales
- Net sales demonstrated a steady increase over the five-year period, rising from $15,544 million in 2018 to $17,967 million in 2022. This represents consistent top-line growth, with particularly notable increments between 2019 and 2021.
- Property, Plant and Equipment, Net
- The net value of property, plant, and equipment, including operating lease right-of-use assets, showed a general upward trend. Starting at $3,881 million in 2018, it increased to $4,785 million by 2022. Although there was a slight dip from 2019 to 2020, the asset base expanded significantly in the last recorded year, which may indicate recent capital investments or asset acquisitions.
- Net Fixed Asset Turnover Ratio
- The net fixed asset turnover ratio fluctuated over the period analyzed. Initially, the ratio decreased from 4.01 in 2018 to 3.69 in 2019, suggesting lower efficiency in using fixed assets to generate sales. It then improved in 2020 and 2021, reaching a high of 4.09, before declining again to 3.75 in 2022. This pattern indicates variability in asset utilization efficiency, which could be influenced by changes in asset value or sales growth pace.
Total Asset Turnover
Colgate-Palmolive Co., total asset turnover calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net sales | 17,967) | 17,421) | 16,471) | 15,693) | 15,544) | |
| Total assets | 15,731) | 15,040) | 15,920) | 15,034) | 12,161) | |
| Long-term Activity Ratio | ||||||
| Total asset turnover1 | 1.14 | 1.16 | 1.03 | 1.04 | 1.28 | |
| Benchmarks | ||||||
| Total Asset Turnover, Competitors2 | ||||||
| Procter & Gamble Co. | 0.68 | 0.64 | 0.59 | 0.59 | — | |
| Total Asset Turnover, Industry | ||||||
| Consumer Staples | 1.47 | 1.41 | 1.32 | — | — | |
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
Total asset turnover = Net sales ÷ Total assets
= 17,967 ÷ 15,731 = 1.14
2 Click competitor name to see calculations.
The analysis of the annual financial data reveals several trends regarding net sales, total assets, and total asset turnover over the five-year period from 2018 to 2022.
- Net Sales
- Net sales displayed a steady upward trajectory throughout the period. Starting at $15,544 million in 2018, sales increased incrementally each year, reaching $17,967 million by 2022. This consistent growth indicates a positive trend in revenue generation and market performance.
- Total Assets
- Total assets exhibited a more variable pattern. From 2018 to 2019, assets grew substantially from $12,161 million to $15,034 million. This growth continued moderately into 2020, reaching $15,920 million. However, in 2021, total assets declined to $15,040 million, signaling a reduction in asset base. The assets slightly recovered in 2022 to $15,731 million, yet remained below the 2020 peak. This fluctuation may suggest strategic asset adjustments or shifts in investment.
- Total Asset Turnover
- The total asset turnover ratio indicates the efficiency with which assets generate sales. The ratio decreased notably from 1.28 in 2018 to 1.04 in 2019, aligning with the significant asset growth that may have outpaced sales increases. From 2019 through 2020, the ratio remained relatively stable at approximately 1.03. Thereafter, the turnover improved to 1.16 in 2021, coinciding with the reduction in total assets. In 2022, it slightly declined to 1.14 but stayed above the levels of 2019 and 2020, suggesting improved asset utilization compared to the earlier years, despite the asset base not fully recovering to previous highs.
In summary, the company experienced continuous sales growth, combined with fluctuating asset levels. The efficiency of asset use, as reflected by total asset turnover, declined following a rapid asset increase but tended to recover upon asset reduction, indicating a dynamic balance between asset investment and sales expansion.
Equity Turnover
Colgate-Palmolive Co., equity turnover calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net sales | 17,967) | 17,421) | 16,471) | 15,693) | 15,544) | |
| Total Colgate-Palmolive Company shareholders’ equity | 401) | 609) | 743) | 117) | (102) | |
| Long-term Activity Ratio | ||||||
| Equity turnover1 | 44.81 | 28.61 | 22.17 | 134.13 | — | |
| Benchmarks | ||||||
| Equity Turnover, Competitors2 | ||||||
| Procter & Gamble Co. | 1.72 | 1.64 | 1.53 | 1.43 | — | |
| Equity Turnover, Industry | ||||||
| Consumer Staples | 5.26 | 5.06 | 4.98 | — | — | |
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
Equity turnover = Net sales ÷ Total Colgate-Palmolive Company shareholders’ equity
= 17,967 ÷ 401 = 44.81
2 Click competitor name to see calculations.
The annual financial data reflects several notable trends over the five-year period considered.
- Net Sales
- Net sales have demonstrated consistent growth from 2018 to 2022. Starting at $15,544 million in 2018, sales increased steadily each year, reaching $17,967 million by the end of 2022. This upward trend suggests a stable expansion in revenue generation and market presence.
- Total Shareholders’ Equity
- The total shareholders' equity presents considerable volatility throughout the period. In 2018, the equity reported a negative value of -$102 million, indicating liabilities exceeding assets at that time. A significant positive shift occurred in 2019, where equity rose to $117 million, followed by a sharp increase to $743 million in 2020. However, this improvement was not sustained, as equity declined to $609 million in 2021 and further to $401 million in 2022. These fluctuations may indicate changes in the company’s financial structure, capital management, or retained earnings over the years.
- Equity Turnover Ratio
- The equity turnover ratio shows an unusual pattern with exceptionally high values starting in 2019. The ratio was not reported or is missing in 2018. It peaked at 134.13 in 2019, then dropped sharply to 22.17 in 2020, followed by moderate increases to 28.61 in 2021 and 44.81 in 2022. Such elevated ratios in the earlier years, coupled with high variability, may be attributed to the low or negative shareholders' equity figures, causing the turnover ratio to spike, as it is calculated by dividing net sales by shareholders' equity. The trend suggests that while sales increased steadily, equity variations heavily influenced this efficiency metric.