Colgate-Palmolive Co. (CL)

Short-term (Operating) Activity Analysis

Difficulty: Beginner

Activity ratios measure how efficiently a company performs day-to-day tasks, such us the collection of receivables and management of inventory.

Ratios (Summary)

Colgate-Palmolive Co., short-term (operating) activity ratios

	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
Turnover Ratios
Inventory turnover	5.06	5.19	5.62	5.19	5.07
Receivables turnover	10.44	10.77	11.24	11.13	10.65
Payables turnover	5.09	5.40	5.98	5.82	5.38
Working capital turnover	12.55	14.71	18.86	18.84	49.49
Average No. of Days
Average inventory processing period	72	70	65	70	72
Add: Average receivable collection period	35	34	32	33	34
Operating cycle	107	104	97	103	106
Less: Average payables payment period	72	68	61	63	68
Cash conversion cycle	35	36	36	40	38

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

Ratio	Description	The company
Inventory turnover	An activity ratio calculated as cost of goods sold divided by inventory.	Colgate-Palmolive Co.'s inventory turnover deteriorated from 2015 to 2016 and from 2016 to 2017.
Receivables turnover	An activity ratio equal to revenue divided by receivables.	Colgate-Palmolive Co.'s receivables turnover deteriorated from 2015 to 2016 and from 2016 to 2017.
Payables turnover	An activity ratio calculated as cost of goods sold divided by payables.	Colgate-Palmolive Co.'s payables turnover declined from 2015 to 2016 and from 2016 to 2017.
Working capital turnover	An activity ratio calculated as revenue divided by working capital.	Colgate-Palmolive Co.'s working capital turnover deteriorated from 2015 to 2016 and from 2016 to 2017.
Average inventory processing period	An activity ratio equal to the number of days in the period divided by inventory turnover over the period.	Colgate-Palmolive Co.'s average inventory processing period deteriorated from 2015 to 2016 and from 2016 to 2017.
Average receivable collection period	An activity ratio equal to the number of days in the period divided by receivables turnover.	Colgate-Palmolive Co.'s average receivable collection period deteriorated from 2015 to 2016 and from 2016 to 2017.
Operating cycle	Equal to average inventory processing period plus average receivables collection period.	Colgate-Palmolive Co.'s operating cycle deteriorated from 2015 to 2016 and from 2016 to 2017.
Average payables payment period	An estimate of the average number of days it takes a company to pay its suppliers; equal to the number of days in the period divided by payables turnover ratio for the period.	Colgate-Palmolive Co.'s average payables payment period increased from 2015 to 2016 and from 2016 to 2017.
Cash conversion cycle	A financial metric that measures the length of time required for a company to convert cash invested in its operations to cash received as a result of its operations; equal to average inventory processing period plus average receivables collection period minus average payables payment period.

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Inventory Turnover

Colgate-Palmolive Co., inventory turnover calculation, comparison to benchmarks

	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
Selected Financial Data (USD $ in millions)
Cost of sales	6,174	6,072	6,635	7,168	7,219
Inventories	1,221	1,171	1,180	1,382	1,425
Ratio
Inventory turnover¹	5.06	5.19	5.62	5.19	5.07
Benchmarks
Inventory Turnover, Competitors
Kimberly-Clark Corp.	6.54	6.88	6.27	6.89	6.23
Nike Inc.	3.77	3.60	3.81	3.89	4.16
Inventory Turnover, Sector
Personal Goods	4.58	4.56	4.73	4.92	4.99
Inventory Turnover, Industry
Consumer Goods	7.39	7.55	7.60	7.66	7.38

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

2017 Calculations

¹ Inventory turnover = Cost of sales ÷ Inventories
= 6,174 ÷ 1,221 = 5.06

Ratio	Description	The company
Inventory turnover	An activity ratio calculated as cost of goods sold divided by inventory.	Colgate-Palmolive Co.'s inventory turnover deteriorated from 2015 to 2016 and from 2016 to 2017.

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Receivables Turnover

Colgate-Palmolive Co., receivables turnover calculation, comparison to benchmarks

	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
Selected Financial Data (USD $ in millions)
Net sales	15,454	15,195	16,034	17,277	17,420
Receivables, net of allowances	1,480	1,411	1,427	1,552	1,636
Ratio
Receivables turnover¹	10.44	10.77	11.24	11.13	10.65
Benchmarks
Receivables Turnover, Competitors
Kimberly-Clark Corp.	7.89	8.36	8.15	8.87	8.31
Nike Inc.	9.34	9.99	9.11	8.10	8.12
Receivables Turnover, Sector
Personal Goods	9.11	9.63	9.23	8.99	8.75
Receivables Turnover, Industry
Consumer Goods	13.40	13.52	14.03	12.82	13.19

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

2017 Calculations

¹ Receivables turnover = Net sales ÷ Receivables, net of allowances
= 15,454 ÷ 1,480 = 10.44

Ratio	Description	The company
Receivables turnover	An activity ratio equal to revenue divided by receivables.	Colgate-Palmolive Co.'s receivables turnover deteriorated from 2015 to 2016 and from 2016 to 2017.

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Payables Turnover

Colgate-Palmolive Co., payables turnover calculation, comparison to benchmarks

	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
Selected Financial Data (USD $ in millions)
Cost of sales	6,174	6,072	6,635	7,168	7,219
Accounts payable	1,212	1,124	1,110	1,231	1,343
Ratio
Payables turnover¹	5.09	5.40	5.98	5.82	5.38
Benchmarks
Payables Turnover, Competitors
Kimberly-Clark Corp.	4.13	4.43	4.58	4.99	5.35
Nike Inc.	9.30	7.94	7.76	7.95	8.67
Payables Turnover, Sector
Personal Goods	6.06	5.91	6.00	6.16	6.34
Payables Turnover, Industry
Consumer Goods	4.87	5.12	5.59	6.06	6.03

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

2017 Calculations

¹ Payables turnover = Cost of sales ÷ Accounts payable
= 6,174 ÷ 1,212 = 5.09

Ratio	Description	The company
Payables turnover	An activity ratio calculated as cost of goods sold divided by payables.	Colgate-Palmolive Co.'s payables turnover declined from 2015 to 2016 and from 2016 to 2017.

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Working Capital Turnover

Colgate-Palmolive Co., working capital turnover calculation, comparison to benchmarks

	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
Selected Financial Data (USD $ in millions)
Current assets	4,639	4,338	4,384	4,863	4,822
Less: Current liabilities	3,408	3,305	3,534	3,946	4,470
Working capital	1,231	1,033	850	917	352
Net sales	15,454	15,195	16,034	17,277	17,420
Ratio
Working capital turnover¹	12.55	14.71	18.86	18.84	49.49
Benchmarks
Working Capital Turnover, Competitors
Kimberly-Clark Corp.	–	–	–	–	30.13
Nike Inc.	3.24	3.35	3.17	3.21	2.61
Working Capital Turnover, Sector
Personal Goods	6.09	6.60	6.82	7.27	5.94
Working Capital Turnover, Industry
Consumer Goods	19.23	22.86	15.33	–	72.46

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

2017 Calculations

¹ Working capital turnover = Net sales ÷ Working capital
= 15,454 ÷ 1,231 = 12.55

Ratio	Description	The company
Working capital turnover	An activity ratio calculated as revenue divided by working capital.	Colgate-Palmolive Co.'s working capital turnover deteriorated from 2015 to 2016 and from 2016 to 2017.

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Average Inventory Processing Period

Colgate-Palmolive Co., average inventory processing period calculation, comparison to benchmarks

	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
Selected Financial Data
Inventory turnover	5.06	5.19	5.62	5.19	5.07
Ratio (no. of days)
Average inventory processing period¹	72	70	65	70	72
Benchmarks (no. of days)
Average Inventory Processing Period, Competitors
Kimberly-Clark Corp.	56	53	58	53	59
Nike Inc.	97	101	96	94	88
Average Inventory Processing Period, Sector
Personal Goods	80	80	77	74	73
Average Inventory Processing Period, Industry
Consumer Goods	49	48	48	48	49

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

2017 Calculations

¹ Average inventory processing period = 365 ÷ Inventory turnover
= 365 ÷ 5.06 = 72

Ratio	Description	The company
Average inventory processing period	An activity ratio equal to the number of days in the period divided by inventory turnover over the period.	Colgate-Palmolive Co.'s average inventory processing period deteriorated from 2015 to 2016 and from 2016 to 2017.

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Average Receivable Collection Period

Colgate-Palmolive Co., average receivable collection period calculation, comparison to benchmarks

	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
Selected Financial Data
Receivables turnover	10.44	10.77	11.24	11.13	10.65
Ratio (no. of days)
Average receivable collection period¹	35	34	32	33	34
Benchmarks (no. of days)
Average Receivable Collection Period, Competitors
Kimberly-Clark Corp.	46	44	45	41	44
Nike Inc.	39	37	40	45	45
Average Receivable Collection Period, Sector
Personal Goods	40	38	40	41	42
Average Receivable Collection Period, Industry
Consumer Goods	27	27	26	28	28

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

2017 Calculations

¹ Average receivable collection period = 365 ÷ Receivables turnover
= 365 ÷ 10.44 = 35

Ratio	Description	The company
Average receivable collection period	An activity ratio equal to the number of days in the period divided by receivables turnover.	Colgate-Palmolive Co.'s average receivable collection period deteriorated from 2015 to 2016 and from 2016 to 2017.

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Operating Cycle

Colgate-Palmolive Co., operating cycle calculation, comparison to benchmarks

No. of days

	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
Selected Financial Data
Average inventory processing period	72	70	65	70	72
Average receivable collection period	35	34	32	33	34
Ratio
Operating cycle¹	107	104	97	103	106
Benchmarks
Operating Cycle, Competitors
Kimberly-Clark Corp.	102	97	103	94	103
Nike Inc.	136	138	136	139	133
Operating Cycle, Sector
Personal Goods	120	118	117	115	115
Operating Cycle, Industry
Consumer Goods	76	75	74	76	77

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

2017 Calculations

¹ Operating cycle = Average inventory processing period + Average receivable collection period
= 72 + 35 = 107

Ratio	Description	The company
Operating cycle	Equal to average inventory processing period plus average receivables collection period.	Colgate-Palmolive Co.'s operating cycle deteriorated from 2015 to 2016 and from 2016 to 2017.

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Average Payables Payment Period

Colgate-Palmolive Co., average payables payment period calculation, comparison to benchmarks

	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
Selected Financial Data
Payables turnover	5.09	5.40	5.98	5.82	5.38
Ratio (no. of days)
Average payables payment period¹	72	68	61	63	68
Benchmarks (no. of days)
Average Payables Payment Period, Competitors
Kimberly-Clark Corp.	88	82	80	73	68
Nike Inc.	39	46	47	46	42
Average Payables Payment Period, Sector
Personal Goods	60	62	61	59	58
Average Payables Payment Period, Industry
Consumer Goods	75	71	65	60	61

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

2017 Calculations

¹ Average payables payment period = 365 ÷ Payables turnover
= 365 ÷ 5.09 = 72

Ratio	Description	The company
Average payables payment period	An estimate of the average number of days it takes a company to pay its suppliers; equal to the number of days in the period divided by payables turnover ratio for the period.	Colgate-Palmolive Co.'s average payables payment period increased from 2015 to 2016 and from 2016 to 2017.

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Cash Conversion Cycle

Colgate-Palmolive Co., cash conversion cycle calculation, comparison to benchmarks

No. of days

	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
Selected Financial Data
Average inventory processing period	72	70	65	70	72
Average receivable collection period	35	34	32	33	34
Average payables payment period	72	68	61	63	68
Ratio
Cash conversion cycle¹	35	36	36	40	38
Benchmarks
Cash Conversion Cycle, Competitors
Kimberly-Clark Corp.	14	15	23	21	35
Nike Inc.	97	92	89	93	91
Cash Conversion Cycle, Sector
Personal Goods	60	56	56	56	57
Cash Conversion Cycle, Industry
Consumer Goods	1	4	9	16	16

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

2017 Calculations

¹ Cash conversion cycle = Average inventory processing period + Average receivable collection period – Average payables payment period
= 72 + 35 – 72 = 35

Ratio	Description	The company
Cash conversion cycle	A financial metric that measures the length of time required for a company to convert cash invested in its operations to cash received as a result of its operations; equal to average inventory processing period plus average receivables collection period minus average payables payment period.

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