PROJECT

PROJECT TOPIC: COLGATE PALMOLIVE

SUBJECT: BUSINESS FINANCE
CLASS: BEC-5
SUBMITTED TO: MUHAMMAD ATHER YAQOOB
DATE: 21/12/2022
GROUP MEMBERS
NAMES REGISTRATION NUMBERS
M. QASIM MIR FA20-BEC-045
M. RAZA SHAH FA20-BEC-046
MUNIR ALAM FA20-BEC-048
SHER ALAM FA20-BEC-060
TANEES BATOOL FA20-BEC-069
WALI MUHAMMAD FA20-BEC-073
ZEESHAN RAZAQ FA20-BEC-079
 TABLE OF CONTENTS
CHAPTER 1 INTRODUCTION.....................................................................................................3
CHAPTER 1.1 BALANCESHEET RATIOS................................................................................3
1.1.1 LIQUIDITY RATIO..............................................................................................................3
1.1.1.1 CURRENT TEST RATIO....................................................................................................4
1.1.1.2 QUICK / ACID TEST RATIO.............................................................................................4
1.1.2 FINANCIAL LEVERAGE RATIO.....................................................................................4
1.1.2.1 DEBT TO EQUITY RATIO.................................................................................................5
1.1.2.2 DEBT TO ASSET RATIO....................................................................................................5
1.1.2.3 LONG TERM/CAPITAL RATIO.......................................................................................5
1.1.3 COVERAGE RATIO............................................................................................................5
1.1.3.1 INTEREST COVERAGE RATIO.......................................................................................5
1.1.4 ACTIVITY RATIO...............................................................................................................6
1.1.4.1 RECEIVABLE TURNOVER...............................................................................................6
1.1.4.2 AVERAGE COLLECTION RATIO/RTO IN DAYS........................................................6
1.1.4.3 PAYABLE TURNOVER RATIO........................................................................................7
1.1.4.4 INVENTORY TURNOVER RATIO...................................................................................7
1.1.4.5 OPERATING CYCLE..........................................................................................................8
1.1.4.6 CASH CYCLE.......................................................................................................................9
1.1.4.7 TOTAL ASSET/CAPITAL TURNOVER...........................................................................9
1.1.5 PROFITABILITY RATIOS.................................................................................................9
1.1.5.1 PROFITABILITY IN RELATION TO SALES.................................................................9
1.1.5.1.1 GROSS PROFIT MARGIN............................................................................................10
1.1.5.1.2 NET PROFIT MARGIN.................................................................................................10
1.1.5.2 PROFITABILITY IN RELATION TO INVESTMENT.................................................10
1.1.5.2.1 RETURN ON INVESTMENT (ROI)............................................................................10
1.1.5.2.2 RETURN ON EQUITY...................................................................................................10
CHAPTER 2 COMMON SIZE/VERTICAL ANALYSIS..........................................................11
CHAPTER 3 INDEX/HORIZONTAL ANALYSIS.....................................................................11
CHAPTER 4 PESTEL ANALYSIS...............................................................................................11
CHAPTER 5 CONCULUSION.....................................................................................................11
 CHAPTER 1 INTRODUCTION
Colgate is an American emblem essentially applied for oral cleanliness gadgets like
toothpastes, toothbrushes, mouthwashes, and dental floss. Made through Colgate-Palmolive,
Colgate's oral cleanliness gadgets have been first bought with the aid of using the enterprise
in 1873, 16 years after the passing of the organizer, William Colgate. The company first
offered cleanser.
Colgate toothpaste become offered in glass boxes starting round 1873. Tubes, as spearheaded
through Keldon, Johnson and Johnson Zones and Sheffield, have been offered in 1896.
Colgate have become widely recognized at some point of the 1950s, with the motto "It
Cleans Your Breath While It Cleans Your Teeth", composed through advertising expert
Alicia Tobin. In January 2020, Colgate enlisted the call for toothpaste containing hemp seed
oil with the U.S. government.
In February 2020, Colgate's determine company declared a consent to shop for Hi Items,
Another Jersey company that had earlier than withinside the month supplied toothpaste,
mouthwashes, and lip ointments containing cannabidiol.
As of June 2022, Colgate Tooth Powder changed into all at the same time as being made and
marketed and may anyways be bought.

CHAPTER 1.1 BALANCESHEET RATIOS

1.1.1 LIQUIDITY RATIO

This ratio tells us about the firm’s ability to pay off its current liabilities with the current
assets available.
We have the liquidity ratio of the given company (Colgate Palmolive) has been calculated for
the year 2022 and 2021.
 1.1.1.1 CURRENT TEST RATIO
Current ratio test is the ratio of the firms total current assets and current liabilities. It
compares the current assets to current liabilities and give the ability of firms to pay off its
current liabilities.

YEAR CURRENT RATIO

2021 3.17
2022 2.94

In 2022 the current ratio is 2.94 this ratio is greater than 1$ which means the firm must pay
2.94 as liability against 1$.
The firm is quite liquid as compared to the previous year where it must pay 3.17 against 1$.

1.1.1.2 QUICK / ACID TEST RATIO

YEAR QUICK/ACID TEST RATIO

2021 2.09
2022 1.42

According to this ratio the most liquid assets are used to calculate the firm’s liquidity or
ability to pay off the current liabilities with given amount of current asset. This ratio can be
calculated by taking current ratio assets and current liabilities. In this company the quick ratio
of 2022 is 1.42 and the ratio of 2021 is 2.09 also the quick ratio tells us more accurate value
of liquidity of the asset.

1.1.2 FINANCIAL LEVERAGE RATIO

The leverage ratio is the measure of the amount of debt used in the financing of the firm.
There are three type of leverage ratio used I the finding the cushion of the creditors to invest
in a firm’s asset and it shows how the business is owned by creditors as compared to the
shareholder.
1.1.2.1 DEBT TO EQUITY RATIO
YEAR TOTAL DEBT TO EQUITY RATIO
2021 0.41
2022 0.46

Debt ratios ratio show that the extent to which the firm is financed by debt. In the given
company of Colgate, this means the creditors are providing in the year 2021 it was 41 percent
and in the year 2022 it was increased to 46 percent for every 1$ of the shareholder.

1.1.2.2 DEBT TO ASSET RATIO

YEAR TOTAL DEBT TO TOTAL ASSETS
2021 0.29
2022 0.32

This is again the same ratio which shows the percentage of the firm’s assets are financed by
creditors. The ratio for 2022 is 32 percent and for the year 2021 is 29 percent.

1.1.2.3 LONG TERM/CAPITAL RATIO

YEAR LONG TERM DEBT TO CAPITAL RATIO
2021 3.06%
2022 3.21%

In addition to the two previous debt ratios, we may wish to compute the following ratio,
which deals with only the long-term capitalization of the firm. It shows all the long-term
debts and owner equity. For the Colgate company it is 3.21percent in 2021 and 3.06 percent
in the year 2021.

1.1.3 COVERAGE RATIO

Coverage ratios are designed to relate the financial charges of a firm to its ability to service,
or cover, them.

1.1.3.1 INTEREST COVERAGE RATIO

 YEAR INTEREST COVERAGE RATIO
2021 68.38
2022 62.07

Interest coverage ratio is one of the types of coverage ratio which shows the relation between
earnings before interest and taxes to the interest expanse of the firm. For the Colgate
company the interest coverage ratio of the year 2022 is 62.07 and for the year 2021 is 68.38
percent. The higher this ratio the higher will be the firm’s ability to cover its interests’
payments without any difficulty.

1.1.4 ACTIVITY RATIO

Activity ratios, also known as efficiency or turnover ratios, measure how effectively the firm
is using its assets. As we will see, some aspects of activity analysis are closely related to
liquidity analysis.

1.1.4.1 RECEIVABLE TURNOVER

YEAR RECEIVABLE TURNOVER (RTO)

2021 43.74
2022 44.30

The receivable turnover ratio tells us how shortly the firm can turn over its account receivable
after making sale on credit the smaller the ratio the batter the performance that it shows in
short period it can turn its receivable into asset. For the company of Colgate, it is 44.3times in
the year 20222 and 43.74times in the year 2021.

1.1.4.2 AVERAGE COLLECTION RATIO/RTO IN DAYS

YEAR AVERAGE COLLECTION PERIOD / RTO IN DAYS
2021 8.34
2022 8.24
Average collection period is telling us how much time it will take to turn over the receivable
to asset. In the case of Colgate company, it is 8 days and few hours in the 2022 while it was
8days and few hours in the year in 2021.

1.1.4.3 PAYABLE TURNOVER RATIO

YEAR PAYABLE TURNOVER (PTO) (PTO) IN DAYS

2021 1.37 322.03
2022 1.31 338.71

Payable turnover ratio is the same as the receivable ratio which shows after making purchases
on credit how much the time does it take for the firm to take to pay off the payables. For the
year 2022 it is 1.31 times in the year and 1.37 times in the year 2021.secondly when we look
according to time it will take 338.71 days in 2022 and 322.03 in 2021.

1.1.4.4 INVENTORY TURNOVER RATIO

 YEAR INVENTRY TURNOVER (ITO) IN DAYS
2021 4.92 74.11
2022 3.54 103.04

This ratio is calculated to know how much time it takes for the firm to cover its inventory into
cash. The shorter the time the shorter the more efficient be the firm in the operating
activity.in the year 2022 it is 3.54 times and in the year 2021 it is 4.92 times. Here we see a
decline in the inventory turnover ratio.
Inventory turnover in days show that how much it takes to convert the inventories into cash.
This company will take 103.04 days in the current year while in 2021 it was 74.11 days.

1.1.4.5 OPERATING CYCLE

YEAR OPERATING CYCLE

2021 82.46
2022 111.28

A firm’s operating cycle is the length of time from the commitment of cash for purchases
until the collection of receivables resulting from the sale of goods or services. It is as if we
start a stopwatch when we purchase raw materials and stop the watch only when we receive
cash after the finished goods have been sold. In this company it 111.64 days in 2022 and
82.45 days in 2021.
1.1.4.6 CASH CYCLE

YEAR CASH CYCLE

2021 -239.57
2022 -227.43

What is the Money Change Cycle? The Money Transformation Cycle (CCC) is a metric that
shows how much time it takes an organization to change its interests in stock over completely
to cash. The change cycle equation estimates how much time, in days, it takes for an
organization to transform its asset inputs into cash. We have 227.43 days in 2022 while
239.57 days in 2021.

1.1.4.7 TOTAL ASSET/CAPITAL TURNOVER

YEAR TOTAL ASSETS/CAPITAL TURNOVER

2021 1.80
2022 1.89

The total asset turnover ratio is the ratio which tells us how efficiently and effectively the
firm can make use of its assets in order to make profit the higher the ratio the more efficient
the firm is, from the given table the turnover for the year 2022 is 1.89 while it was 1.8 in the
year 2021.

1.1.5 PROFITABILITY RATIOS

These are the ratios which relate profits to sales and investment. There are two types of
profitability ratios.

1.1.5.1 PROFITABILITY IN RELATION TO SALES

1.1.5.1.1 GROSS PROFIT MARGIN
This ratio tells us the profit of the firm relative to sales, after we deduct the cost of producing
the goods. It measures the efficiency of the firm operation as well as an indication of how
products are priced.

YEAR GROSS PROFIT MARGIN

2021 29.36%
2022 25.74%

Since the Gross Profit Margin ratios measures the efficiency of business after paying the
direct cost, as in the year of 2021, the production cost of good sales is 35,715,642, and it is
sold for a price of 50,563,022, the gross profit margin is 170.64 percent which is high margin.
According to the thumb rule above the 5 percent is the high profit margin.
As the GPM increases in the year 2022, it means the cost of producing good relative to sales
has decreased.

1.1.5.1.2 NET PROFIT MARGIN

It measures the firm’s profitability of sales after taking accounts of all expenses and income
taxes. It tells us the firm’s net income per dollar sale.

YEAR NET PROFIT MARGIN

2021 11.23%
2022 9.42%

As in the 2021 the NPM ratio is 11.23 percent / dollar, and in year 2022 the ratio decreases
to 9.42 percent / dollar, due the decrease in selling, increases the expenses and higher tax
rate relative to the sales.
1.1.5.2 PROFITABILITY IN RELATION TO INVESTMENT

1.1.5.2.1 RETURN ON INVESTMENT (ROI)

This ratio used to measure the efficiency or profitability of an investment. It directly
measures the amount of return on a particular investment, relative to the investment cost.

YEAR RETURN ON INVESMENT

2021 20.17%
2022 17.79%

The above ROI ratio tells that in the year 2021 the return is 20.17 percent; it means the
company earned returns on first investment is greater than the returns earned on investment in
the year 2022 that is 17.79 percent.

1.1.5.2.2 RETURN ON EQUITY

This ratio frequently used to compare two or more firms in the market. It tells us the earning
power of shareholders on investment.

YEAR RETURN ON EQUITY

2021 28.37%
2022 26.04%

The above ratios in the year of 2021 and 2022 shows that, in 2021 the firm has higher value
of acceptance of strong investment than 2022. It means that the firm has higher net profit, and
the assets turnover is also high in 2021.

CHAPTER 2 COMMON SIZE/VERTICAL ANALYSIS

The representation of balance sheet and income statement in percentage such as to total asset
or total sale of the base year called common size analysis or vertical analysis. These analyses
are extremely helpful in comparing firms whose data differ significantly in size, because
every item on the financial statements gets placed on a relative, or standardized, basis.

CHAPTER 3 INDEX/HORIZONTAL ANALYSIS

Besides, the ordered pay articulations give us data on the extent of outright changes in
benefits and costs. With normal size proclamations, we have no data about how the outright
sums change after some time. In rundown, the normalization of monetary record and pay
proclamation things as rates of sums and as files to a base year frequently gives us
experiences extra to those got from the examination of monetary proportions.

CHAPTER 4 PESTEL ANALYSIS

This is an external factor analysis like how the political, economic, sociological,
technological, legal, and environmental factors affect the decision-making process of the
firms. The PESTEL analysis shows how much the external factor affecting the firms yearly
so that we can control those factors which affect the firms negatively.
 CHAPTER 5 CONCULUSION
The finish of the investigation of premium is that the monetary record sums up the resources,
liabilities, and proprietors' value of a business at a moment, and the pay proclamation sums
up incomes and costs of a firm over a specific period. Monetary proportions are the devices
used to investigate monetary condition and execution. We work out proportions on the
grounds that in this manner we get an examination that might demonstrate more helpful than
the crude numbers without anyone else. Through this information we can anticipate the
eventual fate of the business. Extra experiences can be acquired by normal size and file
investigation. In the previous, we express the different monetary record things as a level of
complete resources and the pay proclamation things as a level of net deals. In the last option,
monetary record and pay explanation things are communicated as a file comparative with an
underlying base year.