Analysis of Financial Statement

Analysis Of Financial Statements

2013Submitted To: Ms. QureshiSubmitted By: Areeba Farooq Ayesha Gul Palwasha Durrani Saba Ejaz Samila Qudoos Sarwat Yar Hussain (MBA-IV-reg)

Analysis of Financial Statement

AcknowledgementThanks to Allah Almighty Who has empowered and enabled us to achieve the task successfully, who bestowed upon us the potential, ability and an opportunity to work on this project. We would first like to thanks our teacher Miss Qureshi who enlightened our understanding towards this course of Analysis of Financial Statements. The project simply could not have completed without her munificent knowledge which she provided to us. We would like to admit that we completed this project due to our parents and family who prayed for our success and supported us in every aspect.

DECLARATION

We declare that this project is our own work and has not been submitted in any form for another degree or diploma at any university or other institute. Information derived from the published and unpublished work of others has been acknowledged and a list of references is given in the appendices. We certify that this report is our own team work, except where indicated by referencing, and that we have followed the good academic practices.Signatures of Team Members: Areeba Farooq ----------------------------- Ayesha Gul ------------------------------ Palwasha Durrani ----------------------------- Saba Ejaz ----------------------------- Samila Qudoos ----------------------------- Sarwat Yar Hussain -----------------------------

INTRODUCTION

Colgate Palmolive is an American multinational consumer products company. It deals in soaps, detergents and oral hygiene products like toothpaste and toothbrushes etc. In 1803 William Colgate opened a factory with the name William Colgate & company. With the passage of time George Henry in 1960 being president and CEO of Colgate Palmolive at that time converted it into modern company He introduced different modifications and restructuring. Company is facing tough competition from Proctor & Gamble for long time.Company starts its operation in Pakistan in 1985 after getting license from US to start manufacturing its products in Pakistan. We selected this company to analyze its financial statements to give an insight to investors and lenders and to help them whether to invest and lend money to company or not. This report will highlight financial health, profitability, solvency and liquidity of Colgate Palmolive.For the analysis of financial statement of Colgate Palmolive we used one of the most commonly used tool i.e. Ratio analysis. Ratio analysis is a tool used for quantitative analysis of companys financial information. Ratios are calculated from current year information and are then compared with previous years ratios. Ratios may also be used to compare company with other company or with industry. It is mainly used to assess the financial health of company. These ratios are mainly divided into four main types:1. Liquidity Ratio2. Profitability Ratio3. Turnover Ratio4. Solvency or leverage Ratio

LIQUIDITY RATIOS

Liquidity ratio measures the ability of a firm to meet its short term obligations, in other words it shows the ability of a company to pay its short term obligations when they fall due. It reflects the short term solvency of company. Company or a firm should ensure required liquidity and take measures to avoid suffering from lack of liquidity. If a company fails to meet its short term obligations it will result in bad credit image and loss of creditors confidence. Very high liquidity is also not pleasing as it shows that funds are idle and are not used efficiently.The different ratios that explain about the liquidity of the firm are1.Current Ratio2.Acid Test Ratio / quick ratio3.Absolute liquid ration / cash ratio

i. CURRENT RATIOCurrent ratio compares current assets with current liability and measures the ability of a company to meet its short term obligations. Higher the ratio more capable company is to pay off its obligation. A ratio less than one suggest that company does not have enough of current assets to pay off its short term obligations if they came due at this point. This shows that company has not good financial health On the other hand if the current assets are more than current liabilities and ratio is higher than one then company is considered to have good financial health.. This ratio also gives sense of efficiency of operating cycle of how efficiently it converts its product into cash. Formula: Current Ratio: Current Assets Current LiabilitiesYEAR 2003: 6,749,85 / 355,985 = 1.89YEAR 2004: 808,825 / 463218 = 1.74YEAR 2005: 877,981 / 4,362,01 = 2.01YEAR 2006: 1,337,476 / 6,999,48 = 1.91YEAR 2007: 1,750,582 / 8,184,50 = 2.13YEAR 2008: 2,138,856 / 8,342,90 = 2.56YEAR 2009: 2,705,155 / 1,072,926 = 2.52YEAR 2010: 2,877,700 / 1,011,144 = 2.84YEAR 2011: 3,687,865 / 1,668,040 = 2.21YEAR 2012: 5,006,017 / 1,867,801 = 2.68Graphical Representation :

Analysis: From year 2003-12 current ratio of Colgate Palmolive shows an irregular increasing and decreasing trend. But, increasing trends are more significant which shows progress in liquidity condition of company. When we separately analyze the ratios of company for every year it is always greater than 1. This shows that company has more assets against liabilities and is capable to pay off its short term obligations. It depicts the sound financial standing of company. Higher ratio is showing operating efficiency of company but it can also be taken as an indication that the company is having an issue in getting paid on its receivables or have long inventory turnover, both symptoms indicate that the company is not efficiently using its current assets. But generally speaking ratio greater than one and increasing trend shows sound financial position of company.

ii. Quick Ratio

Quick ratio is more conformist than current ratio, a better known liquidity ratio. It is known as Acid Test Ratio. Quick ratio measures a companys ability to meet its short term obligations by using its quick assets which include cash, marketable securities and A/R. In other word quick assets include all current assets except inventory. The reason why inventory is excluded from current assets is the fact that is difficult in some situations to turn inventory into cash immediately. Higher the ratio more financially secure a company is in short term.Lower or decreasing quick ratios suggest that company is over leveraged, struggling to maintain or grow sales, paying bills too quickly or collecting receivables too slowly. On the other hand Higher or increasing quick ratio depicts that company is quickly converting receivables into cash, and easily able to cover its financial obligations. Companies with high quick ratios are expected to have high inventory turnover ratios.Formula: Current assets- inventory OR Cash + Marketable securities + A/R Current liabilities Current Liabilities

YEAR 2003: 6,749,85 - 335,736 / 355,985 = 1.0091.009:1YEAR 2004: 808,825 - 438250 / 463218 =0.80.8:1YEAR 2005: 877,981 - 536,707 / 4,362,01 = 0.7820.782:1YEAR 2006: 1,337,476 - 614,349 / 6,999,48 = 1.031.03:1

YEAR 2007: 1,750,582 - 777,851 / 8,184,50 = 1.191.19:1YEAR 2008: 2,138,856 1,006,364 / 8,342,90 = 1.361.36:1YEAR 2009: 2,705,155 1,128,432 / 1,072,926 = 1.461.46:1YEAR 2010: 2,877,700 1,322,237 / 1,011,144 = 1.541.54:1YEAR 2011: 3,687,865 2,370,938 / 1,668,040 = 0.781:0.78YEAR 2012: 5,006,017 2,852,671 / 1,867,801 = 1.151.15:1

Graphical Representation :

Analysis: Analysis of companys quick ratio for ten years shows an irregular trend. In former two years 2004-05 company ratio was unfavorable and after period of 5 years it again fell below 1 which depicts unfavorable financial situation of company during 3years. But in remaining 7 years quick ratio is greater than 1 which shows that company has more of quick assets to pay its short term liabilities. Company is capable of paying its current financial obligations with quick assets on hand.This ratio is helpful for many lenders because it does not include inventory which may not be converted into cash easily. By analyzing this ratio lender can evaluate the financial standing of a company and can take decision whether to lend loan or not. Quick ratio of Colgate Palmolive depicts values greater than 1 which gives a positive sign to lenders.

iii. Absolute Liquid Ratio

Absolute liquid ratio also known as Super quick ratio or Cash ratio, it further specifies the liquidity of firm. It eliminates account receivables (Sundry Debtors and Bill receivables) also due to the doubt in considering their time and amount of realization. For this reason Absolute liquid ratio only relates cash, bank and marketable securities to current liabilities. As absolute liquidity ratio follows very strict standards of liquidity therefore acceptability of this ratio is 50%. It means that this ratio worth one half of the value of current liabilities is satisfactory liquid position of company.Formula: Absolute liquid Ratio: Current Assets- Inventory-A/R OR Quick Assets A/R Current Liabilities Current LiabilitiesYEAR 2003: 6,749,85 - 335,736 9598 / 355,985 = 0.930.93:1YEAR 2004: 808,825 - 438250 - 9937 / 463218 =0.770.77:1YEAR 2005: 877,981 - 536,707 12802 / 4,362,01 = 0.750.752:1YEAR 2006: 1,337,476 - 614,349 - 10863 / 6,999,48 = 1.021.02:1YEAR 2007: 1,750,582 - 777,851 30670 / 8,184,50 = 1.15 1.15:1YEAR 2008: 2,138,856 1,006,364 57741 / 8,342,90 = 1.28 1.28:1

YEAR 2009: 2,705,155 1,128,432 37864 / 1,072,926 = 1.431.43:1YEAR 2010: 2,877,700 1,322,237 20163 / 1,011,144 = 1.521.52:1YEAR 2011: 3,687,865 2,370,938 73398 / 1,668,040 = 0.741:0.74YEAR 2012: 5,006,017 2,852,671 - 41134 / 1,867,801 = 1.131.13:1Graphical Representation:

Analysis:Due to strict standards of liquidity followed by this ratio normal norm for acceptability of this ratio is 0.5:1. Half worth of liquid assets against current liabilities shows satisfactory financial condition of company. Analysis of Colgate Palmolive shows values higher than 0.5 in all ten years even it is more than 1 in some years which shows a sound liquid condition of company.Calculation of liquidity ratio of Colgate Palmolive verifies the condition:Current Ratio > Quick Ratio > Absolute Liquid Ratio.

PROFITABILITY RATIOS

Profitability ratio measures company ability to generate earnings with respect to expenses and other relevant costs incurred during a specific period of time. Profitability ratio is measured in three different relations:a. Profitability in relation to salesi. Gross profit marginii. Net profit margin

b. Profitability in relation to investmenti. Return on equity capital.ii. Return on shareholders investment(ROSI)iii. Return on capital employed

c. Profitability in terms of earnings and dividendsi. Earnings per share (EPS)ii. Dividend per share (DPS).iii. Price earnings ratioiv. Dividend yield ratiov. Earning yield ratio

a. Profitability in relation to salesi. Gross Profit margin :The ratio of gross profit margin expresses the gross profit as a percentage of total sales. It is used as an indicator of the financial health of a business.Formula: Gross Profit x 100Net SalesYear 2003: = 757,288,000 / 2,734,485,000 = 28%Year 2004: = 961,992,000 / 3,348,315,000 = 29%Year 2005: = 1,058,382,000 / 3,920,223,000 = 27%Year 2006: = 1,615,210,000 / 5,005,695,000 = 32%Year 2007: = 1,879,678,000 / 5,934,424,000 = 31.7%Year 2008: = 2,096,800,000 / 7,131,928,000 = 29.4%Year 2009: = 2,781,921000 / 11,264,677000 = 24.7%Year 2010: = 3,829,909000 / 11,529,310000 = 33.2%Year 2011: = 4160564000 / 14150420000 = 29.4%Year 2012: = 5410012000 / 18708711000 = 28.9%

Graphical representation:

Analysis:The gross profit ratio of the company is showing that the company is earning a good percentage of gross profit out of its sales. The gross profit ratio of the company has also increased compared to past years which are showing the good efficiency of the management as well good performance of the company. It is also showing that the company is able to control its cost and is earning consistent profits.

ii. Net Profit Margin :

The profit margin tells you how much profit a company makes for every $1 it generates in revenue or sales. Net profit margin is an indicator of how efficient a company is and how well it controls its costs. The higher the margin is, the more effective the company is in converting revenue into actual profit.Formula : Net profit after tax x 100 Net SalesYear 2003: = 175,022,000 / 2,734,485,000 = 6%Year 2004: = 286,917,000 / 3,348,315,000 = 9%Year 2005: = 302,974,000 / 3,920,223,000 = 8%Year 2006: = 498,855,000 / 5,005,695,000 = 10%Year 2007: = 604,751,000 / 5,934,424,000 = 10%Year 2008: = 679,293,000 / 7,131,928,000 = 10%Year 2009: = 749,966,000 / 11,264,677,000 = 7%Year 2010: = 1,151,639,000 / 11,529,310,000 = 10%Year 2011: = 1,167,380,000 / 14150420000 = 8%

Year 2012: = 1619635000 / 18708711000 = 9%Graphical representation:

Analysis:The net profit ratio has increased over the years which are a good indicator for the company that it is not only earning the profits but is also increasing its profits year by year. It is also showing the efficient performance of the management and that company is providing good returns to its shareholders as well. It is also showing that the company is having good control over its operating costs as well. Net profit ratio has increased from year 2003 to year 2010 as depicted from the calculations but has decreased in year 2011 and 2012 due to the increase in cost of sales.

b. Profitability in relation to investment

i. Return on equity capital :

The amount of net incomereturnedas a percentageof shareholders equity.Return on equitymeasures a corporation's profitabilityby revealing how muchprofit a company generateswith the money shareholders have invested.Formula = Net profit after tax Preferred DividendEquity Share CapitalNote: The company has not issued any preference shares therefore there is no amount for preferred dividend.Year 2003: = 175,022,000 / 122,303,000 = 143%Year 2004: = 286,917,000 / 122,303,000 = 235%Year 2005: = 302,974,000 / 122,303,000 = 248%Year 2006: = 498,855,000 / 122,303,000 = 408%Year 2007: = 604,751,000 / 152,879,000 = 396%Year 2008: = 679,293,000 / 191,098,000 = 355%Year 2009: = 749,966,000 / 238,873,000 = 314%Year 2010: = 1,151,639,000 / 274,704,000 = 419%Year 2011: = 1,167,380,000 / 315,909,000 = 370%

Year 2012: = 1619635000 / 363295000 = 446%Graphical representation:

Analysis:The calculation of Return on Equity Capital for the last ten years has shown that it has increased from year to year up to 2012 which is a good indicator and is showing that the company is efficiently utilizing its Equity share capital for generating the profits. In addition Return on Equity Capital is very high which is indicating that the company is performing well by efficiently utilizing its equity share capital and have enough profits to pay to its shareholders.

ii. Return on shareholders investment (ROSI)

The ROI is a financial technique to measure the loss or gain of money invested in a business, relative to the total amount of investment and is expressed in terms of percentages.Formula: = Net Profit after interest and tax x 100 Shareholders FundYear 2003: = 175,022,000 / 569,637,000 = 31%Year 2004: = 286,917,000 / 770,942,000 = 37%Year 2005: = 302,974,000 / 951,613,000 = 32%Year 2006: = 498,855,000 / 1,298,956,000 = 38%Year 2007: = 604,751,000 / 1,707,110,000 = 35%Year 2008: = 679,293,000 / 2,141,544,000 = 32%Year 2009: = 749,966,000 / 2,700,211,000 = 28%Year 2010: = 1,151,639,000 / 3,577,146,000 = 32%Year 2011: = 1,167,380,000 / 4,373,675,000 = 27%Year 2012: = 1619635000 / 5,554,226,000 = 29%

Graphical representation:

Analysis:The ratio of return on Shareholders investment calculated for the last ten years is showing that the company is efficiently utilizing its shareholders fund in generating the net profit and is also indicating that the primary objective of maximizing the earnings is achieved. There has been a growth in the companys profitability and efficiency in last years from year 2003 to year 2010 but in the years 2011 and 2012 the ratio has decreased compared to the previous years.

iii. Return on capital employed

This ratio is used to measure the efficiency and profitability of the capital investment of any company. This capital investment is invested by the shareholders. It also shows that what portion of investment the shareholders are getting in the form of return or profit and whether they are making good use of their investment in the company or not.Formula:ROCE= Operating profit *100 Capital employedNOTE: Capital employed = Share capital + Retained Earnings + Long-term borrowings (The same as Equity + Non-current liabilities from the balance sheet)YEAR 2003: 292295000/ 705,898000 * 100 = 41.40

YEAR 2004: 450642000/ 945,806000 * 100 = 47.64

YEAR 2005: 481617000/ 1,101,523000 * 100 = 43.72

YEAR 2006: 782642000/ 1,411,543000 * 100 = 55.44

YEAR 2007: 911406000/ 1,832,075000 * 100 = 49.74YEAR 2008: 1040884000/ 2,304,034000 * 100 = 45.17

YEAR 2009: 1194972000/ 2867494000 * 100 = 41.67

YEAR 2010: 1775228000/ 3795426000 * 100 = 46.77

YEAR 2011: 1796114000/ 4742093000 * 100 = 37.87

YEAR 2012: 2258082000/ 6027846000 * 100 = 37.46

Graphical Representation:

Analysis:

As it is visible from the above graphical representation of ROCE that it is showing upward as well as downwards trend but usually downward trend is recorded which shows a negative sign for companys performance. ROCE should increase with time but here the profit on shareholders investment is decreasing with time. ROCE should always be higher than the rate at which the company borrows; otherwise any increase in borrowing will reduce shareholders' earnings. The highest ROCE is recorded in year 2006 but after that a great downfall is observed. So it is advised for the company to make measures for rising its profits and efficiency in order to pay off the shareholders investments and to make better use of its capital.

c. Profitability in terms of earnings and dividends

i. Dividend Payout Ratio

Dividend Payout ratio measure that how much a company pays the dividend to its shareholders, it tells either the company holds the earning or not. If the payout ratio is more than 100%, it means that the firm is paying the shareholders of all its current year profits as well as some of the retained earnings. But is not considered to be sustainable an often a sign of problems. Desirably the payout ratio must be less than 100%. Because this gives some of the safety that profit may fluctuate a little bit without affecting the dividend. Some of the shareholders rely on the dividends and they want some insurance to the flow of income and reluctant to cut the dividends. So they tend to pay less than 100 percent so that they can hold the dividend. Formula: Dividend Payout Ratio = Dividend per share / Earning per ShareYEAR 2003 : 7 / 14.31 = 0.489 YEAR 2004: 10 / 23.46 = 0.426YEAR 2005 12.5 / 24.77 = 0.504YEAR 2006: 16 / 40.79 = 0.39YEAR 2007: 16 / 31.65 = 0.50YEAR 2008: 10 / 35.55 = 0.28YEAR 2009: 11.5 / 27.30 = 0.42YEAR 2010: 13.5 / 41.92 = 0.32YEAR 2011: 14 / 36.95 = 0.37YEAR 2012: 14 / 44.58 = 0.3Graphical representation:

Analysis:There are the fluctuations in the dividend payout ratio of Colgate Palmolive Pakistan and different amount of dividend is paid in different years. The companys decreased dividend payout ratio is showing that it has decreased the amount of dividend to be paid to the shareholders and it is not considered to be favorable for the investors of Colgate Palmolive.

ii. Earnings per share (EPS) :

It is one of the common financial measures that all companies include in their annual reports, and is used to calculate the price earnings ratio and is sometimes referred to as a profitability ratio. Earnings per share are a measure of profitability and it is viewed as the comparative earnings or the earning power of the respected firms.Formula: = Net profit after tax - Preferred DividendNo of Equity SharesNote: The company has not issued any preference shares therefore there is no amount for preferred dividend.

Year 2003: = 175,022,000 / 12,230,300 = 14.31Year 2004: = 286,917,000 / 12,230,300 = 23.46Year 2005: = 302,974,000 / 12,230,300 = 24.77Year 2006: = 498,855,000 / 12,230,300 = 40.79Year 2007: = 604,751,000 / 15,287,900 = 39.56Year 2008: = 679,293,000 / 19,109,800 = 35.55Year 2009: = 749,966,000 / 23,887,300 = 31.40Year 2010: = 1,151,639,000 / 27,470,400 = 41.92Year 2011: = 1,167,380,000 / 31,590,900 = 36.95Year 2012: = 1619635000 / 36329500 = 44.58

Graphical Representation:

Analysis: Earnings per share has increased in the last ten years as it has been depicted from the above calculations which are showing that the company is generating enough profits to pay to its shareholders and is also performing well by keeping the control on all its costs. It has also depicted that the company have good earning power and can give good returns to its shareholders after meeting all of its expenses and can also use some portion of this earning to reinvest in the business for enhancing its growth and further profitability.

iii. Dividend Yield Ratio:It is calculated by dividend per share divided by current share price. It tells us what percentage an investor is receiving in the form of dividends. Dividend yield is a sort of measure of investor return. While dividend payout ratio judges the amount of dividend in relation to the company's earnings for the period, dividend yield ratio presents a contrast of sum of dividend in relation to investment required to purchase its share.Formula: Dividend yield = Dividend per Share Current Share PriceYEAR 2003= 7/ 88.35 * 100= 7.9YEAR 2004=10/ 175 * 100=5.7YEAR 2005= 12.5/ 194.25 * 100=6.4YEAR 2006= 16/ 346 * 100=4.6YEAR 2007= 16/ 470 * 100=3.4YEAR 2008= 10/ 624.79 * 100=1.6YEAR 2009= 11.5/ 280 * 100=4.1YEAR 2010= 13.5/ 586.4 * 100=2.3YEAR 2011= 14/ 769.25 * 100=1.8YEAR 2012= 14/ 979.99 * 100=1.4Graphical Representation:

Analysis:Most rationale investors happen to be risk averse. Investors will not invest where there is high share price whatever the rate of dividend is being paid to him as investing in high priced shares may earn them a good dividend but risk will also be higher. Dividend yield will be low in case of high share price and vice versa. As we can see from the graph that dividend yield is continually falling down that means investor is not getting the intended return on his investment. Company should make measures to satisfy its shareholders because at the end shareholders are the one who pool their investments in the company.

iv. Price Earnings ratio:

A firms price-earnings ratio the most commonly used method for comparing and understanding the value of stock of the company. It measures effectively the price that shareholder pay for each share to the earnings they currently expect to receive from the company. High price earnings ratio is not always acceptable. The higher the P/E ratio, the more themarketis willing to pay for eachdollarofannualearnings. Firms withhighP/E ratios are most of the time to be considered "risky"investments as compared with the firms having low P/E ratios. A high P/E ratio means the high expectations. Comparing the P/E ratios within the industry is useful. The lastyear'sprice/earnings ratio (P/E ratio) will be theactual, whilecurrent years and forward years price/earnings ratio (P/E ratio) will bethe estimates, but in each case, the P in the formulais always the currentprice. Companies that are not currentlyprofitable or having negative earnings do not have this ratio.Formula: Price earnings ratio = Market price per share/Earning per share YEAR 2003: = 88.35/14.31=6.17 6.17:1YEAR 2004: =175/23.46=7.45 7.45:1YEAR 2005: = 194.25/24.77=7.84 7.84:1YEAR 2006: = 346/40.79=8.48 8.48:1YEAR 2007: =470/31.65=14.84 14.48:1YEAR 2008: =624.79/35.55=17.57 17.57:1YEAR 2009: =280/27.30=10.25 10.25:1YEAR 2010: =586.4/41.92=13.98 13.98:1YEAR 2011: =769.25/32.13=23.94 23.94:1YEAR 2012: =979.99/44.58=21.98 21.98:1Graphical representation:

Analysis:The price earnings ratio of Colgate Palmolive for the 10 years is telling that the investors are expecting the higher earnings growth in present as compared with the past ten years. This trend will be useful for the investors in deciding either to invest in company or not. This trend is showing that Colgate is giving more earnings to the shareholders.

v. Earning yield ratio:

This ratio indicates the percentage of each dollar invested in the stock of any company that was earned by the company previously. It is the result of the earnings per share for the most recent 12-month period divided by the current market price per share. This ratio is an inverse of P/E ratio. The earnings yield is most of the time used by many investment managers to determine optimized asset allocations. The earnings yield is a process to measure the returns, and is helpful for investors to evaluate whether the returns are in proportion to theinvestment's risk. It is important to be kept in mind that earnings yield not always representcashavailable to the investor, because companies can decide to reinvestthe earningsrather than paying dividends to its shareholders. This ratio is not dependent on managers allocation decisions. Formula: Earnings yields = market price per share/earnings per shareYEAR 2003: = 88.35/14.31=6.17 6.17:1YEAR 2004: = 175/23.46=7.45 7.45:1YEAR 2005: = 194.25/24.77=7.84 7.84:1YEAR 2006: = 346/40.79=8.48 8.48:1YEAR 2007: =470/31.65=14.84 14.48:1YEAR 2008: =624.79/35.55=17.57 15.57:1YEAR 2009: =280/27.30=10.25 10.25:1YEAR 2010: =586.4/41.92=13.98 13.98:1YEAR 2011: =769.25/36.95=20.81 20.81:1YEAR 2012: =979.99/44.58=21.98 21.98:1Graphical representation:

Analysis:The earnings yields of Colgate Palmolive are showing positive trend i.e. high earnings. Investors can look into the trend for Colgate, which is increasing. It means that Colgate is giving high returns to the investors as compared to the past years and investors can speculate that these returns would become high in future.

TURNOVER RATIOS

Turnover ratios are also known as Activity or Efficiency ratios. Company raises funds to invest in acquiring different assets to carry out its operations. Assets are purchased to generate revenues for the firm. Turnover ratio establishes a relation between sales and assets. These are usually expressed in integers or sometime in percentages or proportions. Turnover is a good measure of financial efficiency of company. i. Inventory turnover ratioii. No. of days inventory held ratioiii. Debtors Turnover Ratioiv. Average collection periodv. Average Payment periodvi. Working Capital Turnover Ratiovii. Creditors Turnover Ratioviii. Sales to Inventoryix. Trade account receivablesx. Capital Employed Turnover Ratioxi. Account Receivables to total Assets

i. Inventory turnover ratio

Inventory turnover ratio is calculated by dividing the cost of goods sold to average inventory. It is also called as activity efficiency ratio and it actions how many times per period; a business involves itself in selling and replacing its inventory again.Formula:Inventory Turnover = Cost of Goods Sold Average InventoryNote: Average inventory is calculated by adding the current and previous years inventory and then divided by 2.

YEAR 2003=1,977,197000/318988500 = 6.19YEAR 2004=2386323000/ 384272000 = 6.20YEAR 2005=2,861,841000/ 487478500 = 5.87YEAR 2006=3,390,485000/ 575528000 = 5.89YEAR 2007=4,054,746000/ 696100000 = 5.82YEAR 2008=5,035,128000/892107500 = 5.64YEAR 2009=7,699,401000/ 1067398000 = 7.21YEAR 2010=8,482,756000/ 1225334500 = 6.92YEAR 2011=9,989,856000/ 1846587500 = 5.40YEAR 2012=13,298,699000/ 2611804500 = 5.09

Graphical Representation:

Analysis:This ratio shows that how efficiently a business is managing its inventory. In more elaborative terms a higher inventory turnover ratio shows better performance where as the low ratio indentifies that the inventory is not being well managed by the business. It may be a sign of overstocking which may cause risk of obsolescence and enlarged inventory holding costs. And a high ratio may result in loss of revenues and sales due to inventory shortage. This ratio is different for different businesses. Here this ratio is usually decreasing accept for year 2009 and 2010 so the company should over look it for earning better performance.

ii: Number of days inventory held:Average inventory period and inventory holding period are other names of number of days inventory held. A low days inventory ratio shows that the company is not having enough of the stock to meet customers demand. Whereas the high days inventory shows that the demand is low for the product being sold.Formula:Number of Days Inventory = 365 days Inventory Turnover RatioYEAR 2003=365/ 6.19= 58.96YEAR 2004= 365/ 6.20= 58.87YEAR 2005=365/ 5.87= 62.18YEAR 2006=365/ 5.89= 61.96YEAR 2007=365/ 5.82= 62.71YEAR 2008=365/ 5.64= 64.71YEAR 2009=365/ 7.21= 50.62YEAR 2010=365/ 6.92= 52.74YEAR 2011=365/ 5.40= 67.59YEAR 2012=365/ 5.09= 71.70Graphical Representation:

Analysis:A high no. of days inventory shows that the demand is low for the product and vice versa. Inventory position is quite satisfactory as Colgate has a regular demand so to meet this demand company should have in hand inventory. The increasing trend in number of days inventory held means inventory is kept in anticipation of demand. But on the other hand increased number of days of inventory means there is less demand of the product.

iii.Debtors Turnover Ratio

An accounting measure used to quantify a firm's effectiveness in extending credit as well as collecting debts.The receivables turnoverratio is an activity ratio,measuring how efficiently a firm uses its assets. Accounts receivable turnover measures the efficiency of a business in collecting its credit sales. Generally a high value of accounts receivable turnover is favorable and lower figure may indicate inefficiency in collecting outstanding sales. But a normal level of receivables turnover is different for different industries. Increase in accounts receivable turnover overtime indicates improvement in the process of cash collection on credit sales.

Formula: Receivables=Net Credit Sales

TurnoverAverage Accounts Receivable

YEAR 2003: 2,734,485/152,636 = 17.9Working:Average accounts receivable= Beginning A/R+ Ending A/R / 2 = 172,481+132,791 / 2 = 152,636YEAR 2004: 3,348,315/124,376.5 = 26.9 Working:Average accounts receivable= Beginning A/R+ Ending A/R / 2 = 132,791+115,962 / 2 =124,376.5YEAR 2005:

3,920,223/114,820.5 = 34.1

Working:Average accounts receivable= Beginning A/R+ Ending A/R / 2 = 115,962 +113,679/ 2 =114,820.5YEAR 2006: 5,005,695/133,026= 37.6

Working:Average accounts receivable= Beginning A/R+ Ending A/R / 2 = 113,679+152,373/ 2 =133,026YEAR 2007: 5,934,424/182,594= 32.5Working:Average accounts receivable= Beginning A/R+ Ending A/R / 2 = 152,373+212,815/ 2 =182,594YEAR 2008: 7,131,928/273,121= 26.1Working:Average accounts receivable= Beginning A/R+ Ending A/R / 2 = 212,815+333,427/ 2 =273,121YEAR 2009: 11,264,677/435,173= 25.8Working:Average accounts receivable= Beginning A/R+ Ending A/R / 2 = 333,427+ 536,919/ 2 =435,173YEAR 2010: 11,529,310/332,834.5= 34.6Working:Average accounts receivable= Beginning A/R+ Ending A/R / 2 = 536,919+128,750/ 2 = 332,834. YEAR 2011: 14,150,420 /307,954= 45.9Working:Average accounts receivable= Beginning A/R+ Ending A/R / 2 = 128,750+487,158/ 2 = 307,954YEAR 2012: 18,708,711 /556,551= 33.6Working:Average accounts receivable= Beginning A/R+ Ending A/R / 2 = 487,158+625,944/ 2 = 556,551

Graphical Representation:

Analysis:Analysis of Colgate Palmolive account receivable turnover ratio for ten years shows an irregular trend. In year 2005, 2006 and in 2011 the A/R turnover shows an increasing trend which indicates improvement in the process of cash collection on credit sales. On contrary to this, in year 2003, 2008 and 2009 is showing a decreasing trend which indicates the companys inefficiency in collecting outstanding sales. Generally a high value of accounts receivable turnover is favorable and lower figure may indicate inefficiency in collecting outstanding sales. Company is making progress in collection of outstanding dues from last 3 years which is a positive sign for a company financial strength.

iv.Average collection period

It is referred as the time period in which the account receivables are outstanding. This must not be high. It is figured as days. In other words we can say that it is a ratio which tells the number of days required to convert account receivables into cash. It is calculated in terms of days. This ratio measures the quality of the debtors of the company. A short collection period suggests quick payments by the companys debtors. It also reduces the chances of bad debts for a company. Likewise a longer collection period suggests too broad and inefficient collection performance. It is difficult to provide a standard collection period of debtors.Formula: Average collection period = 365 days/account receivables turnover ratioYEAR 2003 : = 365 / 17.9 = 20 daysYEAR 2004 : = 365 / 26.9 = 14 daysYEAR 2005 : = 365 / 34.1 = 11 daysYEAR 2006 : = 365 / 37.6 = 10 daysYEAR 2007 : = 365 / 32.5 = 11 days

YEAR 2008: = 364 / 26.1 = 14 daysYEAR 2009 : = 365 / 25.8 = 14 daysYEAR 2010 : = 365 / 34.6 = 11 daysYEAR 2011: = 365 / 45.9 = 8 daysYEAR 2012: = 365 / 33.6 = 11 days

Graphical representation:

AnalysisThere are the fluctuations in the average payment period of Colgate Palmolive. There is a decreasing trend shown in the graph and the number of days for collection of the debts has been decreased over the year which shows the better polices and better management of account receivables by the management of Colgate Palmolive. The collection of debts has been efficient over the years.

v.Average Payment Period:

The average payment period (APP) is defined as the number of days a company takes to pay off credit purchases. It is calculated as accounts payable / (total annual purchases / 360). As the average payment period increases, cash should increase as well, but working capital remains the same. Most companies try to decrease the average payment period to keep their larger suppliers happy and possibly take advantage of trade discounts.Formula: Average payment period= no. of working days Credit turn over Year 2003: 365/ 0.47 = 776.5 daysYear 2004: 365/ 0.31= 1177.4 daysYear2005: 365 / 0.342 = 1067.25 days Year 2006: 365 / 0.299 = 1220.7 daysYear 2007: 365 / 0.329 = 1109.4 daysYear 2008: 365 / 0.421 = 866.98 days Year 2009: 365 / 0.54 = 675.9 days Year 2010: 365 / 0.4377 = 833.9 days Year 2011: 365 / 0.26 = 1403.84 days Year2012: 365 / 0.323 = 1130.03 days

Graphical representation:

Analysis: The average payment period of Colgate Palmolive limited is showing an irregular trend, Shorter the payment period greater the ability of a company to pay its loans. The ability of a company to pay its short term loans is not good. Company takes more time to pay its loan it is greater in 2011 and shorter in 2009. Creditor will have to watch while advancing loans to the company. The average payment period of a company is unfavorable.

vi.Working Capital Turnover Ratio

A company uses working capital (current assets - current liabilities) to fund operations and purchase inventory. These operations and inventory are then converted into sales revenue for the company. The working capital turnover ratiois usedto analyze the relationship between the money used to fund operations and the sales generated from these operations.Formula: Cost of SalesAverage Working CapitalYear 2003: = 1,977,197 / 319,000 = 6 Year 2004: = 2,386,323 / 491803.5 = 5 Year 2005: = 2,861,841 / 566497 = 5 Year 2006: = 3,390,485 / 760544 = 4 Year 2007 : = 4,054,746 / 1103594 = 4 Year 2008: = 5,035,128 / 1584415 = 3 Year 2009: = 8,482,756 / 2120680.5 = 4 Year 2010: = 7,699,401 / 2565507 = 3Year 2011: = 9,989,856 / 2876468.5 = 3 Year 2012: = 13298699 / 3588933 = 4

Graphical Representation:

Analysis:Working capital turnover ratio has decreased from year 2003 to year 2012 as is depicted from the above calculations which is showing that the velocity of utilization of net working capital has decreased. It is showing the less efficient utilization of Working capital by the company in recent years compared to the previous years. Therefore the company needs to focus on the net working capital so as to utilize it efficiently.

vii.Creditors turnover ratio

Credit turnover ratio or Accounts payable turnover is the ratio of net credit purchases of a business to its average accounts payable during the period. It measures short term liquidity of business and how many times during a period, an amount equal to average accounts payable is paid to suppliers by a business.Accounts payable turnover is a measure of short-term liquidity. A higher value indicates that the business was able to repay its creditors quickly. Thus higher value of accounts payable turnover is favorable. This ratio can be of great importance to the creditor since they are interested in getting paid early for their loans. They will prefer to give loans to those companies who have higher creditor turnover ratio. Formula: Creditors Turnover ratio = Net credit annual purchases / average trade creditors Year 2003 132,791/ 280,192= 0.47Year 2004 115,962 / 364,799= 0.31Year 2005 113,589/ 331,324 =0.342Year 2006 154,982 /516,706 =0.299Year 2007 205603 / 623,463= 0.329Year 2008 331,136 /786,145 = 0.421 Year 2009 536,082 /975,381 = 0.54Year 2010 442,305 /1,010,461 = 0.4377Year 2011 436,672 /1,668,040 = 0.26Year 2012 604,979 /1,867,801= 0.323Graphical Representation:

Analysis: The ten years of credit turnover ratio depicting a fluctuating response. This ratio is high in 2003 then it gradually decreases from the year 2006 then again increases in 2009 which is the highest in the whole decade then it again decrease. In 2012 it began to increases. This ratio shows that ability to pay companys short- term liabilities is not high it is risky to give the company loan, as its ability to repay its loan is so low.

Viii: Sales to Inventory Ratio:Sales divided by inventory levels equals inventory turnover. This ratio tells the analyst how many times the inventory sitting in stock has been moved or "turned over" during the average year. As a general rule the higher the inventory turnover ratio, the more efficient the operation of a firm. A firm with a high inventory turnover ratio will pay less storage fees and have fewer dollars tied up in stock. This will likely reduce its borrowing needs or free up cash reserves that can go into new investments or earn interest in a bank. A low inventory turnover ratio also hints that the firm failed to reach its original sales goals, since companies rarely plan to keep excess inventory.Formula: Sales to turnover ratio= Sales / InventoryYEAR 2003: 2,734,485/335,736 = 8.1YEAR 2004: 3,348,315/432,808 = 7.7YEAR 2005: 3,920,223/536,707 = 7.3YEAR 2006: 5,005,695/614,349 = 8.1YEAR 2007: 5,934,424/777,851 = 7.6YEAR 2008: 7,131,928/1,006,364 = 7.0YEAR 2009: 11,264,677/1,128,432 = 9.9YEAR 2010: 11,529,310/1,322,237 = 8.7YEAR 2011: 14,150,420/ 2,370,938 = 5.9YEAR 2012: 18,708,711/ 2,852,671 = 6.5Graphical Representation:

Analysis:The above graph of sales to inventory ratio is showing irregular trend of ten years. In year 2009 it is showing the highest turnover ratio of 9.9 which means that the company is efficiently managing and selling its inventory. The faster the inventory sells the fewer funds the company has tied up. Companies have to be careful if they have a high inventory turnover as they are subject to stock outs. On contrary to this, in year 2011 it is showing lowest turnover ratio which is 5.9 which is indicating that there is a risk that a company is holding obsolete inventory which is difficult to sell. This may eat in to a company's profit.

ix: Trends in Account Receivable Receivables represent money earned but not yet collected, so when receivables become a larger part of the revenue reported by a company, it indicates lower quality revenues. This is because there is no guarantee that the money will be paid back in full. Trend in account receivable shows either the companys A/R increases or decreases, as it is calculated by deducting current receivable from the previous receivables. Companies with shrinking accounts receivable (relative to revenue) are viewed favorably. There is no rule of thumb to estimate that either this trend should be high or low, its depends upon the nature of business. Higher the A/R usually shows the higher realization risk. Formula: Trend in account receivable = A/R of last year A/R of present year Year 2003: 15,324 2,214 = 13110 Year 2004: 2,214 9,937 = -7723Year 2005: 9,937 12,802 = -2865Year 2006: 12,802 10,863 = 1939Year 2007: 10,863 30,670 = -19,807Year 2008: 30,670 57, 741 = -27,071Year 2009: 57, 741 12, 140 = 45,601

Year 2010: 12,140 4, 191 = 7,949Year 2011: 12, 140 50, 473 = -38,333Year 2012: 50,473 20, 936 = 29,537

Graphical Repre sentation: Analysis: There is an irregular trend in A/R, the company A/R is highly fluctuating. The company is not sure about its policy in advancing loans. The company is not managing efficiently its investments in their receivables. It seems as, the company stricken its policy in year 2007, 2008, and 2011 where as the company lose its policy in advancing loan in year 2003, 2009 and 2012. The sharp rise in A/R relative to the previous year indicates the higher realization risk. It is unfavorable for the company to change its advance policy so rapidly. The manager should be rational in making such kind of decisions.

x. Capital turnover ratio

Capital turnover ratio is calculated by taking a ration of companys annual sales to net worth of the company. This ratio signifies the rate of return to be gained on common equity, and is a gauge of how well a company makes use of its stockholders' equity to produce revenue. Another name for this ratio is equity turnover.

FORMULA: Capital Turnover Ratio= Annual Sales Avg. shareholders equityYEAR 2003: 2,734,485000/ 508290000 = 5.37YEAR 2004:3,348,315000/ 670289500= 4.99YEAR 2005: 3,920,223000/ 861277500 = 4.55YEAR 2006: 5,005,695000/ 1125284500= 4.44YEAR 2007:5,934,424000/ 1503033000 = 3.94YEAR 2008:7,131,928000/ 1924327000= 3.70YEAR 2009: 11264677000/ 2420877500= 4.65YEAR 2010: 11529310000/ 3138678500 = 3.67YEAR 2011: 14150420000/ 3975410500= 3.55 YEAR 2012: 18708711000 / 4963950500 = 3.76

Graphical Representation:

Analysis:The growth of any companys current capital investment level is calculated by this ratio. Capital turnover ratio of Colgate Palmolive for these 10 years is not satisfactory. There is a continuous downfall in this ratio except in year 2009 and 2012. It is not using its capital efficiently as the lower ratio or decrease in ratio shows the companys deficiency in term of making best use of its capital.

xi.Account receivables to total assets:

This is one of the most important account receivable ratios which tell the percentage of the account receivables in total assets of the company. The company must not fully rely on the sales which are made on credit basis and also make the policies to collect the debt back from the debtors. High ratio depicts that the most of the transactions are on credit basis which must be minimized. Generally it must not be high because of the fear of bad debts. Formula: A/R to total assets = Account receivables/ total assets*100YEAR 2003: = 92146 / 1427560*100 = 6.45%YEAR 2004: = 96008 / 1409024*100 = 6.81%YEAR 2005: = 83738 / 1537724*100 = 5.44%YEAR 2006: = 105782 / 2111491*100 = 5.00%YEAR 2007: = 144263 / 2650525*100 = 5.44%YEAR 2008: = 177983 / 3138324*100 = 5.6%YEAR 2009: = 339490 / 3040420*100 = 11.1%YEAR 2010: = 316779 / 4806570*100 = 6.59%YEAR 2011: = 321073 / 6410133*100 = 5.00%

YEAR 2012: = 492437 / 7895647*100 = 6.23%

Graphical representation:

Analysis:The amount or the quantity of account receivables in total assets of Colgate Palmolive Pakistan is not very high during the last ten years. It is a favorable condition for the company. It is also depicting the better collection periods as well as the account receivable policies of the firm.

LEVERAGE RATIOS

Leverage ratio forecast the long term solvency of a firm. Leverage Ratios help to measure risk that a business faces. It helps to assess level of debt and decides whether this level is appropriate for your business or not. Commonly used Leverage ratios encompass:i. Debt to equityii. Solvency Ratioiii. Propriety/ Equity Ratioiv. Interest coverage/ Debt service Ratio

i. Debt Equity Ratio:

The debt-to-equity ratio (debt/equity ratio, D/E) is a financial ratio indicating the relative proportion of entity's equity and debt used to finance an entity's assets. Debt-to-equity ratio is the key financial ratio and is used as a standard for judging a company's financial standing. It is also a measure of a company's ability to repay its obligations. If the ratio is increasing, the company is being financed by creditors rather than from its own financial sources which may be a dangerous trend. Lenders and investors usually prefer low debt-to-equity ratios because their interests are better protected in the event of a business decline. Thus, companies with high debt-to-equity ratios may not be able to attract additional lending capital.Formula:Debts equity ratio = outsider funds or external equity Share holders funds or internal equities Year 2003 577,857/ 484,025 19,000 = 1.24Year 2004 638,082 / 770,942 56,000 = 0.89Year 2005 586,111/ 951,613 - 9200 = 0.68Year 2006 812,535 / 1,298,956 99,532 = 0.677Year 2007 943,415 / 1707110-115, 242 = 0.59Year 2008 996,780 / 2,141,544-154900 = 0.50 Year 2009 1240209 / 2700211 - 161,000 = 0.488

Year 2010 1,229,424 / 3,577,146 212,000 = 0.365Year 2011 2,036,458 / 4373675 - 354473 = 0.50Year 2012 2,341,421 / 5554226 458872 = 0.459 Graphical Representation:

Analysis: The debt to equity ratio of a company shows a decreasing trend, which is favorable to the outsides as there interest is better protecting in investing in this company. Because at the time of liquidation it gives higher margin to the claims of the outsiders then those of the owners. It is favorable for the company from the long term creditors point of view. It is higher in the beginning but gradually decreases till 2010 then again increases.

ii. Solvency ratio

Solvency ratios measure the ability of a company to pay its long term debt and the interest on that debt. Solvency ratios, as a part of financial ratio analysis, help the business owner determine the chances of the firm's long-term survival. Solvency ratios are of interest to long-term creditors and shareholders. These groups are interested in the long-term health and survival of business firms. In other words, solvency ratios have to prove that business firms can service their debt or pay the interest on their debt as well as pay the principal when the debt matures. Formula: Solvency ratio = 100 equity ratioYEAR 2003: 100 45 = 55%YEAR 2004: 100 - 54 = 46%YEAR 2005: 100 - 61= 39%YEAR 2006: 100 - 61 = 39%YEAR 2007: 100 - 64 = 36%YEAR 2008: 100 - 68 = 32%YEAR 2009: 100 - 68 = 32%YEAR 2010: 100 - 74 = 26%YEAR 2011: 100 - 68 = 32%YEAR 2012: 100 -70 = 30%Graphical Representation:

Analysis:

The solvency ratio of Colgate Palmolive is showing a decreasing trend from year 2003 to year 2012. The highest solvency ratio is at year 2003 which is 55% and it is indicating that more than half of firm's assets are financed using debt and the other half are financed using equity sources. On contrary to this the lowest solvency ratio is 26% at year 2010 which is showing that 26% of firm assets are financed using debt and this is quite unsatisfactory position of a firm because a low solvency ratio indicates likelihood of default in long term.

iii. Propriety/ Equity Ratio

The equity ratio is a financial ratio indicating the relative proportion of equity used to finance a company's assets. The Equity ratio is a good indicator of the level of leverage used by a company. The Equity ratio measures the proportion of the total assets that are financed by stockholders and not creditors. The equity ratio throws light on a companys overall financial strength. Besides, it is also treated as a test of the soundness of the capital structure. A higher equity ratio or a higher contribution of shareholders to the capital indicates a companys better long-term solvency position. A low equity ratio, on the contrary, includes higher risk to the creditors.Formula: Equity Ratio = Total shareholders equity/Total AssetsYEAR 2003: 484025/ 1,061,882 = 0.45 YEAR 2004: 770,942/1,409,024 = 0.54YEAR 2005: 951,613/1,537,724 = 0.61YEAR 2006: 1,298,956/2,111,491= 0.61YEAR 2007: 1,707,110/ 2,650,525= 0.64YEAR 2008: 2,141,544/ 3,138,324= 0.68YEAR 2009: 2,700,211/ 3,940,420= 0.68

YEAR 2010: 3,577,146/ 4,806,570= 0.74YEAR 2011: 4,373,675/ 6,410,133= 0.68YEAR 2012: 5,554,226/7,895,647=0.70Graphical Representation:

Analysis: From the above graphical representation the equity ratio of Colgate Palmolive is showing an increasing trend from year 2003 to 2012. A ratio used to help determine how much shareholders would receive in the event of a company-wide liquidation. In year 2010 it is representing the highest ratio among all years which means the contribution of shareholders to the capital is 74% and it is also indicating companys better long term solvency position because shareholders would receive the 74% share in total assets of a company. Contrary to this in year 2003 it is showing the lowest equity ratio which is 45% and it is indicating highest risk to the creditors. The overall trend of equity ratio of Colgate Palmolive is showing a positive and increasing trend which is indicating financial growth, stability, future expansion and dividends of a company.

iv. Debt Service /Interest Coverage RatioThe interest coverage ratio is a measure of a company's ability to meet its interest payments. Interest coverage ratio is equal to earnings before interest and taxes (EBIT) for a time period, often one year, divided by interest expenses for the same time period. The interest coverage ratio is a measure of the number of times a company could make the interest payments on its debt with its EBIT. It determines how easily a company can pay interest expenses on outstanding debt. Interest coverage ratio is also known as interest coverage, debt service ratio or debt service coverage ratio. The lower the interest coverage ratio there is more debt burden on company and greater the possibility of bankruptcy of a firm. A higher ratio indicates a better financial health as it means that the company is more capable to meeting its interest obligations from operating earnings.Formula: Interest coverage ratio = EBIT / Interest expensesYEAR 2003: 270,279/22,471 = 12.0 YEAR 2004: 436560/34,163 = 12.7YEAR 2005: 467,091/36,718 = 12.7 YEAR 2006: 769,333/59527 = 12.9YEAR 2007: 896605/61795 = 14.5YEAR 2008: 1021, 009/74839 = 13.6YEAR 2009: 1,146,105/112,508 = 10.1

YEAR 2010: 1,151,639/156,206 = 7.3YEAR 2011: 1,784,181/ 164,081 = 10.8YEAR 2012: 2,240,495/206,472 = 10.8Graphical representation:

Analysis:From the above graphical representation it is showing irregular trend of Interest coverage ratio of Colgate Palmolive. In year 2007 it is showing highest ratio which is 14.5 and a higher ratio indicates a better financial health as it means that the company is more capable to meeting its interest obligations from operating earnings. On contrary to this Year 2010 showing the lowest ratio of 7.3 which means 7.3 times interest is covered by the profits available to pay interest charges. Long term creditors of firms are interested in knowing the firms ability to pay interest on long term borrowings. The Colgate Palmolive position is quite satisfactory in order to pay its interest easily out of profits.

CONCLUSION:

For our analysis purposes we have assessed different short term and long term liquidity ratios as the companys true financial position can b depicted fairly with the help of these ratios. These ratios are best tool for comparing within or across the industry. The financial results of Colgate Palmolive Ltd were quite satisfactory but still it needs to come up with more efficiency to attract more investors and satisfy its shareholders. Company has a strong focus on its customers and its always looking for innovation and provides change to its customer. But in doing so covering cost is not managed effectively by the company. Another reason for the negativities of the ratios is lower demand from the customers as there is a huge competitor of Colgate Palmolive in the industry. Although the changes like innovation and cost effective prices have helped Colgate a lot in growth. Tough there are diverse market situations as well. For example inflation, law and order situation, GDP, per capita income these all factors can collectively affects the companys sale and profitability. The biggest reason behind the increased cost is the rise in cost of crude oil which ultimately affects the companys profitability margins. The company seeks to stimulate its growth pattern. The pressures on the Company's gross margins are likely to rise with ever increasing raw material prices which are going to test the Company's operational efficiencies. But the firm's management policies focusing on aggressive expansion backed by cost-cuttings are likely to help keep Colgate Palmolive on track. The expected future for Pakistan remains stalled in political uncertainty and adverse energy and law and order crises. However, regardless of these challenges, Colgate Palmolive is likely to continue with its growth thrust. Company aims to enhance the customer base both in rural and local markets so the continual savings in product improvement, it is highly unlikely that the firm will not succeed to meet its financial goals in future. Colgate Palmolive Ltd have high growth opportunities because it is a well positioned brand, just a little efforts are required in cost reduction policies, innovation and responsiveness.

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