Market Overview

How Does Colgate-Palmolive's Debt Look?


Shares of Colgate-Palmolive (NYSE: CL) increased by 10.67% in the past three months. Before having a look at the importance of debt, let us look at how much debt Colgate-Palmolive has.

Colgate-Palmolive's Debt

Based on Colgate-Palmolive’s financial statement as of October 30, 2020, long-term debt is at $6.97 billion and current debt is at $265.00 million, amounting to $7.24 billion in total debt. Adjusted for $989.00 million in cash-equivalents, the company's net debt is at $6.25 billion.

Let's define some of the terms we used in the paragraph above. Current debt is the portion of a company's debt which is due within 1 year, while long-term debt is the portion due in more than 1 year. Cash equivalents include cash and any liquid securities with maturity periods of 90 days or less. Total debt equals current debt plus long-term debt minus cash equivalents.

To understand the degree of financial leverage a company has, investors look at the debt ratio. Considering Colgate-Palmolive’s $15.47 billion in total assets, the debt-ratio is at 0.47. Generally speaking, a debt-ratio more than one means that a large portion of debt is funded by assets. As the debt-ratio increases, so the does the risk of defaulting on loans, if interest rates were to increase. Different industries have different thresholds of tolerance for debt-ratios. A debt ratio of 40% might be higher for one industry and average for another.

Why Investors Look At Debt?

Debt is an important factor in the capital structure of a company, and can help it attain growth. Debt usually has a relatively lower financing cost than equity, which makes it an attractive option for executives.

However, due to interest-payment obligations, cash-flow of a company can be impacted. Equity owners can keep excess profit, generated from the debt capital, when companies use the debt capital for its business operations.

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What Does Colgate-Palmolive's Debt Look Like?


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