It is all about Financial Analysis and Financial Statements. Also it contain some comparison of financial ratios to past, industry average, sector and firms.
2. 2
Coca Cola International
The Coca-Cola Company is the world's largest beverage
company.
It is no.1 brand according to fortune 2009 survey.
The company operates a franchised distribution system dating
from 1889.
The Coca-Cola Company is headquartered in Atlanta, Georgia.
With local operations in over 200 countries around the world.
Coca Cola has 150,900 employees worldwide.
3. • Assessment of the firm’s past, present
and future financial conditions
• Done to find firm’s financial strengths
and weaknesses
• Primary Tools:
– Financial Statements
– Comparison of financial ratios to past,
industry, sector and all firms
3
4. Objectives of Ratio Analysis
• Standardize financial information for
comparisons
• Evaluate current operations
• Compare performance with past
performance
• Compare performance against other
firms or industry standards
• Study the efficiency of operations
• Study the risk of operations
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5. Types of Ratios
• Financial Ratios:
– Liquidity Ratios
• Assess ability to cover current obligations
– Leverage Ratios
• Assess ability to cover long term debt obligations
• Operational Ratios:
– Activity (Turnover) Ratios
• Assess amount of activity relative to amount of
resources used
– Profitability Ratios
• Assess profits relative to amount of resources used
• Valuation Ratios:
• Assess market price relative to assets or earnings
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6. December 31, 2012 2011
(In millions except par value) As Adjusted
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 8,442 $ 12,803
Short-term investments 5,017 1,088
TOTAL CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS 13,459 13,891
Marketable securities 3,092 144
Trade accounts receivable, less allowances of $53 and $83, respectively 4,759 4,920
Inventories 3,264 3,092
Prepaid expenses and other assets 2,781 3,450
Assets held for sale 2,973 —
TOTAL CURRENT ASSETS 30,328 25,497
EQUITY METHOD INVESTMENTS 9,216 7,233
OTHER INVESTMENTS, PRINCIPALLY BOTTLING COMPANIES 1,232 1,141
OTHER ASSETS 3,585 3,495
PROPERTY, PLANT AND EQUIPMENT — net 14,476 14,939
TRADEMARKS WITH INDEFINITE LIVES 6,527 6,430
BOTTLERS’ FRANCHISE RIGHTS WITH INDEFINITE LIVES 7,405 7,770
GOODWILL 12,255 12,219
OTHER INTANGIBLE ASSETS 1,150 1,250
TOTALASSETS $ 86,174 $ 79,974
THE COCA-COLA COMPANYAND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
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7. LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 8,680 $ 9,009
Loans and notes payable 16,297 12,871
Current maturities of long-term debt 1,577 2,041
Accrued income taxes 471 362
Liabilities held for sale 796 —
TOTAL CURRENT LIABILITIES 27,821 24,283
LONG-TERM DEBT 14,736 13,656
OTHER LIABILITIES 5,468 5,420
DEFERRED INCOME TAXES 4,981 4,694
THE COCA-COLA COMPANY SHAREOWNERS’ EQUITY
Common stock, $0.25 par value; Authorized — 11,200 shares;
Issued — 7,040 and 7,040 shares, respectively 1,760 1,760
Capital surplus 11,379 10,332
Reinvested earnings 58,045 53,621
Accumulated other comprehensive income (loss) (3,385) (2,774)
Treasury stock, at cost — 2,571 and 2,514 shares, respectively (35,009)
(31,304
)
EQUITY ATTRIBUTABLE TO SHAREOWNERS OF THE COCA-COLA COMPANY 32,790 31,635
EQUITY ATTRIBUTABLE TO NONCONTROLLING INTERESTS 378 286
TOTAL EQUITY 33,168 31,921
TOTAL LIABILITIES AND EQUITY $ 86,174 $ 79,974
BALANCE SHEETS Cont’d
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8. Year Ended December 31, 2012 2011
(In millions except per share data)
As
Adjuste
d
NET OPERATING REVENUES $ 48,017 $ 46,542
Cost of goods sold 19,053 18,215
GROSS PROFIT 28,964 28,327
Selling, general and administrative expenses 17,738 17,422
Other operating charges 447 732
OPERATING INCOME 10,779 10,173
Interest income 471 483
Interest expense 397 417
Equity income (loss) — net 819 690
Other income (loss) — net 137 529
INCOME BEFORE INCOME TAXES 11,809 11,458
Income taxes 2,723 2,812
CONSOLIDATED NET INCOME 9,086 8,646
Less: Net income attributable to noncontrolling interests 67 62
NET INCOME ATTRIBUTABLE TO SHAREOWNERS OF THE COCA-COLA COMPANY $ 9,019 $ 8,584
BASIC NET INCOME PER SHARE1
$ 2.00 $ 1.88
DILUTED NET INCOME PER SHARE1
$ 1.97 $ 1.85
AVERAGE SHARES OUTSTANDING 4,504 4,568
Effect of dilutive securities 80 78
AVERAGE SHARES OUTSTANDING ASSUMING DILUTION 4,584 4,646
THE COCA-COLA COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
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9. Liquidity Ratios
Current Ratio:
09.1
27,821$
30,328$
sLiabilitieCurrent
AssetsCurrent
:RatioCurrent
Years 2011 2012
Current Ratio 1.05 1.09
In 2011, the firm’s ability to cover its current liabilities with its current assets
was 1.05. In 2012, the ratio goes up to 1.09 as compared to 2011, which means
that the company has the ability to pay its liabilities, as the definition says that
higher the ratio, greater the ability of the firm to pay its bills. This tells that
Coca-Cola is improving their liquidity and efficiency, because their current ratio
is improving.
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Industry Average
1.20 to 1
10. 10
97.0
27,821$
064,72$
sLiabilitieCurrent
Inventory-AssetsCurrent
:RatioQuick
Quick/Acid Test Ratio:
Years 2011 2012
Quick Ratio 0.92 0.97
According to the definition of Acid Test Ratio, the company should have the ability
to pay its liabilities through its most liquid assets. The table shows that in 2011, the
firm has the ratio 0.92 cents. Then we observe a slight improvement in 2012. *So
we can figure out from the ratios that Coca-Cola still cannot pay its debts without
its inventory. This leads us to believe that Coca-Cola is a somewhat risky business,
even though it is the largest in the nonalcoholic beverage industry.
Industry Average
1.10 to 1
11. 11
Inventory Turnover Ratio:
8.5
3,264$
19,053$
Inventory
soldgoodsofCost
:TurnoverInventory
Years 2011 2012
Inventory Turnover 5.90 5.80
The Coca-Cola’s Inventory turnover ratios deteriorated from 2011 to 2012,
which means that its ability to sell inventory has relatively come down. In 2011
Coca-Cola had a ratio of 5.90 and in 2012 has a ratio of 5.80. *These ratios are
not what we expected; we assumed that the ratios would be much higher
because Coca-Cola sell its syrup to bottling partners around the world so it does
not need to deal with the storing of the bottled product.
Times
Industry Average
7.50 times
12. Average Collection Period:
days17.36
09.10
365
TurnoversReceivable
365
:PeriodCollectionAvg.
Years 2011 2012
Avg. Collection Period 38.60 36.17
The ability of the firm of collecting the receivables in the specific time. Here
in the year 2011 the turnover in days was almost 39, but the collection days
decrease in the year 2012 and the collection period of approximately 36 days
is well within the 60 days allowed in the credit terms. This shows that the
collection is faster as compared to the previous year.
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Industry Average
37.63 days
13. Debt Ratios
Debt Ratio:
%51.61
174,86$
006,53$
AssetsTotal
sLiabilitieTotal
:RatioDebt
Years 2011 2012
Debt Ratio % 60.09 61.51
The ratio shows the company’s ability to cover its debts through its total
assets. The ratio was 60.09% in 2011, then goes up in 2012. The ratio has to be
low. So we can interpret that in the year 2012, the risk of the firm is getting
higher as the ratio goes up.
13
Industry Average
55.78%
14. Profitability Ratios
Gross Profit Margin:
%32.60
017,48$
28,964$
Sales
ProfitsGross
:MarginProfitGross
Years 2011 2012
Gross Profit Margin % 60.90 60.32
The ratio should be high according to the definition. Because higher the ratio,
higher will be the firm’s ability to produce goods and services at low cost with
high sales. Here in this table there is small difference between the ratios in two
years, but its still high, which means it is favorable.
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Industry Average
58.01%
15. Net Profit Margin:
18.78%
48,017$
0199,$
Sales
IncomeNet
:MarginProfitNet
Years 2011 2012
Net Profit Margin % 18.40 18.78
According to the definition, higher the ratio, higher will be the firm’s ability to
pay its taxes. In the year 2011, the margin was little low but in 2012 the margin
increases by 0.4%. For the company, roughly 0.38 cents out of every sales dollar
consists of ‘After Tax Profit'. Coca-Cola is more efficient at converting sales into
actual profit and its cost control is good.
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Industry Average
18.80%
16. Market Ratios
Price/Earning Ratio:
times40.18
97.1$
25.36$
sharePerEarning
C.Sofeprice/sharMarket
RatioP/E
Years 2011 2012
P/E Ratio 19.00 18.40
Coca-Cola’s price-earnings ratio has decreased 0.6 times in 2012, because in
2011 the ratio was 19.00 times but in 2012 it become 18.40 times which
suggests that investors may be looking less favorably at the Coca-Cola. This
ratio should be high, because the higher the P/E ratio, the higher will be the
investors confidence in company.
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Industry Average
19.98 times
17. Conclusion
After applying all the ratios we got an idea that
the Coca Cola Company is a profitable firm.
Because through out the analysis of two years, we
found that the company is getting profitable
return on short term and long term investment,
their profit margin has been increased as well
and they are in the position to pay their debts
with in their resources.
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